Our outlook on what’s next and how retailers can strategically plan for changing customer demands.
For nearly two years, retailers have faced COVID-19 lockdowns and restrictions, with e-commerce changing consumer expectations and the role of physical stores and online channels. The desire to return to physical retail can be seen in regions where lockdowns have eased. For example, when stores in the United Kingdom reopened in April 2021, sales rose 9.2 percent month-over-month, with a 218 percent jump in foot traffic in the first week after reopening. In the United States, retailers like TJ Maxx have credited consumers’ desire for “treasure-hunting” experiences for strong post-lockdown sales.
(Source: Publicis Sapient research, United Kingdom, 2021)
“Even with the massive shift towards online shopping, the physical store is not going away. In 15 years, brick-and-mortar stores will still be relevant, and they will be the best place for consumers to experience a brand,” said Hilding Anderson, head of retail strategy, Publicis Sapient.
Making a memorable and meaningful brick-and-mortar experience requires a modern-day take—one that combines the convenience of digital tools and services with an inherently unique experience. Here, we explore how retailers are evolving their store footprint to bring new experiences to digital-first shoppers, using data and technology to connect online and offline journeys.
The pandemic has changed everyday life. The realized potential of remote work has led to an exodus from city centers that once thrived from a commuting workforce, with populations of shoppers swapping rituals of the road for at-home comforts.
According to consumer location data from Publicis Sapient AI Labs, U.S. traffic to coffee shops and bakeries—a staple of a typical morning commute—plunged at the height of lockdowns in April 2020, with some uptick as physical locations began to reopen. Convenience stores and service stations, frequented by those who may drive to work, saw a similar trajectory.
“People have relocated, and a lot of people are working from home—they don’t come to the office as often,” said Thierry Elmalem, senior managing director, management consulting, Publicis Sapient. “Retailers will have to change the number of stores they have or relocate stores to where new demand is.”
In 2020, an estimated 12,200 store locations closed throughout the United States, up from nearly 10,000 in 2019. Coresight Research estimates that another 10,000 stores will shut down in 2021, with 4,000 new store openings in the U.S.
COVID-19 restrictions were a catalyst for companies already struggling to maintain profitability at low-performing retail locations. These closures also created space for new entrants into the brick-and-mortar market, with digital natives like Netflix, TikTok, and Amazon announcing plans to expand their physical footprint. Other retailers are using this period to repurpose existing stores to increase profitability, either as dark stores, click-and-collect outposts, or experiential spaces.
“This is demonstrating how companies are re-evaluating the business case for their retail footprint,” said Andy Halliwell, international retail strategy lead, Publicis Sapient. “It’s no longer just about sales, but looking at stores as a very large investment in out-of-home media to create brand awareness.”
Organizations must understand how stores fit into the broader needs of the business and the consumer to create a competitive attack plan and gain market share. “Combined, this intelligence will help retailers make the right decisions on how to evolve their footprint,” Elmalem said.
Leading the Change: Loblaw has been changing the way Canadians shop since 1919, and it was the first grocer to offer click-and-collect to shoppers in Canada. The strategic rollout of express click-and-collect pickup has put 75 percent of Canadians within 10 minutes of a Loblaw location, making order collection easy while expanding the grocer’s footprint.
Consumers expect connected experiences when managing BOPIS (Buy Online, Pick Up In Store) purchases and returns. For example:
BOPIS and curbside fulfillment are preferred methods for shoppers across several key categories, such as household staples, wardrobe staples, DIY products, and OTC medication, with BOPIS or curbside pickup being the most popular option in each category.
Retailers are also rethinking the in-store experience to better serve digital-first shoppers. Some, like Nordstrom, are creating smaller-format stores that focus on services like order pickup, returns, and alterations, rather than carrying a full inventory of products. These stores are designed to complement larger flagship locations and provide added convenience for customers who want to shop online and pick up in person.
As consumer habits continue to move toward click-and-collect, retailers are implementing new models to manage demand, provide better customer experiences, and improve profitability. These include manual picking in-store, hybrid picking, standalone click-and-collect, micro-fulfillment centers, and automated click-and-collect warehouses, each with varying levels of automation, order capacity, and SKU range.
Leading the Change: When Audi wanted to bring their showrooms to crowded city centers, they introduced Audi City, the first all-digital vehicle showroom. An experience powered by seamless gesture control and one-to-one rendering of life-size vehicles, combined with real-time pricing and availability, gives buyers a completely new, transformative approach to car buying.
Technology and data will serve as the backbone of these new store experiences. By seamlessly integrating data across web, mobile, storefront, and inventory channels, retailers can digitally expand their physical footprint while providing the connected, personalized experiences that shoppers want.
“It’s about using data to maximize the experience of the customer through personalization, using techniques like employee awareness of customer preferences and history, personalized promotions, and discounts for genuinely high-value customers,” said Elliott. “Getting to a true understanding of customer profitability across all channels is becoming increasingly important.”
By combining data from an array of sources—transactional, contextual, customer, and retailer processes—retailers can make more intelligent business decisions across the entire organization.
Retailers can use data to provide elevated digital services across every point of the in-store journey:
Leading the Change: Gas retailer Pilot Flying J used data to reimagine the customer journey for drivers, developing a new app that delivers unique recommendations based on vehicle type, geolocation, traffic patterns, and loyalty program information.
In the future, the store experience will feel different. Through new store models, brand initiatives, and digital integrations, retailers will increase their existing footprints by creating seamless experiences shoppers will remember.
Strategic returns management lets retailers get ahead of returns in a way that’s cost-effective and appealing to consumers.
"The returns process is critical to the overall customer experience, so if you focus only on minimizing costs you could create a big issue from a sales perspective. Retailers must balance cost impact with sales impact and brand impact as they’re thinking about optimizing the return process." — Guy Elliott, Retail Lead, EMEA & APAC, Publicis Sapient
One of the biggest differences between e-commerce and brick-and-mortar is the ability for consumers to try on or try out products. Consumer research from Publicis Sapient finds that retailers struggle to replicate this process digitally. Sixty-two percent of shoppers aren’t satisfied with the ability to try on and try out products online. When people don’t feel confident in what they’re buying, it can lead to returns that retailers could have prevented with improved customer experience.
The ability to try on or try out products online, manage returns, and resolve customer service issues are rated the lowest among satisfaction across the digital customer journey. Nearly half of consumers look for an easy way to manage returns when choosing online retailers.
Percent Satisfied or Very Satisfied with doing the following activities online:
In apparel, nearly half of U.S. shoppers will buy multiple sizes of a product online with the intention of returning items that don’t fit. This behavior, known as “bracketing,” is a way for shoppers to ensure they get the right product through trial and error—something that could be perceived as low-risk when returns are free.
“Providing as much information about products as possible can help generate consumer confidence,” Elliott said. “You can actually start to drive down costs by not having to ship three items and take two back, which is going to cause you a loss in almost every case.”
Data is key to helping customers make better purchase decisions, says Andy Halliwell, senior client partner, Publicis Sapient. That starts on the product page. “You need data about the product, the product information, the data around how people are buying it and how people are returning it so that you can feed that into the customer experience,” Halliwell said. In the case of apparel, “use data to your advantage and help make sure that from the start it fits, so a shopper doesn’t actually need to return it.”
Customer data can also be used to identify shoppers with a high likelihood to return. Retailers can then incentivize these customers toward cost-effective return methods, like returning in store or at a click-and-collect location.
“Retailers can segment customers and products based on returns history and promote or suppress marketing efforts based on the customer profile and product attributes,” said Nitin Dsouza, director, strategy and transformation, Publicis Sapient.
Limiting the number of items a customer can buy in different sizes helps avoid the need to discount unwanted products. Adding dynamic pricing on shipping in these cases can incentivize customers to choose the best option while also covering potential losses on returns. For seasonal items, incentivizing customers to return quickly could also be effective.
“Some of the investments that we’ve started to see have been around using artificial intelligence and machine learning to make better predictions based on where shoppers are returning from, and some of their options, like where retailers need that product and how quickly they can have it ready for the next customer. All of this plays a role in driving higher profitability,” said Hilding Anderson, head of retail strategy, North America, Publicis Sapient.
And then there’s the in-store experience. According to Halliwell, “retailers are going to have to start thinking about having a dedicated space where digital sales can be brought back into stores, designed with transactions in mind.” This could be by implementing new experiences, like strategically placing a café near queues where customers can wait comfortably or equipping associates with the right digital tools to manage customer returns on the floor. Digitally, retailers can offer personalized in-store deals to incentivize consumers who choose to return or exchange at their local retail location.
“If you can take the return and immediately sell them the right product, you both minimize your cost of the return and keep the sale,” Elliott said.
Retailers are already using data to get smarter about helping their customers. AI-driven personalization tools like TrueFit ask shoppers to enter basic information about height and weight, along with brands they’ve shopped with before, where they know their size. The tool then recommends similar sizes, so shoppers understand how different sizing translates across brands. Other retailers use a combination of user reviews and personalization to make recommendations by matching past preferences to what similar shoppers have purchased.
Augmented reality lets shoppers “place” an item in their home virtually or “try on” products through photo or video. Livestream demos and chatbots allow shoppers to interact directly with staff and ask questions before they buy.
“The ability to field questions backs up performance promises, delivering the assurance users need to make a big-ticket purchase online, and ultimately reduces costly returns for the retailer,” said Britta Alexander, director of experience, retail, Publicis Sapient.
Although an improved customer experience may prevent unnecessary returns, operational efficiency is what will ultimately mitigate cost when returns do inevitably happen. Visibility and predictability into the supply chain across vendors, transport providers, distribution, stores, and dealers are key to unlocking actionable insights.
“If your reverse logistics are not up to scratch, then it’s going to be tough to hit the levels of profitability that most retailers are used to,” Halliwell said.
Speed to resale on returned items is critical to maximize margins. Improved inventory visibility lets retailers effectively streamline distribution by routing products to the right place at the right time. This requires a de-siloed data system, with information shared across the supply chain to determine the best economic opportunity for redistribution.
Retailers can also get ahead of mail-in returns by dynamically printing shipping labels that route the return to the best distribution point and providing them to the consumer—streamlining shipping while also reducing packaging waste.
“There are retailers who are spending huge amounts of money flying product between warehouses to try to get product into the right space,” Halliwell said. “But if you’ve got 1,000 returns, and it goes directly to the warehouse that doesn’t have any in stock, you can eliminate that step.”
Optimizing returns requires blending cost-effective measures with customer-centric experiences. With data and a modernized, digitally forward supply chain, retailers can make intelligent decisions on how to manage returns seamlessly and effectively.
Recent disruptions to the digital media landscape leave challenges and opportunities for retailers, emphasizing the acceleration of data capabilities to future-proof their businesses for a cookieless world. By 2023, $586 billion globally is projected to be impacted by the deprecation of third-party cookies.
"A brand acting as an advertiser gives the brand more impressions in front of customers and prospects. When you create your own advertising network, you’re getting the same types of signals that the walled gardens are getting without having to depend on the walled garden—you’re decoupling dependencies." — Ray Velez, Global Chief Technology Officer, Publicis Sapient
(Source: Publicis Sapient Digital Life Index, Publicis Sapient/WBR Report)
In 2019, Amazon netted nearly $13 billion in advertising revenue—representing 11 percent of additional income. In 2021, that number is expected to top $26 billion, with Amazon representing around 5 percent of the worldwide digital ad market.
Data independence can be a driving force for retailers looking to stay ahead while increasing e-commerce profitability, improving customer relationships, and driving better business decisions. Here, we explore four ways retailers can build a data strategy that delivers.
There are so many ways a shopper can engage with a brand and each avenue is an opportunity to deliver personalized communications. By creating a single view of the customer, retailers can use data to create unique shopping experiences that lead to new revenue opportunities.
The more connected data a retailer has from point-of-sale transactions, mobile or internet traffic, email engagement, and media impressions, the greater chance it has to create targeted campaigns or new products and services. For example, retailers can combine loyalty program data and transactional data to present personalized credit card offers, auto-replenishment, or subscription services based on past purchase history and preferences.
“To go across these channels to orchestrate a personalized experience is going to get harder unless you’re a first-party brand who has a consent-based relationship that can link back to customers,” Velez said.
A connected customer data platform allows retailers to easily share data with partners, suppliers, publishers, and advertisers in a cleanroom environment, creating the foundation for a media network while remaining fully compliant with regulatory guidelines.
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With a media network, retailers and brands can work together to create joint marketing campaigns that benefit both companies. For example, a consumer technology brand could partner with a big-box retailer to run a campaign on the retailer’s website or marketplace, leveraging the retailer’s customer data to target look-alike customers. Both companies receive direct data on how customers engaged with an ad, what products people were most interested in, and which promotions led to a conversion.
66% of shoppers say they’ve bought something online they’ve seen advertised. “By creating joint campaigns, you’re increasing traffic without having to buy those advertisements yourself,” Velez said.
(Source: Publicis Sapient Digital Life Index)
Data monetization brings new revenue to a business and strengthens the quality of first- and second-party data collection. Once data is collected in a connected ecosystem that is compliant with regulatory conditions, retailers can use the data to improve other areas of the business.
For example, understanding which target audiences are interested in buying a product and where they are located can inform inventory optimization and demand planning, with retailers able to make intelligent decisions on how they stock distribution centers or arrange store layouts to meet local demand. Data can also be used to continuously test and learn when implementing new marketing campaigns and partnerships, improving the quality of customer experiences over time.
“Retailers are getting more information about people who have interest in buying a product,” Velez said. “Now retailers have advertising signals they could use to test new imagery that drives more conversions. All of these things are improved because retailers have more signals to gauge intent.”
Many retailers already have the capabilities in place to better understand their customers. Looking holistically at the customer journey and advertising experiences in a safe, compliant way enables retailers to expand their offerings, improve the quality of personalized experiences, and make their data go the extra mile.
"Marketplaces are the way to expand on different types of things that people buy. But an ecosystem touches every part of what a consumer would be looking for." — Sudip Mazumder, Retail Lead, North America, Publicis Sapient
Ecosystems offer unique value for both specialty retailers and big-box stores. Specialty retailers are typically focused on selling within one product category. However, the products they sell are ultimately part of a larger experience in a person’s life. For specialty retailers, building a platform is about understanding how to expand their brand, becoming a destination where people can go not just to buy, but learn, explore, and grow as they manage this facet of their everyday lives.
“You’re trying to offer something really unique based on what you do,” said Sudip Mazumder, industry lead, retail, Publicis Sapient. “And that’s what will differentiate you in the market.”
Partnerships with other companies or services that are complementary and align with a retailer’s mission give brands the ability to build a network that spans an entire product category.
Take Petco, for example. The pet care retailer offers a wide selection of products, its own pet food line, and a robust loyalty program with auto-replenishment and subscription services. Outside of products, Petco’s reach expands into a suite of pet hotels, grooming services, adoption events in partnership with local shelters, and its own pet health care coverage. As a marketplace, Petco allows partners to advertise on its website, exponentially expanding their network to accommodate a growing number of vendors and affiliates. The breadth of reach achieved through strategic partnerships has established Petco as a place for shoppers to find everything they are looking for as pet owners, from adopting a pet to ongoing pet care and beyond.
In the first half of 2021, shoppers purchased across a variety of channels, with retailer websites and marketplaces being the most popular destinations:
(Source: Publicis Sapient Digital Life Index, 2021)
Growth in the platform trend can be found in the health and wellness sector because the COVID-19 pandemic accelerated the need for digitally connected health care services. More people used telehealth for the first time in 2020, introducing a new audience to the market. More than one-fifth of consumers shopped online at a drug store for the first time during the pandemic, and 70 percent of consumers used a mobile app to manage a part of their health and wellness experience in 2021.
The chart displays the percentage of people in various countries who use digital health and wellness tools for different purposes. The highest percentages for having a telehealth appointment are in Thailand and UAE, with the USA also showing significant usage. Tracking fitness goals is also high in Thailand and UAE, with moderate levels in other countries. Monitoring health conditions, learning about medical conditions, and managing medication are generally lower across all countries, with some variation.
This shift opened new doors for brands to expand their presence in the health care market by introducing new products and services that make it easier for people to manage their health and wellness in new and innovative ways. Pharmacy retailer Walgreens partnered with VillageMD to offer full-service doctor’s offices across the United States that offer in-person and telehealth care. This expansion complements Walgreen’s suite of online tools that help patients find local providers for specific health needs, manage prescriptions and loyalty program benefits, get alerts or reminders, and set pickup or delivery preferences. Apparel retailer Nike’s Training Club app offers personalized workouts, weekly challenges, and nutrition tips. In grocery, Carrefour introduced a digital tool that helps consumers learn about nutrition and make healthier food choices as they shop.
Deciding which activities to own versus those to access through a network is complex and constantly changing as an ecosystem evolves. To grow, retailers must continuously work to identify opportunities to create value, enable competitive advantage, and accelerate market share.
“Retailers always need to think about new products and services that they can bring into the ecosystem, which is going to keep enhancing the value of that network,” Mazumder said.
Identifying the best opportunities for expansion begins with understanding the many unique customer journeys that define a brand’s audience and how to be relevant in the moments that matter in everyday life.
Say you are a parent, and your child’s playing a new sport. A sports retailer could offer you suggestions on the best equipment to buy for beginners, a how-to guide to help you use the equipment, and a directory of local youth leagues where you can explore the right place to sign up your child for practice—all on their website or app. When you have to sign up for a new season the following year, the retailer has suggestions to help you find what you need.
Or, what if you’re a college athlete? You could head to the same sports retailer to find professional-level gear, join a community to chat with other college sports fans, and learn when and where the next big game will be.
These are two very different use cases. But they are both opportunities to bring together consumers that share common interests and needs. Retailers must dive deep into their data to create a holistic view of their customers and how their shopping experiences change over time. As needs change, retailers can offer highly personalized recommendations for products or services at just the right moments, becoming reliable destinations for shoppers to find what they’re looking for.
“At the core of all of this is the ability to really understand consumers and bring like-minded consumers together to create a network that will enhance its value over time,” Mazumder said.
A platform business model can enable resilience and be an engine of innovation. As with ecosystems, creating a platform is a relatively new trend that comes with fundamental shifts in how retailers manage their business.
As these systems expand, retailers need to develop the right capabilities to compete alongside these models, as a potential partner or by building a platform of their own.
To get started, please visit publicissapient.com/retail
Or contact us anytime:
SUDIP MAZUMDER
Retail Industry Lead, North America
sudip.mazumder@publicissapient.com
GUY ELLIOTT
Retail Industry Lead, EMEA & APAC
guy.elliott@publicissapient.com
Publicis Sapient is a digital transformation partner helping retail businesses such as Walmart, Carrefour, and Eileen Fisher get digitally enabled, both in the way they work and the way they serve their customers. As digital pioneers with 20,000 people and 53 offices around the globe, our experience spanning technology, data sciences, consulting, and customer obsession enables us to accelerate our clients’ businesses by designing products and services that put shoppers first. Publicis Sapient is the digital business transformation hub of Publicis Groupe.