In 2015, retailers’ omnichannel offering took centre stage, as brands
innovated across mobile apps and in-store technologies, multichannel
fulfilment
urban
solutions, and coordinated cross-channel promotions and marketing. These
kinds of initiatives will continue to be top of mind in 2016, particularly
as consumer expectation for a seamless and personalised experience grows.
However, 2016 will also bring a new focus on enhancing the high street
experience, which remains a key channel for many brands. Based on APT’s
work with leading apparel retailers, here are the top trends to watch in
2016:
As consumers place more importance on overall experience, retailers are
introducing new attractions to drive visits and earn more time with their
shoppers. Urban Outfitters, one leader in the space, is introducing
in-store pizzerias. Club Monaco is adding libraries, cafes, and floral
shops to some stores, and Liberty continues to offer beauty services at
their in-store treatment rooms, all to extend the shopping experience and
become a destination spot for consumers.
While these high street programmes are cutting edge, their success will
vary widely. At a minimum, retailers will need to ensure that sales
increase enough to pay back the capital expenses, new employee training,
space allocation trade-offs, and other costs in each location.
Some retailers may find that some stores need a tailored approach or don’t
benefit from a new attraction at all.
To generate the best results, retailers should develop rollout strategies
based on how the success of these “experience retail” concepts varies by
location, format, and scale.
While product innovation is constant in the sector, apparel retailers are
increasingly aiming to establish themselves as “lifestyle brands”–a hefty
undertaking but one that can pay dividends if executed correctly. This
trend has manifested itself in new collections like plus size and
“athleisure” lines, as well as fundamentally new categories.
Several players have made significant investments to establish new athletic
lines including Boohoo.com and Mountain Warehouse, which recently launched
its Zakti brand. Meanwhile New Look recently introduced its new homeware
range, complementing its existing beauty and sportswear assortment, while
new luxury tables from COS echo the feel of their sleek clothing designs.
Similarly, H&M is becoming a one-stop shop for customers after launching a
beauty collection this past fall.
The idea of growing share of wallet and gaining new customers is
attractive, but not all innovations will be profitable. Customers may
substitute new products for other items (e.g., yoga pants for leggings) or
simply drop one item to find budget for another. Further, while a new
selection of products may attract new customer segments, it may not
resonate with a retailer’s highest-value, existing customers and cause them
to shift to competitors. Within the store channel in particular, making
room for new products can also mean losing sales on products that are
displaced, putting a high opportunity cost on reallocating floor space.
To profitably introduce new categories, retailers will need to test them in
a subset of locations (often across channels) and compare performance to
similar locations that don’t receive the change. Only the results of these
in-market tests can tell retailers which moves are the best for their
businesses, as well as how their product offering should vary across
channels (particularly in-store versus online).
Executives are focusing on staffing and training to optimise costs without
hurting the customer experience. Many retailers are using traffic-based
staffing models to determine when more associates should be on the floor.
Other leaders are enabling associates with better training and
technologies.
Victoria’s Secret–who paves their way with innovation–continues to invest
in training associates to give style and fit recommendations, while Zalando
introduced a personal stylist service. Other innovators, such as Monsoon
Accessorize and Chico’s, are equipping their associates with tablets to
keep better record of their deep customer relationships and catalyse
cross-sell with tailored product recommendations.
Even the most central labour changes (e.g., adding associates during peak
times) come at a high cost, which means that retailers can’t afford to
adopt programmes that seem great on paper but don’t drive sales. It’s
likely that some stores will require more attention than others, both in
terms of the number of associates and the mix of roles, which puts a high
value on understanding programme impact on a store-by-store basis.
As retailers invest in more specialised labour and equip staff with new
technologies, they should consider experimenting with different aspects of
the programmes. These elements could include which types of employees
should receive training or at which point in the customer experience staff
should leverage in-store tablets.
With a myriad of marketing strategies at hand, apparel marketers are
challenged with determining the ROI of each campaign both online and
in-store. Solving this challenge is only becoming more complex as
innovations like website personalisation and more advanced mobile apps with
beacon technology emerge. For instance, several companies including Very
recently launched custom versions of their website, up to millions of
unique adaptations, tailoring content and promotions based on shopper
interests.
Some of the top retailers are using these platforms to send personalised
offers, such as Ted Baker’s trial of in-store beacons. These initiatives
require an understanding of which customers should receive which messages
and through which channels. A key risk with sending rewards and offers is
that retailers may be giving away margin to customers who would have
purchased anyway. Another potential danger is campaign over-communication
(e.g., daily emails) and losing relevance and attention with some customers.
Navigating this world requires much deeper customer understanding, which is
no easy task. There are a few ways to do this–the most common is to grow a
loyalty programme, collect data about customer behaviour across channels,
and test offers based on that behaviour. In 2016, the most sophisticated
retailers will incorporate third party data to create more targeted offers
(e.g., which customer segments have high industry spend?).
To leverage these expansive data sets, retailers will need to invest in
tools to rapidly uncover opportunities, understand which campaigns work
best, and craft
more effective strategies. Iterative scientific testing should be part of
the process of discovering and continuously evolving the most powerful
message, channel, and frequency of engagement with each individual customer.
From large-scale initiatives like introducing new product categories to
day-to-day marketing campaigns, apparel retailers need to vet each idea to
understand exactly what’s right for their businesses. With the necessary
tools and a list of innovative ideas, retailers will be ready to create a
winning strategy.
The first step is to understand where your analytics stand today and how
they can be improved. The second–to build a funnel of ideas to test in
2016. What better time to start than now?
Written by:
Rupert Naylor: Senior Vice President, Applied Predictive Technologies.
Rupert is in charge of the European operations of APT. Prior to joining
APT, Naylor spent many years at Bain & Company, working in London, Mumbai,
Paris and San Francisco.
He started his career in the UK Government, including a position at the
Embassy in Tokyo.
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