Christmas is super important for retailers. The economics of the Christmas season are well documented as the peak selling period for several retailer types and is often the ‘make or break’ for annual performance figures.
In the US, the shopping season starts as early as October around Halloween and by mid-November the momentum is maintained with Thanksgiving, Black Friday followed closely by ‘cyber-Monday’. In contrast, the Christmas shopping season in Europe and the UK starts around mid-November when many shopping malls and high streets turn on the Christmas lights, the Germany-styled Christmas markets are set up and the Gluewien is invitingly warmed.
There are a variety of economic indicators that provide worthwhile year on year comparative insights, such as ‘Christmas Price Index’, the ‘Price of a Christmas Dinner’, and e-commerce sales as a proportion of all retail sales. Used in isolation they can be misleading but when considered together a more complete picture is formed. For example, in the UK, Neilson recently commented to the British Retail Consortium, “Shop prices are still falling and deflation will continue to at least the end of the year, as the result of the battle for the wallet of Christmas shoppers”. However, a typical shopping basket of Christmas food bought from non-discount supermarkets has increased 14% on last year according to recent analysis by the BBC and mySupermarket.
Meanwhile it is clear that digital transformation continues. According to e-marketer, during the Christmas shopping period of November and December 2016, UK retail e-commerce sales will reach an estimated £16.90 billion and 20.3% of all Christmas season retail sales, up from £14.65 billion and 17.8% last year.
How to differentiate in a busy market?
There used to be a time when retailers could depend solely on store location and the quality of the products they sold to bring in business. Success came from a retailer’s focus on delivering desirable products to the market in an amiable environment. However, the ubiquitous nature of retailing today has given rise to cut throat competition where location is less relevant and product differentiation is a ‘me too’ tactic that is no longer viewed as the key success factor in big business today.
Shoppers have so much choice. If one shop is out of stock or offers a product in the ‘wrong’ colour, there are a dozen other retailers willing to supply the same or similar product. While shoppers used to browse in stores before deciding what to buy, now more than 50% of consumers have researched products online before they even step into a store. What’s more, the modern consumer has access to nearly all the information on their smartphone. The smartphone is a digital shopping window. Shoppers have a choice and want that choice to align with their personal values, preferences and to include a meaningful customer experience.
Retailers are now placing greater emphasis on the customer experience, ‘CX’, in both their product/service design and business model. Instead of making heavy investments in advertising or the sales strategy, customer experience design (CXD) is where retailers are starting to differentiate and create relevance in a crowded marketplace. Customer experience design pioneers include Nordstrom, Apple, Nespresso, Tesla, Warby Parker, Casper, John Lewis Partnership and other retailers who understand that a good customer experience design is how to engage with customers in a more meaningful way.
CXD is not a science; it is an art that embraces every attribute of the retail customer engagement. When it comes to payments, Edgar, Dunn & Company (EDC) understands the importance of payment acceptance within the holistic omnichannel customer experience. Simplified pricing and check out flows, ‘one-touch’ payment, preferred currency transactions and credible alternative payment options all play their part in the overall experience complementing the brand engagement.
With large retailers such as Nordstrom leading the way to create a customised shopping experience using Artificial Intelligence (AI) we see a new era dawning. This app-like software provides a personal shopping assistant to help select perfect gifts this Christmas by assimilating present criteria and the available product range. And, when it comes to completing the transaction, payment needs to flow through effortlessly. New AI decision making and fraud detection tools can also be used to minimise false declines by profiling customer purchase behaviour and leveraging additional data such as location, day, time and device.
At Warby Parker, the US opticians, the purchasing of prescription eyeglasses and sunglasses is a frictionless customer experience. By carefully applying technology to streamline the payment transaction, every sales associate carries a tablet, that not only provides product details, inventory, customer details, a history of previous transactions, but it is POS (point of sale) device. No need to walk over to a separate desk or checkout at the end of the product selection experience. The customer almost doesn’t know the transaction has happened, until they walk out the store with a Warby Parker bag in their hand with a new pair of $450 glasses. Meanwhile, FramesDirect provide the ability for customers to use augmented reality on their website to select frames using their virtual ‘Try-on tool’ before checking out.
Shoppers rate trust and peace of mind as core attributes of John Lewis, knowing that there will be a satisfactory resolution to any problem with the purchase. Returns and refunds are often over looked in the context of customer experience design which can cause issues particularly with ecommerce purchases made via PayPal or an e-wallet which are then returned to store.
CXD will incorporate many attributes of shopping and we recognise it is not all about the payment. Walk into a Paul Smith shop, for example, the British fashion retailer, look at the shelf space and the shop design. There are attractive, idiosyncratic and quirky items that reflect this eclectic fashion brand. It is not a clothes shop, which many men hate to even enter, but it is welcoming, visually stimulating and turns browsing into a customer experience that is akin to visiting the home of an eccentric explorer. A Paul Smith shop suggests that this retailer is about more than just clothes. It is about product design and that includes customer experience design.
Designed by humans for humans
At EDC, we believe that customer experience design must be human centric. As digital and physical channels merge, technology must be complementary to the service that sales colleagues offer and not be deployed to confuse or present a barrier at the point of transaction. Technology and payment processes must primarily enrich the consumer interaction boosting conversion, spending levels and repeat purchase. Retailers that can successfully achieve this will design the future of retailing.
For example, apps that enable restaurant diners to order and pay for meals using a smartphone at table are starting to emerge. The efficiency benefits are obvious with orders routed directly to the kitchen and consumers put in control of how and when they pay. Meanwhile, the human interaction is also enhanced as serving staff can focus on bringing food to the table and catering for guests needs to create a positive, enjoyable experience.
In contrast, could AmazonGO, the cashier-less, the POS-less, fully frictionless shopping experience, be a step too far? Consumers go to a bricks and mortar store because they want to interact with another human. The customer experience will involve a human who understands the consumers’ needs, has empathy, has a sense of purpose, can be a brand advocate, and can demonstrate the product. Put simply, help the consumer to have a good customer experience. The faceless vending machine that you will see in many Tokyo streets has its place for commodity purchases but is not the future of retailing. AmazonGo uses technology that they call ‘just-walkout-technology’ may appear to be futuristic but what value is brought by replacing the human interaction that occurs in shopping? Is AmazonGo the world’s most advanced shopping technology? This question will only be answered when they are rolled out to a high street near you and real consumers get to shop there.
At the end of the day, consumers are already interacting digitally and using digital technology – their shopping behaviour is already omnichannel. Today, many retailers are only just getting to grips with an omnichannel strategy and the importance of customer experience design. Blurring the lines between physical and digital. Online and offline. That is good customer experience design. This is the future of retailing.
Contributors: Mark Beresford, author, Head of the Retailer Payments Practice, with input Max Shinerock, an EDC Senior Consultant, working in the Retailer Payments Practice at EDC and from Emma Allen, a subject matter expert in retailing. Emma has over 15 years of experience of working in this space and works independently and as an EDC associate.