Retail experiences of the future depend on data

Retailers are becoming "experience producers", using machine learning to connect with customers.

Illustration by Ana Duje.

When searching for their first new couch for their first “real” apartment, a young urban couple decides IKEA fits their style and their price point. They go online, choose a couch and pick out several whimsical accessories to go with it. Only problem: they don’t drive, their friends with cars are busy all month, and who wants to Uber out to a suburban warehouse? Thankfully for them, IKEA’s been listening and crunching their consumer feedback data. The retailer recently changed up their in-store experience game by installing smaller stores in urban centres, decreasing delivery costs and personalizing the once impersonal IKEA experience.

Retail brands have become immersive experience producers, and there’s no going back.

Customers now expect more from retail brands in general, including highly customizable retail journeys and memorable in-person experiences that go well beyond a simple transaction for products and services. Those expectations, alongside a steady increase in retail sector growth, have launched an all-new level of brand competition for consumers’ attention, spending and praise. Retail brands have become immersive experience producers, and there’s no going back. 

Physical retail still accounts for about 85 percent of global business-to-consumer commerce, and though Stats Canada’s latest retail data shows an increase in e-commerce sales, those sales still only accounted for 3.1 percent of total retail trade in March 2019. One major factor keeping people engaged with in-store retail is personalized experiential marketing—72 percent of retailers rate personalization as their top priority for improving in-store experiences. As a quick, meticulous route to personalization, companies have started to integrate AI data analysis of customer feedback into their digital analytics strategy.  

72 percent of retailers rate personalization as their top priority for improving in-store experiences.

Experiences build brand relationships

With a renewed emphasis on in-person spending, omnichannel retail experiences are pushing the traditional limits of retail and opening up more channels for personalized brand relationships and related purchasing. Memorable, conversation-worthy experiences are happening in rebranded flagship stores, on Instagram and at Instagrammable pop-up shops. This fundamental shift bridges the gap between the convenience of online shopping and the in-store discovery experience, as Deloitte’s 2019 report Future-proofing your retail business lays out, adding that retail is being further transformed by AI data analysis and other high-tech tools.

As retail companies explore hybrid experiential concept strategies, customized experiences have become a new focal point, with the majority of companies saying they compete on the basis of customer experience (CX). From a data point of view, every step of this hybridized customer journey is a place for interaction and feedback, where hundreds of customers provide qualitative and quantitative data. AI analytics tools gather all that data in one place to provide insights into how customers behave in digital and traditional retail spaces as well as new experiential environments.

Design retail experiences for real people: an Apple case study

At this spring’s C2 creative commerce event in Montreal, former Senior Vice President of Apple Retail Angela Ahrendts talked about how to strategically position brands to succeed in the future. She had two big pieces of CX advice for retail organizations:

We still want to touch, feel, learn and connect with other humans. Retail has to evolve to create and welcome that.

  • Ensure that your digital avenues are consistent, openly communicative and customized.
  • Redesign your physical retail strategy around spaces for human connection.

“We’re still humans,” said Ahrendts. “We still want to touch, feel, learn and connect with other humans. Retail has to evolve to create and welcome that.”

The original Apple store concept, groundbreaking at its launch in 2001 for its clean design principles and Genius Bar service, recently got an experience-focused upgrade. In 2016, Ahrendts unveiled a redesigned Apple flagship store in San Francisco’s Union Square, which set the tone for the company’s rebrand across their retail network. Still open and airy, with more natural wood and plant life, the redesign features an in-demand level of advice from “creative pros”, who can offer solutions to design questions and more, as well as educational sessions relevant to the area’s customers, such as photo and video workshops. Apple rebranded their stores by looking at what still worked, gauging the current state of the retail industry and doing what they’ve always done: designing for human experience by putting the consumer at the heart of every development stage.

CX design thinking can use AI data analysis to shrink the iterative chain and strategic planning processes across departments by combining quantitative data and qualitative feedback that directly links customers to companies. With insights from customer feedback and purchasing data, you can base CX on more accurate big-picture spending trends and the details of why customers buy what they buy.

Three emerging retail trends—technology, experiential concepts and expansion through partnership—will dictate who stays in the competition.

Four other retail experiences worth emulating

  1. IKEA, known for its sprawling suburban warehouses, looked at their customer data and realized they were missing out on a whole market segment: young professionals who don’t drive but want to shop in person. Since 2015, IKEA has opened over 24 small-scale stores, including in urban London and Paris. Customers browse smaller showrooms to find items they’ve put in their online IKEA shopping cart and discover items they see on the website. They can either walk out with their purchases or opt for affordable delivery.
  2. On the other end of the spectrum, Nike‘s 5th Avenue NYC flagship store went big. The six-storey shop even rebranded the experience as Nike NYC, House of Innovation 000. Each space is more akin to a conversation with customers than a transaction, offering personalized and instantly responsive experiences, including in-store customization of shoes and clothing. Throughout the experience, customer data is gathered for application to future brand strategy.
  3. When Macy’s department store analyzed feedback data, they saw that customers preferred to do their online fragrance shopping by scent description. Macy’s decided to rearrange in-store perfumes by scent rather than by brand—the concept proved even more successful in stores due to Macy’s “fragrance finders” who rounded out the experience by talking with customers about the scents they preferred and helping them discover new perfumes.
  4. MEC Adventures proves that you can even take retail entirely out of the store. The Canadian outdoor-gear co-op MEC caters directly to its adventurous customers with international travel experiences based on their own feedback. The retail clincher: a detailed packing list for each trip, from hiking across Iceland to cycling in Italy, suggests dozens of MEC products.

Craft inspiring new experiences with AI analytics

Companies are on the hunt for tools that engage new and existing customers throughout their retail journey. In-person retail experiences offer opportunities for customers to experience a company’s brand and give feedback on products and services—not to mention they allow employees to observe customers’ reactions. 

According to Retail Insider, three emerging retail trends—technology, experiential concepts and expansion through partnership—will dictate who stays in the competition. AI data analysis tackles the first two of these trends directly by providing insights into customer behaviour, while also offering details on the third.

By applying AI data analysis to CX strategy, retailers can track the effects of retail experiences, create profiles for customers that include their purchase history and preferences, and make more informed decisions on which marketing and research avenues to follow and which to leave in the past. Customer data also has uses beyond CX, allowing for personalized outreach across channels to stay in touch with customers’ needs and offering choices and experiences that keep pace with their lives.

Together, data gathered from traditional retail experiences, online shopping and customer feedback is ready for AI text analysis that pinpoints consumers’ needs, wants and motivations. AI analysis tools have the capacity to add quantitative data and feedback from customized retail experiences to the data mix. With those insights, companies can more quickly and accurately strategize CX, product development, customer service and brand loyalty, while getting a clearer picture of the path forward for their retail organization.

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