Why using data to optimise the in-store experience is key to the future of physical retail.
This week GDR CEO Kate Ancketill took part in an expert panel discussion on BBC current affairs show Victoria Derbyshire about the future of the UK high street.
Addressing the decline of many stalwarts of the high street in recent years, retailers and politicians on the panel referenced the fact that 18% of sales in the UK are now being made online and slammed the “unfair” and “outdated” business rates system. Much of the conversation centred on why town centres must be more reflective of their communities and, in this context, Kate explored how individual physical retail brands can future-proof their operations.
The fundamental problem, she contends, is that retailers have not reacted to the fact that not only have shopping habits changed dramatically in recent decades, so have the very people doing the shopping.
Millennials and online shopping
“I think [retail] is facing the perfect storm,” she said. “There are practical issues that are hitting physical retailers, but there is also the fact that, as of next year, in most countries in the West millennials are going to be the majority of shoppers and they are different to previous generations. They are extremely keen online shoppers, they like convenience, they like the pure optimisation that you get online.
“If you are shopping through a website and it is artificially intelligent it knows who you are, it knows what you like, it offers you things it knows you like, it makes sure it has inventory that is appropriate for its target audience, it’s utterly optimised.
“Then you compare that to the physical store experience and you hear “no, we haven’t got that in your size” and “we can get it to you in a week”, and you have to queue, and there’s stinky, smelling changing rooms. Sometimes physical retail is brilliant, but it’s not always an optimised experience. The nuts and bolts often haven’t actually caught up. The basics aren’t right.”
In addition to the development of millennials as the largest customer segment, Kate also highlighted the 13% decrease in the size of the UK middle class since the 1970s as another important societal shift that traditional retailers have not yet successfully addressed.
“There are more people at the upper income end and a lot more people at the lower income end, and that hasn’t necessarily been reflected,” she added. “If you think about it, the high street looks pretty much the same now as it did 30 or 40 years ago. We love it, but it’s got to completely change.
“If I was to say there is one big thing from a futurist’s point of view to drive this change it would have to be data – I mean there is a reason why data analysts are the new rock stars. You can’t do anything in business without understanding the data and then applying artificial intelligence to it.”
Using data to optimise stores
Kate finished by discussing how stores in China, such as Alibaba’s Home Times furniture store, use data to better serve their local communities.
“What is happening in China, which is way ahead of anything that is happening in retail for us, is that they know from people’s online search what is going to popular within a five mile radius of a particular store,” she said.
“Then that store only stocks the things that those people are likely to want to buy. If you go to the store it has digital operations, so you could order anything from the massive stock they’ve got and have it delivered within an hour. But the physical things they can fit in that small space are things that they know those local people are going to want to buy.”