‘The Offer You Can’t Refuse’ for the retail industry
The best retailers are the ones that automate shopping experiences in such a way that the customer has to invest very little time and energy in purchasing what (s)he needs. They offer near-perfect transactional relationships. And the best way to accomplish that today is with a perfect blend of online and offline experiences.
One of my top favorite examples in the matter are Alibaba’s Hema supermarkets that are shops, restaurants as well as distribution and logistics centers all rolled into one. In-store, they offer a fantastically frictionless and transparent experience. You can for instance scan any item and receive the complete backstory about where it was raised and processed which is doubly appreciated in a post-COVID world. And if you eat in their restaurant, you order via your mobile phone and the food is delivered via a robot. As a distribution center, they only cater to a local population in an area of about five kilometers around the store, so that they can guarantee delivery below 29 minutes.
There are so many frictions that retailers find and solve in the most clever of ways. The Amazon Go stores, where you can just walk in and out without having to wait in line and pay the cashier are the most obvious example, but there are many more. There’s New Zealand-based AI company Imagr, for instance, that endows shopping carts with the ability to recognize goods and automate check-outs.
Another great example is Whisk which allows consumers to order ingredients for an entire recipe in a single click. Or Walmart and their “inhome” delivery service, in which the driver is given access to a customer’s home and can therefore put the purchases straight in the fridge. And let’s not forget Alibaba’s InTime mall partnership that has robot couriers driving around in-store and augmented reality mirrors that allow consumers to try one make-up (extra useful in pandemic times).
An interesting development here is the introduction of “voice”, like in the case of Walmart partnering with Google Home in order to provide customers with the ability to shop for more than 2 million items through voice shopping. As with many innovations, voice offers both an opportunity and a threat: the risk is that the voice intermediary will take their place in the customer relationship and thus become a gatekeeper that influences consumers on where to shop (not necessarily with them). I have written many pieces on how companies can respond to these voice gatekeepers and the evolution of marketing to machines, among which “ Three scenario’s for your brand in the future”, if you would like to know more.
But perhaps the most far-reaching development will be when retailers take full advantage of the latest developments in machine learning, face recognition, voice recognition and image recognition to offer a flawless subscription service. One in which the customer is in fact completely taken out of the equation. Customers will be able to fully outsource decision-making to retailers and trust them to deliver the items that they need when they need them. A beautiful example is the AI-powered organic tampon delivery service of Freda of which the deliveries can be synced to the user’s cycle. And of course that of Amazon’s strategy with Dash. Most believe that it’s only low-engagement products like toilet paper and shampoo that will enter this ‘a-commerce’ approach, but I believe that other types, like travel insurance (Revolut has a fantastic automated geo-location Pay-per-Day Travel Insurance service) or even the purchase of clothing items will enter the subscription economy at some point as I describe in my piece The adoption of automated buying in two phases.
Partner in Life
The next phase of the Offer You Can’t refuse (OYCR) is all about optimizing the emotional relationship with the customer: by removing as much as possible the aspects of their lives that give them negative energy and focusing on what gives them positive energy. It’s about enabling the life journey – like a true partner in life – and not just the customer journey. For retailers, this will often entail that they look beyond the borders of their own industry and enter those that are important for the wellbeing and happiness of their customers.
Especially relevant today in COVID-19 times but already happening before that, is the retail industry crossing into the health sector. An obvious example are the retailers that have invested in retail clinics to treat common illnesses and injuries – like sore throats, colds, allergies, cuts, burns, headaches or sprains – in a much more convenient location with better opening hours than traditional clinics. Walgreens, Target, Kroger and Walmart all offer this type of retail clinic service to their customers. But I also love how UK retailer Tesco partnered with Jamie Oliver to stimulate people to eat in a more healthy manner. By for instance offering a more healthy alternative next to more unhealthy products, including the reason why. Another industry-jump is that to the entertainment sector. Clothing retailer Matches Fashion, for instance, has a retail space at 5 Carlos Place in Central London that functions as a shopping environment, but is also an art gallery and a home to supper clubs and book launches.
Sometimes, being a partner in life ‘just’ means offering the very cheapest prices so that less fortunate customers still have enough money to invest in the more fun parts of life. That’s the reason why the e-commerce website AliExpress is so popular, because they are 50% to 70% cheaper than the western platforms. Or why people love to shop in value champions like Aldi, Lidl, Costco, T.J. Maxx and Primark.
Saving the world
Last, but not least, customers increasingly expect retailers to act sustainably and ethically and we do see an increased amount of industry players catering to that need.
We obviously saw many examples of that ‘saving the world’ dynamic surface in COVID-19 times. Like French sporting goods retailer Decathlon, which converted its Easybreath snorkeling face mask into an emergency ventilator mask. Or LVMH, the parent company of luxury retailers Christian Dior, Guerlain and Givenchy, that helped French health authorities by manufacturing hand sanitizer and providing it to them for free. Jack Ma, the billionaire founder of Chinese e-commerce giant Alibaba donated 1.1 million testing kits, 6 million masks, and 60,000 protective suits and face shields to the African continent. The H&M Foundation arranged its vast supply chain to produce personal protective equipment to be distributed to hospitals around the globe and gave global aid to organizations via access to it is social media platforms, so as to spread messages of health and safety.
Sometimes ‘saving the world’ is also making sure that employees have a better life. Walmart, for instance, is known for investing a lot in employee pay, parental leave benefits, education, affordable fitness subscriptions and even aiding employees with adoption costs. Brazilian retail chain Magazin Luiza launched a free telephone line enabling people to denounce cases of domestic violence or violence against women, after an employee was murdered by her husband.
But it’s also about showing respect for the needs of demographics that tend to be overlooked. Like Alibaba’s e-commerce site Taobao that introduced an app for the ageing population which has the usual functions like access to Tmall Supermarket, live-streaming programs and shopping recommendations, but also allows them to communicate with family members via a click and chat option.
Many retailers also launched initiatives to combat climate change and pollution. It’s of course not a secret that that the supply chain from retailers results in a lot of carbon and greenhouse gas emissions which are on average four times greater than the emissions resulting from a company’s direct operations. So it’s good to see, for instance, that three of the top 20 retail companies — Target, Tesco and CVS Health — are joining Walmart in collecting data from suppliers, seeking ways to cut carbon emissions throughout the supply chain. Walmart also gets about a quarter of its global energy from renewable sources. Target also outlined an ambitious plan to reduce chemicals in consumer products, boost more sustainable packaging and use materials from sustainable forests. Trader Joe’s announced, among other initiatives, it will sell fewer produce items with plastic packaging and will phase out single-use plastic bags. Aldi revealed it will convert 100% of packaging to reusable, recyclable or compostable materials by 2025. This is in addition to the company’s pledge not to use single-use shopping bags in stores (a rule that’s been in place for over four decades) and its ongoing corporate responsibility program, which recycled over 250,000 tons of store materials in 2018. Walmart, too, announced that it is working on a plethora of initiatives to reduce the packaging waste generated by its private labels with the goal of achieving 100% recyclable, reusable or compostable packaging for its private brands by 2025. Amazon, then, uses algorithms and machine learning for more streamlined packaging to make improvements on efficiency and sustainability.
But perhaps one of the most interesting development in this “saving the world” pillar of the OYCR is how retailers are increasingly venturing into the rental industry in order to battle the challenges that come with overconsumption. I love the example of Rent the Runway, a (mostly online) retailer that provides designer dress and accessory rentals and was one of the first to normalize apparel rental. IKEA too is running initiatives designed to support the move towards a circular business model, in line with its ambition to become a climate positive business by 2030: in cooperation with a housing association in Amsterdam, IKEA Retail Netherlands is for instance testing a complete furniture rental package for students.
Retail is one of my favorite industries exactly because of its incredibly innovative edge and continuous adaptation to the consumer’s changing needs. It’s also a perfect example of my ‘The Offer You Can’t Refuse’ vision and I hope that it will inspire you to follow suit.