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Retail Deep Dive Retail Media

Retail innovation has stalled. Here’s how to jump-start it.

By Wendy Karlyn, Chief Client Officer



The Drum Network article

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November 16, 2023 | 7 min read

Rightpoint’s Wendy Karlyn argues that retail innovation has slowed after a flurry of activity. For The Drum’s retail deep dive, she tells us how to get it back on track.

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Is retail coming up short in the innovation department? / Johannes Plenio via Unsplash

After several years of rapid evolution in commerce, from the explosion of social commerce to the widespread integration of online and in-store pickups and returns, it may be controversial to say, but retail innovation is a bit stuck.

But consider that just 6% of brands (across industries, including retail) delivered a “significant increase” in customer experience in 2023, while overall CX quality dropped for the second year in a row.

These are disappointing figures, but they’re not surprising. Much of the innovation in commerce since 2020 has focused on making it more convenient for consumers to minimize the time they spend in stores, and some pandemic-era innovations like social commerce are still seen as nice-to-haves rather than key elements. Plus, many of the innovations we saw in retail before the pandemic – like concept stores and smart mirrors – fell by the wayside as store traffic dropped.

Since then, the role of the customer has changed. Customers are now in charge. They want retailers to recognize them and deliver seamless experiences across the channels they shop in, including stores. Thanks to consumers’ high expectations for recognition, consistency, and ease, brand loyalty is becoming a thing of the past; 54% of US adults will drop a brand after a single bad experience.

The message for retailers is clear: innovate to delight your customers, or risk losing them.

What’s holding back retail innovation?

It’s tempting to blame the innovation stall-out on tighter budgets, but the real obstacle is that many retail organizations are struggling to enable the kind of innovation that drives return-on-investment (ROI). Demonstrable ROI is what gets innovation project budgets approved, so in order to clear this hurdle, organizations need to change their internal infrastructure to prioritize and act on new initiatives. But how?

  1. Get serious about getting rid of silos. Despite the push to eliminate data and operational silos, silos are still very common in retail organizations, impairing their ability to align on priorities and contributing to confusion over who owns the customer experience.

  2. Focus on one or two tech initiatives. Too often, retail organizations are working with outdated or inconsistent roadmaps. Even consistent and current roadmaps can fail if they’re so ambitious that no one can execute against them.

  3. Focus on the last-mile delivery approach with an omnichannel view. How customers receive, return and engage with merchandise from retailers at the end of the purchase cycle has significant impact on loyalty. After a poor delivery experience, 85% of consumers would not shop with a retailer again. Invest here to see quick returns.

  4. Center customer behavior and ROI. Retail companies that successfully innovate have reduced their silos and rightsized their roadmaps. They also champion ideal customer behavior as the guide for innovation. Equally importantly, they innovate to drive ROI and business outcomes.

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Customer behavior and ROI are everything

Pre-pandemic, there was a big focus on testing in retail innovation, especially on big, costly initiatives like smart mirrors. Now, with leaner budgets and less predictable customer behavior, the key to successful innovation is identifying core customer behavior and the ROI you want to deliver by supporting that behavior.

The good news is that initiatives that can support ideal customer behaviors and drive ROI usually already exist. Often, silos and the inability to prioritize effectively have caused them to languish. So, prioritize: pick one or two initiatives and identify the barriers you need to remove to execute.

For example, outdated technology may be interfering with customer or employee experience. An effective modernization initiative might leverage generative AI to create dynamic content and improved 1:1 personalization – or it might start by consolidating technologies to streamline experiences.

Likewise, the old model of basing online retail on the physical store experience is outdated. Now, online experiences are driving expectations for in-store experiences that are designed to feel equally seamless – with easy self-scan checkouts or QR codes for product information.

Finally, embrace storytelling in social commerce – which may be worth $13tn within a decade. What makes social commerce unique is that microbrands get equal time with major legacy retail brands in users’ feeds, and both appear alongside personal posts from friends and family, close-up and personal. Focusing on storytelling over selling is key to fully leveraging social initiatives.

Despite the slump in retail innovation, many retailers are closer to delivering new experiences than they may realize. Overcoming internal hurdles, dusting off existing plans and initiatives, prioritizing carefully, and maintaining a laser focus on both customer behavior and ROI can jump-start the innovation and experiences that customers expect.

Get ready for the retail world of the future with more smart thinking and detailed analysis over at our dedicated deep dive hub.

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