Tag Archives: bricks and mortar

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

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

 

Demise of Loyal Retail Customers in the Digital Age

Loyal retail customers have for long now given Bricks and Mortar (BM) retailers an advantage over their competitors. However, the advent of the internet and the subsequent development of the online shopping channel have changed the shopping behaviour of retail customers.

Although BM retailers have invested millions of dollars in customer loyalty programs, the convenience, speed and assortment of products customers enjoy online lured many loyal customers away. This is apparent with the closedown of thousands of retail stores, and the vanishing of well-known retail brands over the last couple of years.

The big challenge for BM retailers is to the get customers back to their stores. Thereafter, the retailers should have a strategy in place to keep them coming back. In other words, making their customers loyal again…

What are loyal retail customers?

Customer loyalty is according to PR Loyalty Marketing both an attitudinal and behavioral tendency to favor one brand over all others. This may be due to satisfaction with the product or service, its convenience or performance, or simply familiarity and comfort with the brand.

Loyalty is formed in four stages 1 – cognitive, affective, conative, and action.

  1. Cognitive loyalty – in the first loyalty stage, consumers develop value expectations and preference for one brand relative to other available alternatives.
  2. Affective loyalty – here the consumers begins to develop a liking or attitude towards the brand based on an increasingly satisfying experience with the brand.
  3. Connotative loyalty – the third stage, which is confined to consumer’s behavioral intention. The consumer has deeply held commitment to buy the brand.
  4. Action loyalty – is where the desire and intention in the previous loyalty state has translated into realistic loyalty actions or behaviour.

It takes time, money and commitment from retailers to get loyal retail customers. This process, mostly took place at the BM retailer’s store in the local shopping center. However, retail customers in the digital age can shop anywhere, at any time, at the best price.

So, BM retailers need to rethink their customer loyalty programs. They need to find out what “delights” their customers. How has the internet and the online retail channel affected their shopping behaviour in the retail stores?

Loyal retail customers in multi-channel retail

Retailers can nowadays rely only on more than one channel to do business with. As a result, most BM retailers adopted eCommerce to become Bricks and Clicks retailers. Online retailers, on the other hand, started to open physical stores to serve as showrooms for their products. Indeed, loyal retail customers need to be found outside the traditional retail channels.

“In the digital age, your customers have apps that let them search for products, compare products, review products, check prices, compare prices, and even buy the product without ever stepping foot in your store “says Tiffany Marshall. So what must retailers do to get their loyal retail customers back?

Media Genesis suggests that retailers do the following to get back loyal retail customers:

  • Build an emotional connection – whether it’s through exclusive content or rewards, making your consumer feel special is an important part of brand loyalty.
  • Personalize – you have your customer’s data; use it to your advantage! Make your content relevant and engaging by making sure that it is (almost) custom-made for your consumer.
  • Use your data – use data, analytics, and your digital business capabilities to go beyond just rewards. Use the information you’ve gathered to really analyse how your consumers want to engage with your brand and build a strategy to do it.
  • Create an active online presence – forgoing a good website and a strong online presence is essentially a death sentence in today’s digital marketplace. Most consumers prefer to shop online and not having an easy to use website is like excluding your brand from the conversation. It’s not enough to just post on social media. Create conversations, respond to customers, and help make customer service a 360° experience.
  • Merge your worlds – make the online to offline experience completely complimentary by identifying all of the crucial touch points you may have with your consumers. You might even see a return in foot traffic if the consumer consistently sees your brand attached to good prices online. When they need something in a pinch, your brand will be at the top of their mind.
  • Make it easy – as a business, you now have to prioritize delivering quality, enjoyable interactions with your consumers. This is the best way to build a lasting customer relationship in the digital age. If your web presence does some of the heavy lifting for your consumer, making it easier for them to reach their end goal, the quality of the experience will resonate and they’ll be back for more.

Concluding

Online shopping caters to the busy lifestyle of modern people, and its prevalence manifests the rise of the stay-at-home economy 2. Also, the internet, big data, the internet of things and social media has revolutionized the way customers interact with their retailers. I wonder, however, how loyal retail customers can be towards a chatbot?

Lastly, has the demise of the loyal retail customer started?

Read also: Personalization of Marketing Communication – not just for your Customer’s sake

Have look at this video: “The role of customer loyalty in the small business”

Notes

1 Kursunluoglu, E. 2014. Shopping centre customer service: creating customer satisfaction and loyalty, Marketing Intelligence & Planning, 32(4):528-548.

2 Wu, M.Y. and Tseng, L.H. 2015. Customer satisfaction and loyalty in an online shop: an experiential marketing perspective, International Journal of Business and Management, 10(1):104.

Image and video

Flickr.comlynda.com

Drop Shipping in 2017 – Opportunities and Turbulence for Retailers

Drop shipping in 2017: Is drop shipping the ‘holy grail’ for struggling Bricks Mortar retailers? Or is it a retail business model that goes against what online customers demand: An easy, consistent and seamless experience.

According to Joel Padi writing in The Market Mogal, the young people in the UK choose increasingly to become entrepreneurs. This is because of the unpredictable economy, high study fees and a fiercely competitive job market. Joel says that some of the young entrepreneurs consider drop shipping as a “risk-free, low start-up cost, and profitable business venture”.

Josh Wexler, CEO and Founder of RevCascade, posting in the MULTICHANNELMERCHANT says that “Thanks to its inherent flexibility and low-risk nature, drop shipping has the potential to be your ultimate tool for merchandising and product curation”. However, Ed Kennedy cautions that with drop shipping, a retailer may put his/her good reputation in another’s hands. A real concern…

The drop shipping in 2017 will be discussed – does it offers opportunities for retailers, or is it too troublesome?

The drop shipping distribution model

The drop shipping distribution model is usually contrasted with the traditional retail distribution model. Comparing the two models is not without a good reason. Traditional retail distribution models require the retailer to buy inventory, and to store and manage it. This practice needs a monetary investment that serves as an important entry barrier to the industry.

There is no need for a retailer to buy inventory, or to handle it when using drop shipping.  Since the capital requirements starting a drop ship retail business is small, the barrier to enter the industry is low. Therefore, starting a drop ship business seems easy, but how easy is it to keep it open?

The pros and cons of drop shipping in 2017

Drop shipping, as with any other retail business model, has its advantages and disadvantages:

The advantages of using drop shipping for existing retailers are according to Josh Wexler as follows:

  • Increasing volume with existing brands – launching a drop ship program largely takes the responsibility of shipping and fulfillment off your shoulders;
  • Selling new products from new (and existing) brands – your product mix and brand offerings can be drastically expanded and diversified with virtually no risk;
  • Testing new verticals – drop shipping can mitigate risk to the point where retailers can test out merchandising with entirely new verticals, not just products and brands;

The disadvantages for retailers using a drop shipping system are according to Strategy Plus:

  • Processing your orders can become difficult. The time between selling a product and getting it shipped can take long. Also, there are many conversations and actions that need to take place before it gets sent off;
  • Not having all of the product information is problematic. As you never actually handle the products that you are selling, you have no realistic idea of what they are like;
  • Customer service issues. Drop shipping removes the responsibility of shipping but, sadly, it also removes a large part of the customer experience from your control;
  • A vast amount of competition is everywhere. Finding great drop shipping products means they generally will come with competition from other retailers in your sector.

How should retailers practice drop shipping in 2017

In a time where many Bricks and Mortar retailers are closing shops because changes in the buying behaviour of their customers, a drop shipping distribution model may provide an outcome. Indeed, drop shipping has the power to build a retailer’s eCommerce site and increase product offerings with little capital investment.

However, Peter Zaballos, Chief Marketing Officer at SPS (quoted in the MULTICHANNELMERCHANT) suggests that before retailers decide to add drop shipping capabilities, they should consider the following six questions:

  1. Do I have the infrastructure needed to support it? Drop shipping involves many moving parts and requires flawless orchestration between retailers and suppliers. Communication, collaboration and efficiency are key to meeting the promise made to consumers.
  2. Do I have the right internal resources in place? Managing the increased document flow drop shipping requires may tax your internal teams. It’s critical that you have systems and processes that can support increased volume.
  3. Which of my suppliers have drop shipping capabilities? While having a relationship with a supplier that offers drop shipping makes it easier to add this component to your merchandising strategy, it is not a necessity.
  4. How will I receive reliable, accurate product information? Today’s digital consumers rely on detailed product information when making purchasing decisions. To ensure you provide such information, gather item attributes from your suppliers.
  5. How will I maintain service levels? Drop ship agreements require collaboration and trust in order to ensure customer expectations are met. From the start, foster and encourage open dialogue and set expectations, requirements and goals.
  6. In what way will I manage returns? Even with accurate product information and a good shopping experience, returns are inevitable and must be planned for. First, determine what to do with merchandise that is returned. Will it go back to the warehouse or the supplier, be discounted and sent to store shelves or sold elsewhere?

Concluding

Although the start-up costs are low with a drop shipping business, it’s not so easy to run it. Websites such as Dropship.com and Shopify as well as other applications run by the wholesale suppliers will mostly give entrepreneurs a seamless start. However, what happens there after will require all the ‘guts’ and determination to keep going.

Then there is the ‘the paradox of choice’. Jeremy Hanks, CEO of Dsco said recently in Practical Ecommerce that “customers overwhelmed by product variety end up just window shopping.” Joel Padi writing in The Market Mogal advises that when starting with drop shipping, specialization in a niche market could prove to be the key to a profitable start-up. By reducing their focus, first-time entrepreneurs can narrow the target market, reducing advertising and marketing costs.

Finally, to do successful drop shipping in 2017, the retailer must maintain control over the entire customer experience, including how transactions and communications take place, says Adrien Nussenbaum, co-founder of Mirakl (Internet Retailing).

Image: Pixabay

Read also:  Drop shipping retail in 2016

 

 

How do Customers Respond to Self-Service Technology in Retail Shops?

Retailers use Self-Service Technology (SST) to make shopping for their customers more convenient. Some retailers even offer a smartphone app that lets customers scan items as they shop. “They pay on their phone, skipping the physical checkout counter entirely” writes Lauren Zumbach, recently in Phys.Org. Is self-checkout a time-saver for customers, or is it just another gadget that can go wrong, or is not understood nor trusted by customers?

SST has been introduced to Bricks and Mortar shops to match the convenience of online shoppers that never have to wait in a line 1. When last did you spend time at a checkout in a retail store? Have a look at this video just to remind you what it is all about! Looking at the long lines at a Walmart store on Black Friday, 27 November 2009, (Recorded by Maria S) one hopes that a self-checkout system will make things better.


So, where are we now with SST?

Self-Service Technology in retail shops

SST is technological interfaces that allow customers to produce services independent of involvement of direct service employees. In other words, the technology replaces many of the face-to-face interaction that customers usually have with retail employees. Retailers make use of SST to reduce costs, increase efficiency, flexibility, productivity and improved corporate performance 2. “The technology empowers customers to be in control of their shopping experience, while effectively reducing lines, cart abandonment and the time associates need to spend at checkout” writes Rebecca Minkoff in Apparel.

While SST is used at an increasing rate by retailers, there are some issues emerging.

The demographics of SST users

The age and gender may influence the use of SST by the customers of retailers.

  • Age – Orel and Kadar 2 found that younger customers had higher tendencies to use self-checkout systems during their shopping in supermarkets. These consumers were also savvy with internet and technology use. Lee and Yang 3, on the other hand, suggest that old consumers tend to feel that they are not competent to learn new things. Also, they enjoy interacting with other people such as store employees, service agents, and fellow shoppers. Therefor older people are less likely to adopt new service options such as SSTs.
  • Gender – men have more negative wait expectations than women 4. That means that if the lines at retail checkouts are too long, or move too slowly, men are more likely than women to leave the shop. Men may want to maximize the efficiency of their shopping trip by using SST. Women prefer doing their shopping with a minimum amount of external distraction, such as using a cumbersome SST 5.

Another issue with the use of SST by retailers is about the atmosphere of the shop.

The atmosphere of the shop

Store atmosphere is the physical characteristics of a retail store used to create an image in order to attract customers. Creating the ‘right’ atmosphere for your shop is more important than ever because of challenges from online retail. Shari Waters writes the following in The Balance: “If you’re thinking about opening up a business of any kind, it’s imperative that you remember the role that store atmosphere can play in its success. Customers not only care about how a store looks and feel; they’re also likely to make purchasing decisions based on the ambiance of the establishments they patronize.” But what effect does SST have on a shop’s atmosphere?

SST may have the following effects on the atmosphere of retail shops:

  • Customers receiving less attention from retail employees may affect the shop’s atmosphere negatively;
  • SST may lower the shop’s customer density which may be perceived as an improvement of the atmosphere 4;
  • Old consumers tend to feel that they are not competent to learn new things due to their information processing deficiencies 3. They may therefore create an ‘atmosphere’ of chaos in the shop as they seek assistance with SST, which is probably not there…

In spite of the issues around SST, the implementation thereof is growing globally.

The future of SST

The swiftly growing retail industry has been witnessing the fastest adoption of the self-checkout terminals. According to Technavio reported in BusinessWire, the forecast is for the global retail self-checkout terminals market to grow at almost 18% during 2017-2021. Amazon.com has also put its trust in SST. Thabiso Mochiko of the Financial Mail quotes Amazon as follows: “Amazon Go is a shopper’s dream. It eliminates the drudgery of queuing at a till. The company’s “Just Walk Out” technology automatically detects when products are removed from or even returned to shop shelves and keeps track of them in a virtual cart. When you’ve completed your shopping, you leave the shop and are charged electronically.”

It seems that nothing is going to stop the use of SST in our shops…

Concluding

So, how do customers respond to SST in retail shops? It is like this – nowadays people are getting older and the younger ones are tech savvy in a digital world. The older people go shopping not only to buy groceries, but most importantly to interact with people in the shop. They may be retired, living alone and miss socializing with people. Also they are not always tech savvy therefore may resist using SST. Young people, on the other hand, are tech savvy ‘by excellence’ and enjoy SST as a ‘game’ – something that should be there.  And gender? Have a peek of my blog “The Shopping Behavior of Woman”. However, as it concerns SST, men love SST if it can get them out of the shop as soon as possible. Women, in contrast, may ignore SST as long as possible because it may reduce their shopping time. Maybe the image below will illustrate my last point.

The Shopping Patterns of Men and Women

Notes

1 Bednarz, M. and Ponder, N. 2010. Perceptions of retail convenience for in-store and online shoppers. Marketing Management Journal, p49.

2 Orel, F.D. and Kara, A. 2014. Supermarket self-checkout service quality, customer satisfaction, and loyalty: Empirical evidence from an emerging market. Journal of Retailing and Consumer Services, 21(2):118-129.

3 Lee, H.J. and Yang, K. 2013. Interpersonal service quality, self-service technology (SST) service quality, and retail patronage. Journal of Retailing and Consumer Services, 20(1):51-57.

4 Grewal, D., Baker, J., Levy, M. and Voss, G.B. 2003. The effects of wait expectations and store atmosphere evaluations on patronage intentions in service-intensive retail stores. Journal of retailing, 79(4):259-268.

5 Rinta-Kahila, T. 2013. The adoption of retail self-service checkout systems-An empirical study examining the link between intention to use and actual use.  Department of Information and Service Economy, Aalto University School of Business.

Images

flickkr.com; i-imgur.com

 

Pop-Up Shops as a Marketing Tool for Retailers

Pop-Up Shops are short-term, temporary retail events that are “here today, gone tomorrow”. It is the temporary use of physical space to create a long term, lasting impression with potential customers. “The pop-up retail phenomenon, once known as flash retailing, has grown in recent years” say experts at Gordon James Realty, a local property management firm. Retail space for pop-up shops is rented for a fraction of the cost of a long-term space and is a cost-efficient way for a retailer to increase its brand awareness and make a profit.

Pop-ups are changing how commercial property owners are leasing their spaces; how big brands are launching new products and how online retailers are marketing the merchandise they sell online 1. Inquisitive customers enjoy pop-ups because there they can learn more about product they are buying – e.g. where, how and by whom the products were made. Online customers can enjoy the shopping experience by visiting Pop-Up shops of online retailers. It offers a physical space to touch, smell and try-out products that they’d searched online.

What are Pop-Up shops?

My first memory of a Pop-up shop was as a little boy at a school bazaar. The local fish-and-chips fast-food retailer has setup a stall, with the necessary fryers and other equipment from his store at the school. The sounds and smells that were coming from his pop-up stall will always stay with me. However, more formally:  A distinguishing feature of pop-up retail is its temporary nature, intentionally springing up, and disappearing quickly 2. Consequently Pop-up shops can further be described as follow:

  • The shops usually involve one retailer rather than a group of retailers, and are usually found in trade shows. The latest trend however, is that they are setup in unused open spaces, storefronts, or within existing stores.
  • They are a way for promoting selected products or brands in a temporary location and on a smaller scale than trade shows;
  • Pop-up shops may be open in only one location, and are designed to be open a few days to a year;
  • Customers are allowed to have unique, personalized interactions and experiences with brands at the shops; and
  • Pop-up shops employ brand representatives who have a lot of knowledge about the brand.

The benefits of Pop-up shops are according to Sriram Subramanian writing in ShoppinPal:

  • Low overhead costs – retailers can take advantage of prime retail space at the fraction of what it normally cost;
  • Lower risk – short term monthly leases, low initial expenses and flexibility in operations reduce the risk for retailers;
  • Higher brand awareness – people are interested in the sudden appearance of a store, especially if it offers something different;
  • Increase sales – by taking your store where your customers are and making it more convenient from them buying from you;
  • Extended reach for established retailers – reach into different locations and new market niches without having to establish new stores in those locations.

Let’s take a look how retailers may use pop-up shops strategically to their advantage.

 Bricks and Mortar retailers use Pop-Up Shops to stay competitive

The battle for Brick and Mortar retailers to survive against the virtual onslaught of their online counterparts has been discussed many times by this author (e.g. “Crossing the digital threshold – adding Clicks to Bricks for sustainable retail outcomes“). Hence some Bricks and Mortar retailers had to resort to Artificial Intelligence and using the Internet of Things to integrate digital technology to the physical stores.  However, resolute Bricks and Mortar retailers have found another innovative way to enhance the shopping experience of dwindling customers.

Pop-up shops that are strategically placed on shopping floors are appreciated by customers because of the positive hedonistic aspects thereof 2. Here they enjoy the excitement of the experience and the exposure to new, unique products. The Pop-up shop offers an interactive environment where the customers may communicate with knowledgeable brand representatives to gather information and share their perspectives.

A pop-up shop placed inside the retailer’s store can be used as a hub where customers can get more technical information about products and services. It gives them the opportunity to buy the retailer’s products online while they are in her shop.

Online Retailers use Pop-Up shops to let their customers feel, smell and taste their products

One of the big drawbacks that online retailers have is that their customers can’t feel, smell or taste their products online.  However, pop-up shops may help online retailers to bring their customers in touch with their products. Pop-up shops are ‘mobile’ and can relative easily be assembled in places where customer traffic is high.  They can be erected in shopping malls, at trade fairs etc.  Further, online retailers that sell niche products may choose to setup the pop-up shop close to their target customers.

The big online retailer Amazon.com has started to launch pop-up shops in multiple locations across the USA, according to Eugene Kim of the Business Insider. The pop-up shops reflect the company’s growing drive to reach consumers directly . Amazon.com does it through a variety of access points including retail storefronts, home delivery, and innovative devices.

Amazon’s Pop-up Shop

Concluding

Although pop-up shops are not new to retail, they are nowadays used more strategically as a marketing tool. Therefore retailers should ask themselves what they want to achieve with pop-up shops. Are the additional costs and benefits worth the effort? Also, the roll-out of pop-up shops need to be preceded with a focused marketing strategy. Therefore, tell the people in the vicinity of your planned pop-up shop about it . They need to know what they can find there, and what the benefits are for them.

Finally, the rise of pop-up shops can partly be ascribed to the ongoing digital disruption taking place in the retail marketplace.

Notes

1 Baras, J. 2015. Popup Republic: How to Start Your Own Successful Pop-up Space, Shop, or Restaurant. John Wiley & Sons.

2 Kim, H., Fiore, A.M., Niehm, L.S. and Jeong, M. 2010. Psychographic characteristics affecting behavioral intentions towards pop-up retail. International Journal of Retail & Distribution Management, 38(2):133-154.

Images

flickr.com

Shopping Behavior of Women

Women are the world’s most powerful consumers, and their impact on the economy is growing every year. In fact, women call the shots in the vast majority of consumer spending decisions. In the USA, women buy or influence 80% of consumer purchases.1

The shopping behavior of women has been studied for ages now. Maybe Noa Shavit, a Behavioral Analyst depicts the typical shopping behavior of women by saying:  “Walk into a women’s clothing store and you’re bound to see a familiar sight: bored men sitting on any flat surface they can find, holding purses and shopping bags as their girlfriends/wives/daughters scour the store.” I found myself frustrated many times (mostly when I was younger) doing shopping with the girls. Luckily, nowadays, my shopping trips are restricted to the nearest convenience store. Women have evolved to behave in a different manner than men.

John Gray uses the metaphor in his book “Men are from Mars and Women are from Venus”2 that men and women are from distinct planets. Gray also explains how men and women perceive each other: “Men mistakenly expect women to think, communicate, and react the way men do; women mistakenly expect men to feel, communicate, and respond the way women do.” We have forgotten that men and women are supposed to be different, says Gray.

Retailers should therefore recognize that the shopping behavior of women is different from that of men. But how is the shopping behavior of women different?

The shopping behavior of women

Noa Shavit suggests that the hunter-gatherer archetypes of men and women are often brought to life while shopping. She says: “Many women spend hours sifting through merchandise, looking for inspiration and taking care to ‘gather’ the items that suit them, while men tend to ‘hunt’ for the necessities, looking for what they need and exiting the premises as soon as they’ve found it.” Therefore, the shopping behavior of women tends to be more hedonic whilst that of men appears to be more utilitarian.

Charles Dennis and Andrew McCall3 characterize the shopping behavior of US women as follows:

  • Women like searching, comparing, finding the best value and taking pride in shopping as an activity;
  • They make 10 per cent better cost savings than men, making them the ‘better shoppers’;
  • They have a more positive attitude to shopping and see the activity as a satisfying experience in itself;
  • US women experience shopping as a leisure and social activity in which they are more involved and through which they can express love for their families and their social network; and
  • Women shopping together spend nearly twice as long in a shop as men shopping with women or other men.

The shopping behavior of women has been well debated and described in Bricks and Mortar shops, but what happens if they shop online?

Women shopping online

One way of describing how women shop online is to compare them with the online shopping behavior of men. Catalin Zorzini recently contrasted online shopping habits between women and men using different sources. Some interesting differences are tabled below:

 

WOMEN MEN
The online shopping experience has to be social and comprehensive Want their shopping experience simple and straight-forward
Shop based on future needs Tend to purchase when need is immediate
More selective and more likely to buy a product that fits all their requirements Stop shopping when they find the first workable product
Buy gifts for others too More likely to spend money on themselves
Make impulse purchases Tend to think logically when making purchase decisions
More responsive to marketing emails, coupons and sales Less interested in discounts, deals, or out of season sales
More receptive to other people’s opinions Need detailed product descriptions, feature comparisons to other similar products, and customer reviews

Do you recognize some of your own online shopping behavior listed in the above table? The online shopping behavior of women is almost the same as if they are shopping in a department store.

Concluding

Bricks and Clicks retailers should recognize that women do their shopping differently from men. “There is, after all, no known society in history where gender differences did not exist” says Dr. Noam Shpancer, professor of psychology at Otterbein University in Westerville Ohio. However, retailers who ignore the needs and wants of women will do it at their own peril.

Notes

1 Huddleston, P. 2011. Consumer behavior: women and shopping. Business Expert Press.

2 Gray, J., Adams, A., Jacobs, B.D. and Jacobs family, 1993. Men are from Mars, women are from Venus. Harper Audio.

3 Dennis, C. and McCall, A. 2005. The savannah hypothesis of shopping. Business Strategy Review, 16(3):12-16.

Image: pixabay.com

Artificial Intelligence – Digital Outcomes or Digital Disruptions for Retailers?

Artificial intelligence (AI) is intelligence exhibited by machines. AI, still science fiction for most of us, is now becoming a daunting reality in the retail sector. Although we have learned machines (e.g. robots) for some time now, connecting them with the internet may accelerate digital disruption. Digital disruption occurs because unmet needs in the market and in our societies can be addressed through digital means1.

What does Artificial Intelligence means for retailers?

“Artificial intelligence is the key to the future of online retail, providing a crucial way to help shoppers find what they want” suggests Isabell Fraser business and property reporter at The Telegraph.  It is about consumers using voice commands using their smartphones to order products from retailers.

The opportunity that the Internet of Things (IOT) may offer Bricks and Mortar retailers was previously discussed in this blog (Retail and the Internet of Things). The IOT allows any machine with an on/off switch to be connected to the internet. “The IOT is very closely related to Artificial Intelligence (AI). In fact, IOT would not be very powerful without AI” commented Douglas Green in Quora. According to Mark Jaffe, CEO of Prelert, the realization of IOT depends on being able to gain the insights hidden in the vast and growing seas of data available. Since current approaches don’t scale to IOT volumes, the future realization of IOT’s promise is dependent on machine learning to find the patterns, correlations and anomalies that have the potential of enabling improvements in almost every facet of our daily lives.

Customers of retailers may therefore, in the near future, command any household appliance to function at their convenience.

Not long from now…

Imagine this, not long from now – Mary asks her washing machine (she named it Alice) with the following voice command: “Alice, add 2 kilogram washing powder to the shopping list”. Alice, an AI device, is also part of the IOT. Alice has recognized Mary’s voice command and added washing powder to Mary’s online shopping list which is instantly send to her local grocery retailer. Later the same day, a drone delivered the groceries, also the washing powder that was ordered by Alice.

Allright, we’re not there yet. Two of the most common uses of AI in retail are around visual search, offering shoppers items that are similar to a picture they like and have uploaded, and for personalized recommendations report Leslie Hook and Lindsay Whipp in The Financial Times.

AI inside the physical shop

AI also creates opportunities inside a store. Bricks and mortar retailers hope that AI could draw customers back to their physical stores. Leslie Hook and Lindsay Whipp quoted Michael Klein, head of industry strategy for Adobe Marketing Cloud saying that “merchandising needs to become entertainment”, pointing to digitally enabled experiences such as virtual makeovers or home furnishing demos.

Experts writing in The Future Of Shopping report talk about the impact the “fourth industrial revolution” – a merging of physical, digital and biological technologies – on shopping.

The report, co-authored London marketing agency Holition forecasts the following:

  • Virtual reality (VR) headsets that gauge your mood in the lighting and atmosphere of a simulated store.
  • Immersive virtual experiences involving products, such as visiting a cocoa farm to watch beans being picked and processed to make chocolate.
  • AI assistants that know your interests and tastes better than you do and can pre-empt purchases. For instance, shortly before a seaside holiday they might show you a range of swimwear.
  • Holographic fashion shows held in unusual locations.
A customer using a virtual mirror in store

A customer using a virtual mirror in store – image Wikimedia

Wow! There are seemingly unlimited opportunities for retailers, household appliance manufacturers and cloud computing companies applying AI. Or will the digital disruption that AI cause too big to handle?

The other side of Artificial Intelligence

The AI story unfortunately has an eerie side.

Jerry Kaplan2 introduced AI in his book with the following warning: “Recent advances in robotics, perception, and machine learning, propelled by accelerated improvement in computer technology, are enabling a new generation of systems that rivals or exceed human capabilities. These developments are likely to usher in a new age of unprecedented prosperity and leisure, but the transition may be protracted and brutal”. Kaplan foresees that without adjustments to economic systems and regulatory policies, there may be an extended period of social upheaval…

Kaplan’s concerns are shared by Bill Gates reports The Washington Post.   Gates said: “First the machines will do a lot of jobs for us and not be super intelligent. That should be positive if we manage it well. A few decades after that though the intelligence is strong enough to be a concern”. Stephan Hawkin, although totally dependent on AI, bluntly suggests that AI could bring an end to mankind.  Retailers, however, do need mankind to stay in business…

Retailers that choose to ignore AI may not escape from the digital disruptions it causes. Digital disruptors innovate rapidly, and then use their innovations to gain market share and scale. This happens far faster than challengers still clinging to predominantly physical business models can cope with1.

Concluding

Retailers will have to decide where and when Artificial Intelligence has the potential to replace human intelligence. Cost and scale will drive these decisions. Future decisions about AI by retailers will probably be about the ethics of using the technology and the effect it may have on society.

Notes

1Bradley, J., Loucks, J., Macaulay, J., Noronha, A. and Wade, M. 2015. Digital Vortex: How Digital Disruption Is Redefining Industries, ©Global Center for Digital Business Transformation.

2Kaplan, J. 2015. Humans need not apply: A guide to wealth and work in the age of artificial intelligence, Yale University Press.

Images: flickr.com; wikimedia.org