Fast Adapting Customers Leave Inert Retailers Behind

Fast adapting customers are leaving obstinate retailers in droves. Hence the headlines dominating retail news portals are about thousands of retail stores closing their doors. That’s happening because retail customers are adapting quickly and easily to the digital world of today.

Many retailers, on the other hand, aren’t keeping up with the changing buying habits of their customers. Indeed, they are ignorant at best and stubborn to keep on doing what they did for decades…

The sad result is that retail brands are disappearing. The Centre of Retail Research reports that during the first eight months of 2017, 35 companies failed in the UK, closing 1,194 stores and affecting 10,611 workers.

There may be many reasons for retailers closing down. However, it may be because the retailers fail to react to the opportunities and threats of the digitized world…

How fast adapting customers are on top of the world

Tech savvy retail customers have never had it better. It doesn’t matter whether they are shopping online or at their favourite Bricks and Mortar store. They can do either shopping effortlessly. In fact, retail customers can shop how and wherever they want in the omni-retail channel. The benefits for adapting retail customers in the omni-retail channel are:

  • Omni-channel retail is customer focused. It is a powerful strategy adopted by retailers for improving customer experience, says Brad Arsenault (FithQuadrant).
  • Retail customers expect the same basic brand experience across all channels. Omni-channel retail allows customers to buy from any channel.
  • The fast adapting customers feel more valued. They have a seamless journey from online to offline and is more likely to return to the brand who they feel gives them a fully personalised experience.

Retail customers in the digital world expect every retailer to offer them the greatest shopping experience they’ve ever had. If retailers can’t achieve that, they’ll probably soon close their doors (if they haven’t already done so). As result thereof, retailers should change the way they’re doing business to keep up with their fast adapting customers, or perish…

How can retailers keep up with their fast adapting customers?

Start right now to change the direction of your business, a turnaround – 180 degrees. Yes, you should get out of that box (the one you’ve been hiding in for decades…), and think out of the box! More importantly, you should be the revolutionary leader (or at least appoint one). Disrupt and destroy the old culture of your business. Burn your vision and mission statements. Therefore, appoint leaders that are humble, adaptable, visionary and engaged. Let go of the rest…

Then, find out what shopping experience your customers most want. And give it to them!

Concluding

Do what you have to do now! Oh, and good luck!

Read also:

  1. Success in the Digital Age Requires Extraordinary Retail Leaders
  2. How successful are Retailers in the Omnichannel?

Image:

Bricks2Clicks

 

Voice-Activated Shopping an Effortless Customer Experience

Is voice-activated shopping the digital outcome that retailers need to offer their customers an effortless shopping experience? Or is it taking AI and machine learning a step too far?

Humans are what we are because of our ability to speak with one another, to listen what’s said, to comprehend the info and to react on what we perceive. We also like to be part of a group, to socialize. Said MacFarlane 2, (2014): “Because our evolutionary heritage provides us with genetic material open to forces and influences from the physical environment, we also require a social environment for brain development and for the acquisition of skills such as speech and written communication.”

So we learn from others and learn others by using our voices. But that is now changing. Now, after millions of years of being humans, we’re learning machines how to listen to voices, to recognize and analyze the message and then to respond in a ‘sensible’ way.

So, if you’re still able to speak, say Hallo! to voice-activated shopping. Because, according to Hailee Sosnowski’s post in DigitalCommerce, voice search is projected to account for half of online searches by 2020.

What is Voice-Activated Shopping?

Voice-activated shopping (VAS) means that a customer can use his or her natural voice to control technology whilst shopping. There is no need to touch anything and the customers can do voice-activated shopping by using their smartphones. VAS is already adopted by some retailers.

Laura Agadoni (JLL) remarked the following about voice-activated shopping: “Right now it’s being used for ordering groceries, pizza or coffee. For consumers there’s no driving to stores, logging onto a computer, or pulling out smartphones to open an app. They simply say what they want to one of the new voice activated devices coming onto the market from the likes of Google and Amazon.”

Take the example of Alexa, the AI-based personal assistant from Amazon. With Alexa in your kitchen, adding an item to your Ocado order is a breeze, says Holly Godwin (OcadoTechnology). Run out of biscuits and have a friend coming for tea? – Just tell Alexa “Alexa, ask Ocado to add biscuits”.

Alexa converts the audio stream into a command (for example, “add to trolley”) and a search term (such as “biscuits”). Alexa most probably will find exactly what you want, because Ocado has ‘trained’ Alexa to recognize the top 15,000 commonly search terms from Ocado.com.

How will Voice-Activated Shopping affect the retail market?

In today’s age of digital driven technology, it’s no shame to ask how voice-activated shopping may further disrupt the retail market. However, there is no consensus about what the opportunities or challenges of VAS are for retailers.

Opportunities using VAS (OnlyRetail.com)

  • More sales. Amazon found that sales of its Echo devices increased nine fold compared to 2015. Also, they also spend 10% more and their buying frequency went up by 6%.
  • Shopping for customers is now effortless. VAS allows householders to buy groceries just by talking to the fridge.
  • Gathering data for an omnichannel approach. Voice-enablement could be the unifying force omnichannel has been missing.
  • Investing for the future. It’s been reported that 55% of 13- to 18-year-olds use voice search every day, so clearly there is an appetite (Emma Lyons, Campaign US).
  • Speed of ordering. The ability to immediately order household essentials is the most obvious use for voice-enabled retail.

Challenges using VAS

  • “It’s still quite a new market and quite complex, so it requires advice and people will want to come talk to someone who can explain how it works, so we see it as an opportunity in that respect,” according to Grace Bowen, RetailWeek.com.
  • Tailoring search algorithms for Voice-enablement. “We know that shoppers will not go past the second or third page of a Google search result – voice will be like that on steroids” (Luke Tugby Retail Week).
  • Acceptance of VAS. Older generations may take a bit more convincing to adopt voice-activated technology.
  • Universal use of VAS in retail. A big question is whether voice recognition technology can work for all retail. What about fashion? Consumers can’t very well order a “black dress,” for example, and get exactly what they want, wonders Laura Agadoni (JJL).

Concluding

Speech has been argued to be the most natural and comfortable way to communicate 1. So it came as no surprise that it is now integrated in AI technology. So, what do commentators say about voice-activated shopping technology?

“Voice recognition technology is the next iteration of online shopping as consumers increasingly prize ways to complete chores or get the information they need easily and quickly,” Laura Agadoni (JJL).

“The convenience of voice search makes it instantly attractive to consumers, but it also introduces new complexities that retailers who want to survive the age of voice must fully understand,” Hailee Sosnowski, paid search planner, BKV (DigitalCommerce360.com).

My advice? Are your business performing as planned? If not, revisit your business’s digital marketing plan and identify the problem areas. If the most important reason why your business is losing sales is that your customers seeks VAS, then do VAS!

Read also: Artificial Intelligence – Digital Outcomes or Digital Disruptions for Retailers?

Notes:

1 Kääriä, A.  2017. Technology acceptance of voice assistants: anthropomorphism as factor, Master’s Thesis, University of Jyväskylä.

2 MacFarlane, A.E. 2014. Voice activated: exploring the effects of voices on behaviours., PhD Thesis, University of Canterbury.

Image:

Flickr.com

Website Analytics Helps You to See How Your Online Business is Performing

Website Analytics is there for retailers to use. You’ve just decided to start an online retail business. Why not? It’s relatively easy and cheap to do. You can start a Drop Shipping business, or join Shopify or trade your own goods online with a Woocommerce site. According to Quora, there are between 12 and 24 million ecommerce websites on the net. However, only about 650,000 ecommerce websites generate annual sales of more than $1,000. That’s a miserable 2.7% generating very modest turnovers.

Is your online business not performing as planned? Are your paid search adverting and social media marketing campaigns not resulting in sales? Then you’re probably targeting the wrong customers at the wrong place with the wrong products. So how will you know that you’re doing things wrong? You can do the right thing by using a Website Analytics tool such as Google Analytics.

What is Website Analytics?

Web analytics is the process of analyzing the behavior of visitors to a Web site. Indeed, the use of Web analytics is said to enable a business to attract more visitors, retain or attract new customers for goods or services, or to increase the dollar volume each customer spends, says Margaret Rouse in Techtarget.com.

Web Analytics is not just a process for measuring web traffic but can be used as a tool for business and market research, and to assess and improve the effectiveness of a website, according to Salini, Malavolta and Rossi (2016).

Salini et al (2016) mentioned that the four essential stages of Website Analytics are:

  1. Collection of data,
  2. Processing data into information,
  3. Developing Key Performance Indicators (KPIs), and
  4. Formulating an online strategy.

Each of these stages impacts or can impact the stage preceding or following it; in other words they are sequentially connected and not isolated from each other.

  1. Collecting data for Web Analytics

The simplest, cheapest and most used Web Analytics tool is Google Analytics (GA). Indeed, Google analytics offers a free service to its users. But before you can use GA, you need to create a new account. GA will create a tracking code that you can copy into the memory of your website. Your website should now be connected with Google Analytics.

However, your site needs traffic in order for GA to do its algorithms and results. Therefore you need to write a post or promote products to start attracting visitors.

  1. Processing data into information

Google Analytics can track a visitor’s location, device, landing page, and behavior while he or she is using your website. In addition, you can see where the visitor came from (Google, Bing, Yelp, etc.). This can help you to spend those pay-per-click marketing dollars wisely.

Kristi Hines suggests in his blog Kissmetrics.com that Google Analytics help you as follows:

  • Find out which online campaigns bring the most traffic and conversions.
  • Determine where your best visitors are located.
  • Learn what people are searching for on your site.
  • Visualize what people click on the most.
  • Uncover your top content.
  • Identify your worst performing pages.
  • Determine where people abandon the shopping cart.
  • Discover if you need a mobile site.

Before you start perusing the pie charts, line graphs, and spreadsheets available in the user interface of Google Analytics, it’s important to figure out what to monitor.

  1. Developing Key Performance Indicators (KPIs)

Since you’ve identified what works and what does not work with your website, you need to develop KPIs. A KPI, or Key Performance Indicator, is a metric used to measure performance. Drew Strojny of The Theme Foundry advised that SMEs and bloggers using WordPress to keep the following ideas in mind when identifying website-related KPIs:

  • KPIs should align with business goals. The KPIs related to your website should align with a specific action you want website visitors to take. In many cases, this will be a revenue-impacting action, like contacting you for a quote if you’re a service provider.
  • KPIs should correspond to trackable metrics in Google Analytics. Therefore, when you know what your KPIs are, you should connect each one to a specific tool or tool in Google Analytics.

The top 8 metrics and KPIs that online retailers should take into account with website analytics are according to Natalie Pavlovskaya writing in InstantShift:

  1. Average Order Value (AOV). AOV is considered a key metric by many online retailers, because the higher you can encourage AOV to be, the more income your store will get. The basic calculation is: (Sum of Revenue Generated)/(# of Orders) = Average Order Value
  2. Conversion Rate. The conversion rate tells how effective your store is at closing deals. The basic calculation is: (Number of Sales) / (Number of Visits) = Conversion Rate.
  3. Bounce Rate. Bounce Rate is a percentage of visitors who leave your site immediately, probably because they didn’t find what they were looking or the website was too complicated or annoying to use. The basic calculation is: (Number of visitors who leave immediately) / (Total number of visitors) = Bounce Rate.
  4. Shopping Cart Abandonment Rate. According to the Baymard Institute, the average shopping cart abandonment rate is 69% (2017). The basic calculation is: (#of people who don’t complete checkout) / (# of people who start checkout) = Shopping Cart Abandonment Rate.
  5. Cost per Acquisition. Cost per Acquisition is a critical marketing metric. It can tell you which campaigns can drive your sales and which will become a costly pile. The basic calculation is: (Total Cost of Marketing Activities) / (# of Conversions) = Cost per Acquisition.
  6. Traffic. Where does your audience come from? Which channels produce the most customers? What social networks, keywords work best for your business?
  7. Net Profit. Net Profit is the actual amount of profit a business generates after all expenses. It tells you the profitability of your ecommerce business after taking all costs into account. The basic calculation is: (Total Revenue) – (Total Expenses) = Net Profit.
  8. Customer Lifetime Value (LTV). Customer Lifetime Value measures the total amount of money a customer spends in a store during his relationship with it. The basic LTV equation: (Average Order Value) x (# of Repeat Sales) x (Average Retention Time).

Once you’ve got the overall picture of your online store’s performance, you’ll need to formulate or change your online business strategy.

  1. Formulating an online strategy

Formulating an actionable online strategy for your business may be your biggest challenge. Sarah Williams Founder & CEO of 816 New York proposed the following steps to develop a Google Analytics Measurement Plan:

  • Step 1. Document your business’s objectives. Ask yourself as a company: Why do we exist? What is the Core Purpose and Vision of the brand itself?
  • Step 2: Identify strategies and tactics. One Strategy you would adopt is to sell products. The tactics that support that strategy, then, might be to sell online through the website, sell items in stores, or sell via a mobile shopping app.
  • Step 3: Choose KPIs. For an e-commerce site, the KPIs (measurements of strategies and tactics) might include monitoring how much revenue has been generated, and the average order value from online and mobile app sales.
  • Step 4: Choose segments. It’s important to segment your data to drill down to its essence. Not all customers are the same, and it’s often helpful to segment your reporting to identify distinct market segments.
  • Step 5: Choose targets. You must define the targets for each KPI. What indicates success? Where can you do better? Isn’t that what you want to find out, after all?
  • Step 6: Implement and control. Monitor the data regularly to adjust your tactics with the trends.

A Google Analytics result page

Concluding

Lastly, one of the greatest advantages having an ecommerce website is that you can measure the activity and the behaviour of users. However, there is no advantage if you don’t measure the performance of your website and marketing strategies. Therefore, make sure that you target the right customers with the right products at the right places, and, o yes – the right prices. For that reason mastering website analytics tools such as Google Analytics may bring you close to achieve all your KPI goals. Good luck with your website analytics!

A last word from Albert Einstein “Not everything that can be counted counts, and not everything that counts can be counted.”

Read also:

  1. Predictive Analytics helps Retailers to make sense of Big Data
  2. Marketing Automation is enabled by Artificial Intelligence, Big Data and Chatbots

Note

Salini, A., Malavolta, I. and Rossi, F. 2016. Leveraging web analytics for automatically generating mobile navigation models, In Mobile Services (MS), 2016 IEEE International Conference, 103-110.

Images

Pixabay.com

Flickr.com

 

Marketing Automation is enabled by Artificial Intelligence, Big Data and Chatbots

“Marketing automation is growing – sizzling fast, announced Michael Jans recently in his blog AgencyRevolution.com. In fact, there are eleven times more B-B companies using marketing automation than were in 2011 (VBInsight). Most visible marketing automation for retail customers are chatbots.

Advancements in artificial intelligence (AI), coupled with the proliferation of messaging apps, are fuelling the development of chatbots.  Artificially intelligent chatbots or conversational agents can be used to automate the interaction between a company and customer.

What is Marketing Automation?

Marketing automation, in general, complements interactive and direct marketing with the help of automation and further on in CRM and email marketing 4. The goal of marketing automation is to target the right customer with the right content 1. To achieve this goal, the optimization of customer data – e.g. name, contact information, transactional data is critical. Consequently customers can be targeted with the right message. Therefore marketing automation allows marketers to respond instantly to identified opportunities in real-time even outside the marketing plan.

This use of marketing intelligence provides valuable management insights to markets, customers and campaigns and leads to enhanced efficiency. Also, this same use of data enables customers to receive personalized, relevant messages and offers at appropriate times. As result of this, customer experience is improved significantly. Indeed, Sarah Burke of Spokal concurs: “Marketing automation is a super effective tool when it’s used to supplement our marketing efforts in an attempt to make the lives of our customers even better”.

However, marketing automation is facilitated by Artificial Intelligence.

Artificial Intelligence

Techopedia defines Artificial intelligence (AI) as an area of computer science that emphasizes the creation of intelligent machines that work and reacts like humans. AI is becoming part of our lives ever more. Today we can ask a computer questions, sit back while semi-autonomous cars negotiate traffic, and use smartphones to translate speech or printed text across most languages. For AI to work properly, the machines or robots needed to be ‘learned’.

Machine learning is the process that offers the data necessary for a machine to learn and adapt when exposed to new data. Nello Cristianini suggests we should think of it as training a machine: “It depends on the other two methods by reading mined data, creating a new algorithm through AI, and then updating current algorithms accordingly to “learn” a new task.”

For most retailers and marketers in the digital economy, the intelligent ‘machines’ of choice are chatbots. However, chatbots are dependent on a host of interconnected and emerging technologies, many of which rely on machine learning and require massive amounts of data 3.

The use of data to enable Marketing Automation

Douw G Steyn, owner of the Bricks2Clicks (this blog) had this to say about Big Data: “One of the fall outs of the digitization of business is the massive amount of data that are everywhere. Every time a customer makes a purchase online or registers online, data is generated. The data can potentially tell you almost everything about consumers.”

Randy Bean in MITSloan commented on the use of Big Data with AI: “The impact of Big Data goes well beyond simple data and analytics. Big Data and AI in combination are providing a powerful foundation for a rapidly descending wave of heightened innovation and business disruption. While the first wave of Big Data was about speed and flexibility, it appears that the next wave of big data will be all about leveraging the power of AI and machine learning to deliver business value at scale.“

Data mining can find the answers to questions that you hadn’t thought to ask yet. What are the patterns? Which statistics are the most surprising? What is the correlation between A and B? (upfrontanalytics.com).

“Intelligent machines need to collect data – often personal data – in order to work. This simple fact potentially turns them into surveillance devices: they know our location, our browsing history and our social networks. Can we decide who has access, what use can be made of the data, or whether the data gets deleted for ever? If the answer is no, then we don’t have control” says Nello Cristianini in the New Scientist.

Chatbots as interactive conversational platforms

By definition, a chatbot is a computer program that responds to natural language text and/or to voice inputs in a human like manner 2. Chatbots can run on local computers and phones, though most of the time they are accessed through the internet (Chatbots.org). Moreover, the effectiveness of Chatbots is depended on the quality of the source data and how well they are programmed. They are after all robots! And robots need to be learned…

Once a customer starts to interact with a chatbot, the chatbot’s software identifies the customer. The chatbot will then have the demographic information of the customer, her purchasing history – such as what products she’d purchased most frequently, what time of the year she does most of her shopping, and when last did she purchased? The scope and depth of information can be never-ending.

The  of a typical conversation between a chatbot and a retail client (image: Chatbotsnewsdaily)

Eric Samson writing in Entrepreneur.com mentioned 7 benefits using chatbots as marketing tools

  1. Customer service – by providing the chatbot option for customers, you will lower the stress of dealing with customer service and increase customer satisfaction with your brand.
  2. Consumer analysis – chatbots can play a large role analysing customer data, and optimizing sales and marketing strategies in light of this analysis.
  3. Personalized ads – another chatbot strategy that’s proven to be successful is the creation of personalized ads.
  4. Proactive customer interaction – chatbots are ideal for “reach out” initiatives. To do this, the accompanying action should be something small, like inquiring whether or not the customer needs assistance.
  5. Site feedback – chatbots are great for reaching out to customers via simple questions and the gathering of feedback. This strategy is useful, especially for website optimization.
  6. Lead-nurturing – using the information that chatbots collect about a customer, you can create customized messaging that guides the consumer along his or her “buyer’s journey,” ensuring movement in the right direction that achieves higher conversion rates.
  7. Maintain a presence on a messenger act via a chatbot – by maintaining a presence on a messenger app via a chatbot, you can save money while simultaneously remaining available for your customers 24 hours a day.

According to Chatbot Conference, the 3 main disadvantages of chatbots are:

  1. Too many functions – most of developers strive to create a universal chatbot that will become a fully-fledged assistant to user. But in practice functional bots turn out not to cope with the majority of queries.
  2. Primitive algorithms – AI chatbots are now considered the best as they can respond depending on the situation and context. However, complex algorithms is required for this purpose. Meanwhile, only IT giants and few developers possess such powerful technological base.
  3. Complex interface – talking to a bot implies talking in a chat, meaning that a user will have to write a lot. And in case a bot cannot understand the user’s request, he will have to write even more. It takes time to find out which commands a bot can respond to correctly, and which questions are better to avoid. Thus, talking to a chatbot does not save time in the majority of cases.

Concluding

With Big Data, Artificial Intelligence and Chatbots there aren’t a clear ‘pecking order’. The Upfront Analytics Team explain it as such: “Data mining, artificial intelligence, and machine learning are so intertwined that it’s difficult to establish a ranking or hierarchy between the three. Instead, they’re involved in symbiotic relationships by which a combination of methods can be used to produce more accurate results.”

The speed at which technology is moving forward – “software is developing software” and “machines are building machines” an affordable, practical usable chatbot for customer care and marketing is not far away…

Read also:

  1. Predictive Analytics helps Retailers to make sense of Big Data
  2. Chatbots in Retailing – a Fact or a Fad?

Notes

1 Mattila, J. 2016. Customer experience management in digital channels with marketing automation, Master Thesis, University of Oulu, Department of Information Processing Science.

2 D’Haro, L.F. and Lue, L. 2016. An Online Platform for Crowd-sourcing Data from Interactions with Chatbots. Proceedings of WOCHAT, IVA.

3 Etlinger, S. 2017. The conversational business: How chatbots will reshape digital experiences, Altimeter.

4 Sandell, N. 2016. Marketing automation supporting sales, Master’s Thesis, University of Jyväskylä.

Image

Pixabay

 

The Value Proposition for Bricks and Clicks Retailers

I’m not aware of one retailer that does his/her business without customers. Indeed, retailers that have plenty of loyal customers enjoy a competitive advantage and are doing well. So, how do they do it?  Retailers with a clear and effective value proposition at least know who their customers are, what they want and need and why are they coming back. Above all, retail customers can also be found online…

With the advent of the internet and subsequent social media networks, the way that retail customers interact with retailers, products, and patrons has changed. In fact, in today’s tech savvy society, shoppers have access to brands 24/7, from websites to mobile apps to storefronts. Therefore Bricks and Clicks retailers (retailers that use both the physical and online retail channels) need to develop a value proposition for their store and online customers.

What is a value proposition?

A value proposition is an entire set of experiences, including value for money that an organization brings to customers 1. Importantly, customers may perceive this set or combination of experiences to be “superior, equal or inferior to alternatives”.

The customer value proposition can also be explained by this equation: value = benefits less (-) costs. The equation suggests that customer value comprises positive consequences (benefits) and negative consequences (costs). When customers perceive greater benefits than sacrifices, customer value is created 2. Perceived benefits and costs for retail customers are shown in the Table below.

Customer perceived benefits Customer perceived costs
Transactional – lower prices, lower interest rates; Monetary – maintenance costs, running costs, disposal costs;
Relational – product quality, service support, delivery, personal interaction Learning costs – time and money needed to learn how to use a product;
Functional – finding the right products, convenient shopping hours. Logistics costs – delivery costs, time to deliver.

How do customers perceive value?

Customers perceive value on the benefits of the product or service they receive. Consequently, as the environment changes, and the customer experience and their needs change, the value they seek also changes. Before the advent of the internet, retailers that had the most knowledgeable sales persons were valued by customers, especially when they shopped for specialty products. However, nowadays, in the digital era, customers can not only get comprehensive product information online, but they also can read product reviews and compare prices.

Retailers need therefore to communicate their value proposition also in the online channel, through their websites and in social media networks.

The value proposition for online customers

Retail customers are rapidly engaging in the online channel. Indeed, there are, according to Dr Dave Chaffey, Smart Insights, 27 Apr, 2017, 2.8 billion active social media users. With these billions of social media users, retailers are no longer in control of customer relationships. Instead, customers and their highly influential virtual networks are now driving the conversation, which can trump a retailer’s marketing, sales and service efforts with their unprecedented immediacy and reach 3.

Kumar and Reinartz 4, 2016 said the following about how customers perceive value online:

For many online services (e.g., Google Maps, Facebook), customers are not expected to pay in monetary terms. The core benefit is free of monetary charge from the end user’s perspective. The monetization comes mainly from advertising revenues, with ads targeted at narrow segments or personal individual profiles. However, in the context of digitization, a new cost related aspect has been emerging.

“Customers now have to understand the value of the personal information that they will give up in this exchange. Thus, customers pay in terms of less privacy instead of monetary outlays. In fact, some customers value privacy of personal information privacy so much that they would be willing to pay to preserve privacy – this then creates a market for privacy” concluded Kumar and Reinartz 4.

What if you don’t have a value proposition yet?

The purpose of retailers is to create value for their customers. Therefore a value proposition equates to a positioning statement because it defines “who is the target customer?” as well as “why should the customer buy it?” and “what are we selling?” 2. According to Rintamäki, Kuusela and Mitronen, 2007, a value proposition should:

  • Increase the benefits and/or decrease the sacrifices that the customer perceives as relevant;
  • Build on competencies and resources that the company is able to utilize more effectively than its competitors;
  • Be recognizably different (unique) from competition; and
  • Result in competitive advantage.

GetToGrow mentioned the following advantages of a value proposition

  1. Gives direction. A value proposition gives you direction by defining your ideal target audience right up-front, and then identifying and understanding a core need that you look to satisfy with your planned solution.
  2. Creates focus. A robust value proposition gives you and your team focus by identifying the fundamental initiatives, activities and aspects of your business that will have the greatest impact on meeting your defined target audience’s needs.
  3. Breeds confidence. Confidence comes from knowing that you’re making a difference to the people that you’re serving, that you’re doing so in a way that’s meaningful to them, and that your actions are aligned to delivering an overall remarkable experience.
  4. Improves customer understanding and engagement. By grounding your solution in an understanding of your audience and their specific need, you can engage with them in a much more compelling and effective manner.
  5. Provides clarity of messaging. The value proposition frames not only how you’re creating value for your audience by addressing a core need, but critically why your solution is better than what they are currently doing or using, or versus whatever else is potentially out there that could do so.
  6. Increases effectiveness of marketing. By truly understanding your desired customers and their core need that you’re solving for, you’re able to focus on the channels and vehicles that are most relevant, and will effectively communicate the benefits and advantages of your solution.

Concluding

Retailers that know and understand their customer’s needs, want and wishes the best can communicate a superior value proposition to them. By using ‘big data’ or your internal sources of customer data, your firm’s value proposition can be customized and personalized. However, care should be taken not to infringe on the individual’s privacy.

Further reading:

Implementing Social Customer Relationship Management in Retail

Video: Value Propositions and Positioning

 

Notes:

1 Hassan, A. 2012. The value proposition concept in marketing: How customers perceive the value delivered by firms–A study of customer perspectives on supermarkets in Southampton in the United Kingdom, International journal of marketing studies, 4(3):68.

2 Rintamäki, T., Kuusela, H. and Mitronen, L. 2007. Identifying competitive customer value propositions in retailing, Managing Service Quality: An International Journal, 17(6):621-634.

3 Heller Baird, C. and Parasnis, G. 2011. From social media to social customer relationship management, Strategy & Leadership, 39(5):30-37.

4 Kumar, V. and Reinartz, W. 2016. Creating enduring customer value, Journal of Marketing, 80(6):36-68.

Image:

Flickr.com

Implementing Social Customer Relationship Management in Retail

One of the most important goals for retailers is to maintain long-term and profitable relationships with their customers. The construct Customer Relationship Management (CRM) started when retailers moved the orientation of their business from their companies to their customers. However, the advent of the internet, Web 2.0, and online social networks have disrupted the traditional way that retailers communicated with their customers.  Hence, Social Customer Relationship Management (SCRM) came to the fore because of the emergence of a “social customer”.

Social customers comprise the 2.8 billion* active social media users (Dr Dave Chaffey *, Smart Insights, 27 Apr, 2017). With these billions of social media users, retailers are no longer in control of customer relationships. Instead, customers and their highly influential virtual networks are now driving the conversation, which can trump a retailer’s marketing, sales and service efforts with their unprecedented immediacy and reach 1. However, social media needn’t to be a threat for retailers. Indeed, retailers that learn how to use social media technology to their advantage can gain valuable insights about the demographics and buying behaviour of their customers.

The use of technology for successful Social Customer Relationship Management

Social networks offer retailers practicing Social Customer Relationship Management masses of customers who group themselves around a brand 2. It is here, in these networks, that retailers can study the community’s behavior toward a brand or firm beyond purchase. The data originate from motivational drivers such as word-of-mouth activity, recommendations, customer-to-customer interactions, blogging, and the writing of reviews 3.

But retailers haven’t yet realized the opportunities of using their own data resources for Social Customer Relationship Management. Sandra Gittlen, mentioned  the following recently in CIO: “In an age where most companies have a social media presence on platforms such as Facebook, Twitter, LinkedIn, Snapchat and Instagram, it’s somewhat surprising that many still haven’t figured out how to turn the data gathered from company-owned properties and broader social media listening tools into automated and actionable intelligence”.

Trainor, Andzulis, Rapp and Agnihotri, (2014) 4 identified four functional blocks enabled by social media technology that are particularly relevant in a CRM context:

  1. Sharing – refers to technologies that support how users exchange, distribute, and receive digital content (e.g., coupons, texts, videos, images, “pins” on Pinterest, etc.). This is similar to the concept of information reciprocity – the activities and processes that encourage customers to interact and share information – which has been shown to positively influence a firm’s ability to manage relationships.
  2. Conversations – represents technologies that facilitate a firm’s interactive dialog with and between customers (e.g., blogs, status updates on Facebook and Twitter, discussion forums, etc.) and capture the information from these dialog.
  3. Relationships – represents the set of technologies that enables customers (and businesses) to build networks of associations with other users (e.g. Facebook, LinkedIn, Ning, Yammer, etc.) and allows organizations to utilize this network information.
  4. Groups – represents the set of technologies that support the development of online user communities centered on specific topics, brands, or products. Examples include SalesForce.com’s Ideaforce and Igloo’s Customer Community application software.

Integrating your Social Customer Relationship Management program with your marketing automation

SCRM deals with the strategies, processes and technologies that retailers can use to link the social web with their CRM strategy. According to Reinhold and Alt, (2012) 5, SCRM poses a challenge for large firms with numerous employees, market offerings and offices. Consequently, they need to discover the relevant conversation threads, synchronize information flows, initiate the appropriate actions and communicate at an individual level within millions of social web conversations.

However integrating SCRM with marketing automation is not impossible – you only need to start right. Malinda Wilkinson (DestinationCRM.com) advises that it’s important that your technology should always follow your process, not precede it. “Without this integration, it is difficult to create a consistent experience for your prospects and customers. And on top of that, too much time and too many resources will be drained trying to coordinate activities to ensure leads don’t fall through the cracks”, concludes Malinda.

Fitting your Social Customer Relationship Management program with your business philosophy

The success of an effective CRM system depends on the background marketing methods and business philosophy 2 of retailers. Therefore customer centricity should become the new strategic goal, where retailers build their brand and image together with their customers.

Linda Shea in AdAge.com proposes the following to become and remain a customer centric company:

  • Executives need direct interaction with customers. The key to executive buy-in, commitment and active support is first-hand knowledge and understanding of what is delivered to the customer, relative to their needs and desires.
  • All employees need to embody the intended customer experience. A narrative must be cascaded down to every single individual in the organization. Your employees must clearly understand their role in delivering the promise the narrative makes to the end customer.
  • Just say “no” to off-strategy ideas. Excitement abounds in most organizations with ideas and fresh thinking that may lead to new revenue streams. However, it is imperative to recognize that customer-centricity is not a destination but rather a multi-faceted, multi-year journey that will require laser-sharp focus, commitment and investment.

Concluding

Retailers that are not with their customers on the social networks will soon run out of customers. The Social Customer Relationship Management construct is customer centric by definition, giving retailers the opportunity, with the aid of marketing automation, to be part of the social media cloud.

Further reading:

  1. Finding Customers in the Vastness of the Internet
  2. Predictive Analytics helps Retailers to make sense of Big Data
  3. Demise of Loyal Retail Customers in the Digital Age

Notes:

1 Heller Baird, C. and Parasnis, G. 2011. From social media to social customer relationship management, Strategy & Leadership, 39(5):30-37.

2 Bagó, P. and Voros, P. 2011. Social customer relationship management, Global Journal of Enterprise Information System, 3(3):35-46.

3 Yoon, K. and Sims, J.D. 2014. Integrating Social Media and Traditional CRM: Toward a Conceptual Framework for Social CRM Practices, Harnessing the Power of Social Media and Web Analytics, IGI Global, Chapter 5:103-131.

4 Trainor, K.J., Andzulis, J.M., Rapp, A. and Agnihotri, R. 2014. Social media technology usage and customer relationship performance: A capabilities-based examination of social CRM, Journal of Business Research, 67(6):1201-1208.

5 Reinhold, O. and Alt, R. 2012. Social Customer Relationship Management: State of the Art and Learnings from Current Projects. In Bled eConference, 155-169.

Image:

Flickr.com

 

Webrooming and Showrooming – Buying Behaviors of Retail Customers in Virtual and Physical Environments

Webrooming and showrooming are popular jargons that describe how retail customers use different combinations of online and physical channels to search for information about products, corroborate this information and make the purchase 4. These customers are tech savvy and they use their mobile phones to great effect to help them to decide what to buy where and at what price.

Both Bricks and Mortar retailers and Clicks Only retailers were slow to react to the changes in the buying behavior of their customers. However, Bricks and Mortar retailers are now adding the online channel to their business and Clicks Only retailers are opening physical stores. The adoption of the omnichannel by retailers couldn’t happened sooner. Hence Bricks and Clicks retailers…

Brain Eisenberg, quoted by ClickZ said that “Retail does not exist without an online component and online retail isn’t as cost-effective if you don’t have a brick-and-mortar component.” “We’re connected all the time through the phones in our pockets, but we live in a physical world”, said Eisenberg.

Webrooming and showrooming

Showrooming

Most of us has done showrooming at least once before. Showrooming is when you visit a store, saw a product you like, but then purchase it online instead of from the store 1. According to Douw G Steyn, author at Bricks2Clicks, the advent the internet has led to the adoption of innovative digital technology and the rolling out of broadband mobile connectivity.

At the same time, consumers quickly learned how to use mobile devices to compare products and prices when shopping 2.  These tech-savvy consumers are changing the fundamental consumer-retailer relationship and showrooming is fast becoming a problem plaguing the retail industry.  In the past few years, as online shopping exploded and smartphones became the norm, the showrooming phenomenon — consumers using their phones to comparison shop in stores — seemed poised to gut the revenue of offline retailers.

The real hurdle, though, is pricing writes Ann Zimmerman in the Wall Street Journal 5. “Lower prices are one of the main reasons people pick Amazon and other internet-only emporiums over traditional retailers” said Ann.

Machavolu and Raju, 2014 6 advice retailers to do the following to counter showrooming:
  1. Adopt a Collaborate-and-Coordinate business model. In today’s business set-up, manufacturers and retailers, both are working in different silos and eventually end up contending against each other. But it will be fine if both operates together to offer customized solutions that exactly suits their shoppers’ needs.
  2. Treat customization as the mantra for success. Customization programs can only be successful when retailers believe they are a key areas of focus for all their staff. Treating the programs as only a ‘side task’ may result in mediocrity and leave the retailers worst off than before.
  3. Lay emphasis on customer experience. The new age customers want themselves to be part of the process while the product is being planned, developed or delivered, hence companies must focus on getting their customers involved in doing so.

Luo, et al (2014) 2 have identified two measures that retailers can take to influence shoppers’ intention to showroom, namely 1) to reduce the online-offline price difference and 2) to improve the level of employee knowledge competency. Webrooming is nowadays recognized as an opportunity that retailers can use to counter the showrooming phenomenon.

Webrooming, which is similar (but opposite) to showrooming is a manner which customers use to help them in making their buying decisions.

Webrooming

Webrooming is the opposite of showrooming.  Showrooming is when you’re standing in a store, and you pull out your smartphone to see if you can get a better price online. However, webrooming is when you’re searching online, check what item you like and go to the store to pick it up 3.

“Webrooming is actually nothing new. Since the early days of online shopping, more people have researched their shopping online than have actually bought there”, says Emily Adler in Business Insider. Emily highlighted results from a recent report from BI Intelligence:

  • Webrooming is more common than showrooming. In the U.S., 69% of people practice webrooming, while 46% do showrooming.
  • The data shows that millennials prefer webrooming. For electronics, shoes, sports equipment, and cosmetics, more millennials say they prefer to webroom, rather than research in store and then buy online.
  • Amazon remains the No. 1 place where showroomers end up making their purchases. But it’s an even more popular destination for webroomers who ultimately buy elsewhere.
  • Only recently have Bricks and Mortar retailers begun to capitalize on webrooming. They’re using tactics like knowledgeable sales staff, in-store pick-up of online orders, in-store Wi-Fi, and smartphone discounts that nudge showroomers to buy in-store.
  • New initiatives for the connected in-store experience keep popping up: tablets and mobile phones used as register systems. Also robotic arms that deliver clothing into dressing rooms, and beacon hardware, which powers in-store maps and automatic hands-free payments.

Concluding

It seems that retailers are starting to catch up with the buying behavior of their tech savvy customers. Whether their customers are webrooming and showrooming , the retailer’s main goal should be to get the sales through their businesses.

Notes:

1 Quint, M., Rogers, D. and Ferguson, R. 2013. Showrooming and the rise of the mobile-assisted shopper, Columbia Business School, Center on Global Brand Leadership.

2 Luo, Q., Oh, L.B., Zhang, L. and Chen, J. 2014. Examining the Showrooming Intention of Mobile-Assisted Shoppers in a multichannel Retailing Environment, In PACIS (p. 141).

3 Nesar, S. and Sabir, L.B. 2016. Evaluation of Customer Preferences on Showrooming and Webrooming: An Empirical Study, Al-Barkaat Journal of Finance & Management, 8(1):50-67.

4 Flavián, C., Gurrea, R. and Orús, C. 2016. Choice confidence in the webrooming purchase process: The impact of online positive reviews and the motivation to touch, Journal of Consumer Behaviour, 15(5):459-476.

5 Zimmerman, A., 2012. Can retailers halt ‘showrooming’, The Wall Street Journal, 259:B1-B8.

6 Machavolu, M.S.K. and Raju, K.V.V. 2014. Showrooming: The Next Threat to Indian Retail, MITS International Journal of Business Research, 1(1):1701.

Image:

Flickr.com

Thinking About Competing With Amazon.com? Think Again…

Competing with Amazon.com may prove to be a difficult if not an impossible challenge. You are up against an extraordinary company led by an extraordinary leader.

“Your margin is my opportunity”, dares Jeff Bezos, the founder, chairman, and chief executive officer of Amazon.com. According to Jessica Stillman, contributing for INC. , Jeff sees a competitor’s love of margins and other financial ‘ratios’ as an opportunity for Amazon. Says Jeff: “The competitor will cling to them while he focuses on absolute dollar free cash flow and slices through them like a hot knife through butter.”

The migration of Amazon.com from a sole online retailer (Clicks Only) to physical locations (Bricks and Clicks stores) is perceived by many retailers, big and small, as a threat to their existence. However, incumbent retailers can learn much from how Amazon.com conducts their business. Amazon.com is now an omnichannel retail giant that makes the most of the opportunities that digital technology in the new economy offers – showing the way for others to follow.

George Parker has recently converted from an Amazon hater to an Amazon admirer. George writes in Business Insider: “But perhaps the thing that impresses me most about Amazon’s unconventionality is its ability to structure its business model in unexpected ways. Because of the massive volume of product it sells 24/7/365, Amazon maintains 80 enormous warehousing and fulfillment centers scattered around the known universe.” Amazon.com is an uncompromising competitor with an unconventional business model.

How on earth can retailers compete with that?

Where is Amazon.com coming from?

Amazon.com was founded during 1995 and started as a website selling only books. They started out as an online bookstore and grew patiently but significantly to be the world’s largest online retailer. Being one of the few companies that survived the “dot.com” crash during 2000, Amazon.com made their first yearly profit during 2003. Net profit came in at $35 million, or 8 cents per share, compared with a net loss of $149 million, or 39 cents per share, in 2002 (Quora.com).

NASDAQ reported Amazon’s net income for 2016 was an impressive $2.37 billion. This income was mainly coming from its online retail business. RetailDive recently reported that Amazon dominates online sales traffic with an equal or greater share of sales compared to all other e-commerce sites combined, when measured across 11 retail categories. Indeed better than all the rest.

What is Amazon doing now?

Amazon.com is on a buying spree in the Bricks and Mortar retail market. They’ve also came to realize that adding Bricks to Clicks is the future of retailing. Richard Kestenbaum, contributing for Forbes concurs: “Now even Amazon has recognized that online alone is not going to work. In order to succeed in grocery, there will have to be a symbiosis of online and physical stores.” There seems no stopping from Amazon buying Bricks and Mortar retailers.

Competing with Amazon.com is getting more difficult. The Seattle giant launched a radical assault by acquiring a brand-name high-end grocery chain with 456 stores in the U.S. (436), Canada (11), and the United Kingdom (9). Whole Foods also owns three distribution centers (Brad Thomas, Forbes).

So, Amazon is now becoming a true Bricks and Clicks retailer and you will most probably have to compete with it. What are Bricks and Clicks retailers up against when competing with Amazon?

Competing with Amazon.com – the last crusade or new horizons for retailers?

Amazon’s business model is a formidable one, with deep moats on multiple fronts that make it tough for competitors to gain ground. The only way to stop Amazon is to either beat AWS [free Amazon Web Services], which holds a commanding lead in the cloud platform market, or replicate Amazon’s multi-layered Prime strategy [offering tons of benefits on Prime memberships]; (Leo Sun, The Motley Fool).

Kavadias, Ladas and Loch, (2016) have identified six recurring features in the business models of companies (also Amazon.com) that were successful in transforming their industries:

  1. A more personalized product or service – many new models offer products or services that are better tailored than the dominant models to customers’ individual and immediate needs. Companies often leverage technology to achieve this at competitive prices.
  2. A closed-loop process – many models replace a linear consumption process (in which products are made, used, and then disposed of) with a closed loop, in which used products are recycled. This shift reduces overall resource costs.
  3. Asset sharing – some innovations succeed because they enable the sharing of costly assets, e.g. Uber shares assets with car owners. Maybe independent retailers can share assets across the supply chain – what about sharing warehouses, or delivery services?
  4. Usage-based pricing – some models charge customers when they use the product or service, rather than requiring them to buy something outright. The customers benefit because they incur costs only as offerings generate value. The company, on the other hand, benefits because the number of customers is likely to grow.
  5. A more collaborative ecosystem – some innovations are successful because a new technology improves collaboration with supply chain partners and helps allocate business risks more appropriately, making cost reductions possible.
  6. An agile and adaptive organization – innovators sometimes use technology to move away from traditional hierarchical models of decision making. In order to make decisions that better reflect market needs and allow real-time adaptation to changes in those needs. The result is often greater value for the customer at less cost to the company.

Independent or small retail chains need to “think outside the box”. Maybe you should pool your resources and thereby establishing a critical mass to counter the likes of Amazon.com. Also, your location and local knowledge may be a substantial niche – be the first to explore it!

Concluding

Competing successfully with Amazon.com will probably be not viable for independent or small retail chains. Best is to learn Amazon successes and failures and use that knowledge to compete locally in a niche market.

Further reading: Amazon.com and Walmart – Set to Face Off in the Omni-Retail Channel Space

Note

1 Kavadias, S., Ladas, K. and Loch, C. 2016. The transformative business model, Harvard Business Review, 94(10):90-98.

Image

Flickr.com

 

Order Fulfillment in Omni-Channel Retail – the “Last Mile Delivery” most Retailers Fail to Complete

Shoppers expect a seamless shopping experience — no matter where they are, what device they are using, or how they choose to shop. Order Fulfillment in Omni-Channel Retail – taking the right product, putting it in the right box, shipping it, and gaining the customer’s approval – is a demanding task.

It is a demanding task, because customers in the retail omni-channel demand near perfect delivery of their products. Kirby Prickett speaks of the “last mile delivery” of eCommerce: “The last mile delivery is a metaphor used to describe the movement of goods from a fulfillment center to their final destination.”

The last mile delivery is the place where business success or failure for omni-channel retailers is mostly decided. Thirumalai and Sinha 1, (2005) suggest that “it is here – in the down-and-dirty details of consumer direct order fulfillment – that the epic battles for domination of the e-commerce marketplace will ultimately be won or lost.”

Success with order fulfillment in omni-channel retail may give a retailer a sustainable competitive advantage – take the dominance of Amazon.com as an example. However, to compete with Amazon, the average retailer needs bags of money and the greatest employees in the industry.

A more realistic approach for retailers is to have a critical look at their own order fulfillment processes, the last mile delivery, and fix what is not working.

The challenge of Order Fulfillment in Omni-Channel Retail

Indeed, Order Fulfillment in Omni-Channel Retail is a huge challenge for retailers. Results from a recent survey done by Radial with the help of EKN Research showed that 37 percent of CEOs questioned cited that their inventory order and supply chain operations are not properly aligned.

Retailers with physical shops or “Bricks and Mortar” (BM) retailers that added the online channel to their business becoming “Bricks and Clicks” (BC) retailers, have additional challenges. One of the challenges is to align their traditional store-based distribution processes with the requirements of the online channel 2.

Tony Evans from GLOMACS Training & Consulting highlighted the differences in logistic processes between Bricks and Mortar retailers and online retailers (OR):

  • Order size – BM retailer’s orders are counted in cases, picking is run per shipment and picked goods are ready for dispatch without additional handling. In contrast, OR’s orders are rather small including just a few items per line.
  • Warehousing operations – the picking system suitable for BM is not efficient for OR. A common characteristic for both channels is the high labor costs.  Therefore companies need to decide whether to keep the stock for all channels in one regional distribution center (RDC) or to keep them separated to avoid confusions and inefficiencies.
  • Technology – modern retail companies (e.g. BC retailers) are investing in new technologies to optimize logistics operations to give them a competitive advantage. Warehouse Management Systems integrated with Enterprise Resource Planning Systems and Transport Management System are essential for e-commerce operations. These systems provide real time information about the inventory level and estimated delivery time that may help customers during their purchase process.
  • Order fulfillment – BM shopping gives customers the opportunity to verify the products that they have purchase before they put them into a shopping basket. In OR operations any error in order fulfillment results in returns and problems in customer retention.  Potential errors are related to wrong item picked and packed, quality issue or late delivery.
  • Transport planning – orders that OR receive are mostly small in size. Therefore one truck typically delivers parcels in a wide area to various customers. These fragmented deliveries require retailers to plan their dispatching and delivery scheduling efficiently.
  • Network design – BM retailers choose the location of regional distribution centers (RDCs) to serve as a ‘center of gravity’ for the region and for heavy vehicles to have easy access. Hence the RDCs are usually located outside urban areas.  On the other hand, having picking centers close to urban areas work better for OR retailers. That is to do timely next-day or even same-day order fulfillment.

What cause the problems in the last mile of Order Fulfillment in Omni-Channel Retail?

Arsh Sing posting on the TOOKEN site, list a number of possible causes for problems in the last mile of Order Fulfillment in Omni-Channel Retail:

  • Poor infrastructure – especially in developing countries, poor transportation infrastructure inevitably means long journeys, inefficient routes, inefficient transportation technology, etc. All of these compound and translate into woeful costs and time lags, which may be otherwise circumscribed.
  • B2B vs B2C deliveries – now if you’re transporting a huge B2B delivery, the extra costs and wasted time may still be worth it. However, as is often the case in urban areas, especially with B2C deliveries, the costs of fuel and time wastage must be borne for just one package.
  • Types of goods – occasionally, even the type of goods can make add to the challenges of last mile delivery. For instance, toxic, fragile, perishable or flammable items call for more planning.
  • Customer nuances – phenomena like incorrect address, remote locations, cramped locations, absence of the customer to receive the package, whimsical cancellations of orders, returning orders, etc. These nuances ensure that the factors affecting potential costs of the last-mile cannot be accurately anticipated.

How can retailers improve the last mile of Order Fulfillment?

According to Jim Tompkins, Chief Executive Officer, Tompkins International, the correct approach for retailers to get the last mile of delivery right is to focus first on strategy, then on structure, followed up by implementing the systems you need. However, Melicia Morris and Dan Rottenberg writing for Retail Law Advisor have a pragmatic approach to help solve challenges in last mile of delivery:

  1. Creating a fulfillment center – a fulfillment center allows customers, who place online orders, the ability to pick up their items at a nearby physical location. Along with decreasing the shipping costs, the benefits include faster delivery of merchandise and the leveraging of existing store personnel.
  2. Constructing brick-and-mortar buildings – where customers familiar with their products and service can both shop and receive their deliveries.
  3. Implement automated locker systems – to address customer deliveries.
  4. Using drones – to deliver packages via parachute, though the method presents issues of both safety and efficiency.

Concluding

Online shoppers want to receive their goods as soon as possible. Parcel delivery has become a very powerful marketing leverage for your e-commerce. According to Mélanie Vaast from ECN about 37% of online shoppers who face a poor delivery experience blame the online seller itself and never shop again on its website. The concept of last kilometer represents a daily challenge for online stores owner in a very competitive market.

Notes

1 Thirumalai, S. and Sinha, K.K. 2005. Customer satisfaction with order fulfillment in retail supply chains: implications of product type in electronic B2C transactions, Journal of Operations Management, 23(3):291-303.

2 Ishfaq, R. and Raja, U. 2017. Evaluation of Order Fulfillment Options in Retail Supply Chains, Decision Sciences.

Image

Pixabay

 

3D Printing Technology for Retailers – An Opportunity or a Waste of Money?

3D printing technology for retailers is now emerging as an outcome for small localized retailers that are facing closure. However, as it is with most disruptive technologies, the advantages that 3D printing offer for retailers should be weighed against its potential pitfalls.

Although the 3D printing technology has been used for a number of years, it has been mostly on an industrial scale. Meanwhile, the price of desktop 3D printers has started to come down resulting in an average annually growth rate of 170% since 2008 1. The door is now starting to open for innovative retailers to include 3D printing technology into their business models. As a result, brave small retail store owners have already started using in store 3D printing.

3D printing is a game changer in retailing, according to Richard Kestenbaum, contributing for Forbes. Richard writes: “Last week Ministry of Supply installed a machine in its Boston store that can make a garment on demand in 90 minutes (with finishing done offline after the garment is created). The machine can be set to make garments all day and night or it can be instructed to make a garment to a specific customer’s design, allowing customers to customize the colors they want in the garment.”

Let’s have a look how 3D printing works…

How does 3D printing works?

3D printing, also known as additive manufacturing (AM), refers to processes used to create a three-dimensional object in which layers of material are formed under computer control  (Wikipedia). According to Berman (2012), 3D printers work in a manner similar to traditional laser or inkjet printers. Rather than using multi-colored inks, the 3D printer uses powder that is slowly built into an image on a layer-by-layer basis. All 3D printers also use 3D CAD software that measures thousands of cross-sections of each product to determine exactly how each layer is to be constructed 2.

3D printing uses such raw materials as plastics; resins; super alloys, such as nickel-based chromium and cobalt chromium; stainless steel; titanium; polymers; and ceramics. Examples of products that are manufactured by 3D printing includes artwork, automotive parts, ductwork for a mobile hospital, sand cores for automotive engine block castings, architectural models, dental bridges, jewellery, ball bearing assemblies, and gear assemblies 4. But how can retailers use 3D printers to their advantage?

3D Printing technology for retailers – a 3D-printed product out of a desktop printer

What are the opportunities of 3D printing technology for retailers?

Cremona, et al. (2016) identified the following points on how 3D printing may influence a firm’s strategy:

  • Process innovation:
    • Delivery time of the product: the time to market is extremely reduced, to the extreme that it might become real time.
    • Product development process: is optimized because adjustments are made in a faster and less costly way.
    • Quality and flexibility: is under the control of the retailer with 3D printing.
    • Satisfaction of the single customer demand: personalized products are added to the platform.
  • Customer’s value:
    • Brand awareness: a close collaborative relationship is established between the retailer and the customers thanks to usability testing.
    • Customer’s loyalty: offering customized, personalized products may help clients to feel special.
  • Product platform enhancement:
    • Pushing the limits of traditional manufacturing machines: now new products can be developed also in a different approach and materials are added instead of subtracted.
    • Personalized modules: products can be designed and delivered exactly how the customers want them.
  • Sustainable competitive advantage:
    • Differentiation strategy: carrying out projects on demand makes the retailer to perform a differentiation strategy. It aims at delivering the most technologically advanced product, which is a unique solution with a unique design for each customer.
    • High specialized production know-how: allow companies to actually integrate 3D printing in the product life cycle. In doing so, an additional service is provided.

The most important strategic advantages that 3D printing offer small local retailers are customization, personalization and control over the supply chain. But what are the pitfalls of 3D printing?

What are the pitfalls of 3D printing technology for retailers?

3D printing is in the introduction phase of its life-cycle in the retail industry. Subsequently there will be a lot of surprises (good and bad) as the technology gets adopted more widely.

Shaleen recently blogged in inkjetwholesale.com.au the following of disadvantages of 3D printing:

  1. Scale and size limitations – you can’t print multiple objects of the same type at the same time.
  2. The absence of economies of scale – because every object or product is printed individually.
  3. Cost of buying and setting up a 3D printer – the initial cost still remains something of a roadblock for most businesses and individuals.
  4. 3D printed objects may require heavy duty post processing – it isn’t only the lack of polish that is the problem but also the possible dimensional inaccuracy.
  5. Large scale adoption of 3D printing will result in significant job losses – every new invention ends up taking away jobs amongst the masses.

According to Beck and Jacobson (2017), legal implications may include what is exactly a product, who is the manufacturer, what is the marketplace, and who should be potentially liable for a defective 3D-printed product (once “product” is defined).

At the end of the day, the most important aspect of 3D Printing technology for retailers is whether the customers will accept or reject it.

What do customers think of 3D printing technology in retail stores?

Retail Customer Experience recently reported results of a survey by self-service solutions company Interactions on what shoppers want from retail technology. The study, “What Shoppers Want from Retail Technology,” surveyed more than 1,000 adult shoppers. Of those polled, 84 percent expect retailers to successfully use tech features and functionality to boost the shopping experience and 62 percent are motivated to shop after an initial human greeting when entering a store. Importantly is what the respondents said about 3D printing in shops…

“According to the survey, 95% of shoppers said they were eager to buy products that were 3D printed, and 79% said that they would even spend more money at a store that offered product customization through 3D printing.”

Wow, really? I think we should end (or start) here…

Concluding

Lastly, 3D printing technology for retailers is a genuine disruptive digital technology that may (or will) turn the retail industry upside down. There are many recent examples of disruptive technologies that changed the rules of the retail game. As the costs of buying and setting up 3D printing technology are getting less, more retailers will adopt the technology. Indeed, if you invest now in the technology, you’ll be an early adopter and enjoy (localized) market leadership. Consequently, you’ll have to battle through the growing pains of the technology. On the other hand, by waiting a bit longer, laggard retailers my get 3D printers for a bargain, but at that time, probably, the customers will already be with the pioneers.

Video: The 3D printing process

Notes

1 Li, Y., Linke, B.S., Voet, H., Falk, B., Schmitt, R. and Lam, M. 2017. Cost, sustainability and surface roughness quality – A comprehensive analysis of products made with personal 3D printers, CIRP Journal of Manufacturing Science and Technology, 16:1-11.

2 Berman, B. 2012. 3-D printing: The new industrial revolution, Business horizons, 55(2):155-162.

3 Cremona, L., Mezzenzana, M., Ravarini, A. and Buonanno, G. 2016. How additive manufacturing adoption would influence a company strategy and business model, MIBES Transactions, 10(2):23-34.

4 Conner, B.P., Manogharan, G.P., Martof, A.N., Rodomsky, L.M., Rodomsky, C.M., Jordan, D.C. and Limperos, J.W. 2014. Making sense of 3-D printing: Creating a map of additive manufacturing products and services, Additive Manufacturing, 1:64-76.

5 Beck, J.M. and Jacobson, M.D. 2017. 3D Printing: What Could Happen to Products Liability When Users (and Everyone Else in Between) Become Manufacturers, Minn. JL Sci. & Tech., 18:143.

Images and video

  1. Commons.wikimedia.com; https://commons.wikimedia.org/wiki/File:3D_print_in_process_(9437659715).jpg
  2. Proto3000