Heading into the home stretch of the 2019 Holiday season it looks like a bipolar mix of optimistic mania on one extreme and relative ho-hum on the other. Customer Growth Partners holds the mania ticket, predicting 5.6 percent growth (even up from their original 4.3 percent). And at the opposite pole, NPD is forecasting a relatively unexciting 2.7 to 3.2 percent. With six fewer shopping days between Thanksgiving and Christmas this year over last and high levels of inventory due to early over-buying to offset potential tariff increases, I would place my bet on NPD’s forecast. And what lurks around the corner in an over-inventoried situation is that now-old phrase of mine, the race to the bottom, as retailers start slashing prices earlier and going deeper with the cherry on top of fewer shopping days.
And if you add in a heightened level of national anxiety as we head into 2020, it’s possible NPD’s prediction may even be too high. So, what are some of the headwinds that could put a mental hold on consumers’ opening their pocketbooks?
The short list: impeachment proceedings; the Democratic nomination and a presidential election; immigration issues and climate change. Then there is the tariff issue, geopolitical unrest and increasing violence and protests around the world, all of which is slowing global growth. Then there is the fear that the corporate and personal tax breaks were a one-off with no sustainable increases in capital investments, wages and consumer spending. And a big unknown is how violent the political animosity will get, to be exacerbated by the 24/7 full volume noise of the media. Some new scary moves by President Trump may be triggered by all of this media mayhem and the relentless political war. What effect this anxiety will have on consumer behavior over the Holidays is unknown.
Six Challenges and Opportunities
Regardless of a questionable landscape for retail in 2020, only those retailers who focus on the following six strategic and structural challenges and opportunities will win the all-powerful new world consumers.
1. The Power of the Consumer and Redefinition of Value
New-world, young consumers have redefined what value is, and price ranks at the bottom of the list. Newness and quality are the price of entry across all levels of distribution — from mass to class. Quality trumps quantity. Whatever the product may be, it must be curated to the individual desire of each individual (personalized). Other components being scrutinized by these young, soon-to-be-dominant consumers are: where the product was made, and if under humane and safe conditions; if the product and its ingredients are environmentally friendly; how responsive its distribution/delivery (fast and free and convenient) is; and, how it’s presented (the environment, the package) and the entire holistic, frictionless and personalized customer experience.
If you can check off all of these components, you will have met these consumers’ definition of value. And magically, they will come back more often, they will spend more time in your store or on your site, they will buy more, and golly gee, they will pay full price, even if they must sacrifice the purchase of another item or must wait until they can save enough to afford yours.
2. AI and Personalization
Personalization should be on the top of every retailer’s and brand’s strategic priority list. And technology enables consumer-facing industries to understand and to use data in ways never before possible. A shift in mindset is necessary to first understand that the world is choking on data but starving for intelligence and knowledge. So, the first phase of pursuing the personalization of marketing, distribution and the product itself is the aggregation of as much personal information that can be collected or scraped from all of the individual’s transactional points of contact. The more difficult phase is identification of the most relevant data to use in personalizing the individual’s shopping journey. Finally, and the most complex phase, is implementing the personalized journey. Amazon leap-frogged traditional legacy industries and has advanced to the ultimate level of predictive analytics. They know when you need something before you do. Beam me up Scotty.
3. Fluidly Ubiquitous, Laser-like Distribution
The consumer as POS is a moving target. Therefore, every supply chain must be capable of reaching every one of those personal points of sale, physically and digitally. Through AI and the personalization process, it’s possible to find where each of your core consumers reside in the physical world. And along with knowing what these consumers desire, it’s possible to develop a small-store strategy, physically capable of moving into their neighborhoods with smaller assortments curated with their personal preferences. Think Target’s smaller stores on college campuses or the Nordstrom Local strategy.
Personalization is essentially fragmenting distribution into thousands of different channels, and now with the addition of a mobile POS (each individual consumer), it requires incredibly fluid and agile, yet laser-like supply chains. This highly complex requirement is not for the faint of heart. However, for those who understand the technology enablers, the entire value chain can be transformed to more efficiently and effectively deliver the precisely desired product to the precise consumer, faster and more often. This is another component that the new world consumer has baked into their definition of value. Get it right and they will pay full price and you will achieve profitable growth.
4. Experiences and Services
At risk of insulting one’s intelligence with overstating the obvious: experiences, entertainment, treasure hunts, restaurants, salons, yoga, fitness centers, ski slopes, education, events, blah, blah, blah: you must figure out what experiences fit into your brand’s DNA. And services like Costco’s gas pumps, RV rentals and dozens of others, which account for 20 percent of their $150 billion revenues, can also provide huge cross-over revenues while adding to the experiences. This new consumer has no reason to go to your store or site just to buy a product for a low price.
Augmented reality is an engaging strategy that creates frictionless, co-created entertaining shopping experiences such as interactive touchscreen kiosks or windows, 3D imaging, virtual fashion mirrors, interactive dressing rooms, robot assistants, streaming videos — and more on the way. Tech adds dramatically to the overall shopping experience.
6. Sales Associates as Brand Ambassadors
And finally, the sales associate’s role is more critical than ever. This human being, typically called an associate, should be educated to earn a master’s degree in customer engagement, brand ambassadorship or in empathy. With tongue in cheek, they deserve an acronym like MCE or MBA! And they should be compensated accordingly. As I’ve said forever, the associate is the final, most important link in the value chain – the link that touches the consumer at point of sale where the purchase begins or ends.
The impact of these six strategic and structural priorities will assure the beginning of multiple return visits, multiple purchases, more experiential engagement time and more profitable growth with pricing integrity.
Go for it: 2020 looms on the horizon.