The Next Generation of Retailing—The Future Is Now

Retailers have always focused on their customers, but changes in the last three to five years have forced retailers to understand their customers on a deeper level in order to differentiate in their chosen markets, according to Jerri Traflet, director of retail solutions for Redwood Shores, Calif.-based Oracle Retail.

During the TOPSS session “The Next Generation of Retailing—The Future Is Now,” Traflet discussed how the retail industry has split into two distinct camps —one focused on price and scale (such as Wal-Mart and Tesco) and the other focused on targeting consumers and service (such as Abercrombie & Fitch and Best Buy).TOPSS is produced by Chain Store Age and Retail Technology Quarterly.

Historically, retailers with good pricing and product selection were together in the middle, and there was room for many players. But the split in the industry has been caused by several different changes in the consumer market.

Retailers often forget that consumers are extremely diverse, Traflet said. “We try to put them into little demographic categories, but that doesn’t always work. Understanding them on multiple levels allows retailers to truly focus their product, pricing and service offerings to the customer segment that delivers profitability.”

Retailers should also keep in mind that consumers are inclined to reject unwanted marketing techniques. “Spam and snail mail are usually trashed immediately,” Traflet said. “Therefore, businesses must find a way of getting through and delivering information that they will value in the shopping process.”

The Internet has changed the expectations of those who shop in all channels. “[Consumers] expect product information and comparison tooling like they have on the Web,” Traflet said. “They want access to competitive pricing information and they want to know product affinities.” Therefore, “Webifying” the store and call center is a big challenge for today’s retailer, she added.

Since it’s hard to compete against low-price retailers, Traflet also noted that this is why many companies have differentiated themselves through service. “Retailers should understand what consumers value most, from price and time, to convenience, location and home delivery,” Traflet said. “Recent studies show that the older the shopper, the less price-sensitive they are and the more brand-aware they are. They buy based on the strength of the business and the knowledge that the company will be there to service them. However, the younger shopper values brand very little—it’s all about price.”

One of the other key issues causing this shift is segmentation blurring. It’s difficult for consumers today to determine if they are in a mass merchandising, grocery or drug store—every retailer carries nearly the same goods, Traflet said.

“That’s why we have seen such success among specialty retailers in recent years,” she said. They tend to focus their business on fewer categories and they stand out for the specific trends in clothing, such as Gap or Abercrombie & Fitch, or for their specific brand of goods, such as Apple or Bose.

In order to stand out in a crowded marketplace, retailers need to truly understand what their customers want and give them the unique shopping experience they expect.