Deloitteresearch on the consumer experience found that we are not in the midst of a retail apocalypse, but a retail renaissance. The report, which was based on a survey of more than 500 traditional retail, pure play, consumer goods, and branded manufacturing leaders around the globe, showed that brand leaders are rethinking the consumer experience by investing in new emerging technologies like AI, mixed reality AR/VR, and engagement platforms to grow revenues and new customers.
Here are some examples that the retail apocalypse is exaggerated:
Retail spend has outperformed GDP and risen every year since 2009.
In 2017, 44 percent of consumers reported spending more on retail than 2016. Only 14 percent said they spent less.
Brick and mortar is predicted to grow by $36 billion by 2022, and e-commerce is predicted to grow by $50 billion in the same period.
Deloitte notes that brands must understand that four key disruption behind the retail renaissance:
Consumer disruption - Thanks to the proliferation of smartphones and connectivity, consumer expectations for speed and convenience have reached new heights.
Technology disruption - No facet of retail has gone untouched by technological revolution, from awareness to purchase and from brick-and-mortar to ecommerce. Thirty-four percent of shoppers say they've researched a product online using a mobile device while in a physical store, and innovations such as AI allow brands to personalize across every consumer touch-point.
Competitive disruption - Today, brands race against literally thousands of competitors, including behemoth marketplaces, nimble pure plays, and new business models like subscription services -- including Amazon and Walmart.
Economic disruption - Income and expense pressures have driven a bifurcation in consumer behavior, where growth has occurred primarily with price-based and premier brands.
There's reason to be optimistic. However, brands must understand the four key disruptions behind the renaissance before they can address them. Brands also need to place a stronger emphasis on the consumer experience as a significant part of their value proposition.
Here are some of the key takeaways from the Deloitte survey:
1. Too many brands focus on their value proposition on their products versus consumer experience -- nearly 60 percent of brand leaders said their company's value proposition is based on their product quality and uniqueness. Product differentiation is not enough for retailers to compete and win new business. Only 1 in 10 surveyed rate values and emotional connection as their unique value proposition. In a digital economy, the consumer experience is the product.
2. Consumer experience is especially disconnected at the top of the funnel - Brands rated the biggest challenge as engagement and discovery (32 percent), followed by awareness and acquisition (24 percent). These two top-of funnel areas collectively represent more than half of the areas that need the most improvement. One of the reasons that retailers cannot improve the consumer experience is that data is scattered throughout the enterprise -- brands are not able to analyze product and customer data in a meaningful or actionable way.
3. Brand leaders are not sure who should own the consumer experience - There is no common blueprint on consumer experience ownership. When the C-level executives are asked about ownership, 72 percent say the CEO owns the consumer experience, strategy, and execution. When SVP and VPs are asked, only 21 percent point to the CEO as the owner. I believe the CEO must be the biggest advocate for the stakeholder experience -- employees, partners, customers, and community. That said, I also believe the winning the consumer experience game is a team sport. Every single employee should be trained, empowered and rewarded for delighting their customers. The consumer experience battleground is won with the alignment of culture, talent, processes and technology, all aimed at anticipating and proactively delivering products and services that meet and/or exceed the consumer expectations.
4. Digital investments take the lead- Over half of brand leaders estimate that their organization's digital business is more than 25 percent of total retail or direct-to-consumer revenue (see Figure 5). According to Deloitte: "Industry data reflects this shift to digital. During the 2017 winter holidays, ecommerce sales grew by 18 percent (Salesforce), compared to 5.5 percent for retail overall in the same period (NRF). Online revenue is largely propelled by mobile devices, with mobile orders growing by 45 percent in Q3 2017 compared to Q3 2016 (Salesforce). Similarly, mobile traffic to e-commerce sites now firmly outpaces desktop traffic, with 60 percent of traffic coming from mobile versus 33 percent from computers (Salesforce)."
5. Elite brands win by focusing on cultivating a data-driven culture - Brand leaders -- who reported a revenue increase of at least 10 percent in the past fiscal year -- focus on data at nearly 2x higher rates than under-performers across all areas, on average. The top three areas of data deficiencies for under performing retailers are:
Governance: 68 percent don't have clearly defined roles and governance for managing consumer data.
Agility: 63 percent don't respond to consumer demands and insights in an agile manner.
Security: 54 percent don't have rigorous compliance and security to monitor and protect consumer data.
6. The biggest AI bets are pricing, promotions, and search - On average, just over one-third of brand leaders have adopted any given AI use case, with more popular applications in tailored pricing and promotions and relevant search results. Brands are also investing in people that can help greater adoption of AI. According to the survey, brands plan to employ 50 percent more data scientists over the next three years. A 36- degree view of your customers is no longer enough. For retailers to compete and win, they must deliver value in real-time to their customers.
7. If AI is the rocket ship, data is the rocket fuel - 65 percent of branded manufacturers can access none to a moderate amount of consumer data via indirect channels.
"To compete in this new world, where competition is fragmented among thousands of options that consumers can find at the tap of a phone, brands should focus on accessing first-, second-, and third-party data -- the more granular the better to find relevant opportunities for action. This requires the right technology, as well as the right people and approach." - Deloitte
Leading brands will ensure that marketing, sales, commerce, and service teams collaborate to deliver a complete and unified consumer experience. Brands cannot achieve a unified consumer experience unless they invest in AI-powered (machine learning) customer relationship management (CRM) platforms.
8. Platforms expand from unified commerce to unified engagement - Leading brands will use technology across the entire journey -- before, during, and after a purchase of products and services. Brand leaders today maintain an average of 39 disparate front-end systems to manage consumer engagement (point-of-sales, mobile, call center, e-commerce, email marketing, social, etc). That's not only impractical but devastating for companies that truly care about speed, scale, and security.
9. Two-thirds of brands have an active and funded unified engagement platform initiative in play - According to Deloitte: "These investments signal an understanding of the need to include commerce, marketing, and service together in a system of engagement in brands' unified platform strategies." Fifty-two percent of C-level executives say they plan to replace existing systems of record with a single platform immediately. I believe the use of AI, machine learning, and advanced analytics must be boardroom discussion in order for brands to survive in the age of the connected, intelligent consumer.
10. The elite brand performer's roadmap is a phased approach: data, intelligence, engagement.
"The report defines elite performers as brands whose revenue increased more than 10 percent in the past fiscal year. High performers are those whose revenue increased 1 percent to 10 percent in the past fiscal year, while under-performers' total revenue has stayed the same or decreased during the same period." - Deloitte
In summary, Deloitte's survey results point to the data as the currency and building block for brands and retailers that will compete and win in the age of the connected and intelligent customer. Data combined with AI powered engagement platforms will be the currencies for the next generation of consumer experience initiatives. Leading brands will recognize that the people on the outside of your business will hear, see and feel what is inside of your business.
In a hyper connected, knowledge-sharing economy, powered by digital technologies, your culture is your brand. What is your brand promise? And you have the right talent, processes and technology to support your brand promise? Remember this, the customer experience is the product.