Why Digital Is The Future Of Retail (Guest Post By Leah Helfgott)

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Digital retail is about to get a makeover. In her “before selfie,” digital retail looked like a nice ecommerce site with email marketing and some social media. In her “after selfie,” digital retail is completely transformed by data and technology, impacting both online and in-store experiences, deeply connecting with her customers, and paving the way for the future of retail.

We got a good glimpse of digital retail and her brand new look at CommerceNext, an industry event in New York City held July 25-26, 2018. We were amazed by the tremendous power of data and AI,  innovations in customer experience, and the transformation of retail and ecommerce experiences. We learned from both established companies who are now selling in brand new ways, and from newer digitally-native companies that are breaking ground.

“Our goal with CommerceNext is to bring together a community of leading retail and ecommerce companies to share best practices on how they are growing their respective businesses, “ says Veronika Sonsev, cofounder of CommerceNext. “With the rapid pace of innovation, we want to create a platform where industry leaders learn from each other in order to accelerate their growth.”

Data and AI

Data was a huge theme at this year’s CommerceNext. In one panel, we discovered that almost all retailers in the room are using some form of AI or real-time data analysis to predict consumer behavior. The most common use for AI is an algorithm that generates content for a “You May Also Like” section on a website. The suggested products might be based on what others ultimately bought when they viewed a given product, the site’s best sellers, or what a customer may have bought in the past. Most likely, however, it is based on multiple such factors, each one weighted a certain amount. Algorithms take all these factors into account and then determine which is the strongest recommendation to show a particular customer.

AI’s reach is much greater than that, however. It can also be applied to customizing marketing messages for certain target segments, predicting outcomes of customer contacts, and fully personalizing the customer’s shopping experience, whether on site or in store. Optimove CEO Pini Yakuel predicted that by 2028, customer data will be inexpensive, and we will all have access to a massive database about each customer detailing every touchpoint or purchase. Our job as digital retail leaders is to “use the data to gain faster and deeper insights than everyone else.”

Even with all these advances, concerns that AI will replace jobs in digital retail were roundly dismissed. AI is only as good as the people who “man the machine” and the variables they put into it. One always needs to consider what the algorithm is weighing, and how. The human touch will still be needed to manage changes in the environment and make decisions that only humans can make.

Smart Stores

Levi Strauss & Co, probably the oldest company in the room, collected extensive customer data to help improve conversion in their physical stores. Carrie Ask, their EVP and President of Global Retail, said that through data, they discovered “a game changing revelation – that stores need to be more engaging, compelling, and inspiring.” They ended up doing a complete revamp. The new stores sport digital kiosks, large fitting rooms with help buttons, and high-speed inventory scanning technology. Six years ago, the company sold mostly wholesale in the US, and mostly men’s bottoms. Post-makeover, Levi’s is much more international, with 50,000 points of distribution worldwide. In addition, their women’s business is up 33%. “Physical retail is not dead,” Carrie said, “Boring retail is dead.”

Digitally-native retailers, like UNTUCKIt and AWAY, are now starting to open physical stores and are working data into everything they do. As UNTUCKIt co-founder and CEO, Aaron Sanandres, said, “Stores are just another extension of our ecommerce.” The company is seven years old, but within the last three years, they opened 38 stores across the U.S. For AWAY, as Mark Chou, VP, Growth Marketing and E-Commerce, tells it, the company is only three years old, but they tried a few pop-up shops and the customers loved it. They now have four permanent stores.

Digitally-native companies are moving the needle on old-school retail. In some of these new “smart stores,” geolocation on your phone can alert your favorite company that you have entered the store. Your phone may ding with a special offer. In another instance, you may have never been to the store, but cameras match your face with your Facebook profile and you are welcomed by name. Digitally-native stores are even pushing mall-owners to collect foot traffic data so they can synthesize it with their own. The in-store experience is being directly influenced by the principles and practices of ecommerce.

Digital Stores

In another big shift, we heard how Qurate Retail Group (QVC/HSN) moved their main selling platform from traditional television to Facebook Live where they now have millions of high-engagement followers. Whereas previously, they could only feature one or two customer calls in each TV show, they can now hear from 2.7 million followers on QVC and 1.2 million on HSN. The company also owns Zulily, the flash sale apparel company, with 4.9 million followers. Facebook is now the hub of the company, and they have seen tremendous success with it.

The definition of a “store” is morphing, too, as any medium or location can now serve as a point of sale. We loved the idea of a “store” that can exist in an open-air place at a specified time. Activewear retailer Outdoor Voices scheduled a product launch where customers had to arrive at a specific spot on a running trail in order for an AR purchasing experience to be activated on their phone. The app was custom-built by their IT team, and was wildly popular in their target market.

It’s All About the Customer

With data and technology front and center, it was nice to see that the personal touch was not forgotten. As ThirdLove Chief Creative Officer, Ra’el Cohen, said in her talk, “We use data to connect with our customers.” ThirdLove’s bra finder quiz gave them 600 million data points about the fit issues that 10 million women were experiencing. When they went to design their product line, they were directly solving the most common fit problems and handing the customer their best solutions. In addition, their “Notify Me” button gathers millions of data points about the exact size, style, and color that customers are looking for but don’t see on site. This allows them to develop new sizes, plan inventory, and stock what the customer actually wants.

Customer data showed Foot Locker that their key demographic, millennials and gen-z customers, had low credit card penetration according to Vijay Talwar, President of Digital at Foot Locker. They found that if they offered a “pay later” option with third party provider AfterPay, they could help customers attain what they wanted without incurring undesirable debt. In line with their research, Foot Locker also invested in an online appointment system to prevent in-store crowds on massive launch days, and they built an app that serves as an index of all sneakers, where a photo or screenshot can identify the shoe instantly.

Estée Lauder is now offering customers a chance to speak with “Liv,” a personalized skin care assistant through Google Home. Users can now ask their Google Home to “speak with Liv at Estée Lauder” and they can then sign up for reminders to start winding down at night, relaxation tips, relevant articles sent to their phone, and personalized recommendations for their skin care regimen. Estée Lauder’s Tricia Nichols, SVP of Consumer Marketing, said initial results are strong. First time users spend 6.5 minutes talking to Liv, three times Google’s benchmark. Returning users spend 12 minutes. Estée Lauder is the first luxury company to partner with Google to create a custom voice assistant. According to Nichols, the project was very much in line with their company culture. “Estée used to say, ‘Telephone, Telegraph, Tell a Woman.’ She believed that technology could create community.”

At Chewy, a seven-year-old digital startup in the pet products space, they use bend-over-backwards customer service and go the extra mile to wow the customer. “We treat our customers like family,” said Chewy’s VP of Customer Service, Kelli Durkin. “Pets are an emotional thing. It’s about being human and not a robot.” At holiday time, they had all hands on deck writing six million personalized holiday cards. Customers get sympathy flowers when a pet dies. When a customer sends them a photo of their pet, they have an artist recreate it as an oil painting and send it back as a surprise gift. These great lengths for the customer earned Chewy high customer loyalty and resulted in Chewy being acquired by Petsmart for a reported $3.5B.

New Directions

In two whirlwind days of inspiring keynote speakers, panels, and roundtables, we learned that the definition of “store” keeps changing. Retailers are selling on diverse platforms and using a mix of both physical and digital shopping experiences. We heard that data is absolutely key in understanding the customer and what they need or want. New technologies are cropping up that can better speak to customers—wherever and however they shop—and can offer a truly personalized experience.

We’re really excited about what’s to come in this industry. There are so many great leaders and so many ways to innovate. Join CommerceNext in 2019 and celebrate the future of retail.