Why Tomorrow's Customers Won't Shop At Today's Retailers

Because algorithms will increasingly become the intermediaries between merchants and consumers, empowered by those who own - or more likely, lease - their services to make commercial decisions.

Survival will mean 'marketing to the machine.' JL


Dan Clay reports in Fast Company:

Consumers are increasingly willing to trade privacy for more tangible benefits. In retail  this means perfectly tailored products and a more personally relevant experience. our customer of the future’ll give an intelligent, IoT-enabled agent personalized filters so the agent can buy on her behalf. The robot becomes the customer, and retailers must win over smart AI assistants before they even reach end customers. “I’m not sure if in 20 to 50 years we are going to be entertaining you, or entertaining AIs.”

Meet Dawn. Her T-shirt is connected to the internet, and her tattoo unlocks her car door. She’s never gone shopping, but she gets a package on her doorstep every week. She’s never been lost or late, and she’s never once waited in line. She never goes anywhere without visiting in VR first, and she doesn’t buy anything that wasn’t made just for her.

Dawn is an average 25-year-old in the not-so-distant future. She craves mobility, flexibility, and uniqueness; she spends more on experience than she does on products; she demands speed, transparency, and control; and she has enough choice to avoid any company that doesn’t give her what she wants. We’re in the midst of remarkable change not seen since the Industrial Revolution, and a noticeable gap is growing between what Dawn wants and what traditional retailers provide.

[Illustration: Lippincott]

In a comprehensive study, Lippincott analyzed the major technological and sociological trends that will fundamentally change the way consumers shop and interact with brands. Synthesizing the most relevant conclusions for the retail industry, we sought to answer the question: How do retailers need to change to meet the needs of the customer of the future?”

“Right now” is already late

In 2005 Amazon launched free two-day shipping. In 2014 it launched free two-hour shipping. It’s hard to get faster than “Now,” and once immediacy becomes table stakes, competition will move to prediction. By intelligently applying data from our connected devices, smart digital assistants will be able to deliver products before we even acknowledge the need: Imagine a pharmacy that knows you’re about to get sick; an electronics retailer that knows you forgot your charger; an online merchant that knows you’re out of toilet paper; and a subscription service that knows you have a wedding coming up, have a little extra in your bank account, and that you look good in blue. Near-perfect predictions are the future of retail, and it’s up to CX and UX designers to ensure that they are greeted as miraculous time-savers rather than creepy intrusions.

Every product is personalized

While consumers are increasingly wary about how much of their personal data is being tracked, they’re also increasingly willing to trade privacy for more tangible benefits. It then falls on companies to ensure those benefits justify the exchange. In the retail space this increasingly means perfectly tailored products and a more personally relevant experience. Etsy recently acquired an AI startup to make its search experience more relevant and tailored. HelloAva provides customers with personalized skincare product recommendations based on machine learning combined with a few texts and a selfie. Amazon, constantly at the forefront of customer needs, recently acquired a patent for a custom clothing manufacturing system.

Market to the machines

Dawn, our customer of the future, won’t need to customize all of her purchases; for many of her needs, she’ll give her intelligent, IoT-enabled agent (think Alexa with a master’s degree) personalized filters so the agent can buy on her behalf. When Siri is choosing which shoes to rent, the robot almost becomes the customer, and retailers must win over smart AI assistants before they even reach end customers. Netflix already has a team of people working on this new realm of marketing to machines. As CEO Reed Hastings quipped at this year’s Mobile World Congress, “I’m not sure if in 20 to 50 years we are going to be entertaining you, or entertaining AIs.”

Branded, immersive experiences matter more than ever

As online shopping and automation increase, physical retail spaces will have to deliver much more than just a good shopping experience to compel people to visit. This could be through added education (like the expert stylists at Nordstrom’s store without any merchandise) or heightened service personalization (like Asics on-site 3D foot mapping and gait cycle analysis) or constantly evolving entertainment (like Gentle Monster’s Seoul flagship store’s monthly changing “exhibition“).

In this context, brand is becoming more than a value proposition or signifier—it’s the essential ingredient preventing companies from becoming commoditized by an on-demand, automated world where your car picks its own motor oil. Brands have a vital responsibility to create a community for customers to belong to and believe in.

A mobile world that feels like a single channel experience

Dawn will be increasingly mobile, and she’ll expect retailers to move along with her. She may research dresses on her phone and expect the store associate to know what she’s looked at. It’s no secret that mobile shopping is continuing to grow, but retailers need to think less about developing separate strategies for their channels and more about maintaining a continuous flow with the one channel that matters: the customer channel.
WeChat, for example, China’s largest social media channel, is used for everything from online shopping and paying at supermarkets to ordering a taxi and getting flight updates, creating a seamless “single channel” experience across all interactions. Snapchat’s new Context Cards, allowing users to read location-based reviews, business information and hail rides all within the app, builds towards a similar, single channel experience.
The future promises profound change. Yet perhaps the most pressing challenge for retailers is keeping up with customers’ expectations for immediacy, personalization, innovative experiences, and the other myriad ways technological and societal changes are making Dawn the most demanding customer the retail industry has ever seen. The future is daunting, but it’s also full of opportunity, and the retailers that can anticipate the needs of the customer of the future are well-poised for success in the years to come.