With the large number of stores closings across the U.S., it's easy to believe that brick-and-mortar stores are dwindling as online retail takes over. However, a closer look at shopping behavior of 46,000 consumers reveals that:
20 percent are online-only shoppers
7 percent are store-only shoppers
73 percent of shoppers use multiple channels
This clearly implies that it is no longer about the channel being used. The line between online and offline retail is blurry, as customers are willing to switch to different channels depending on their need and the experience they get.
The idea of "new retail" is to bring a new level of experience for customers by blending the digital and in-store retail experience. Several top retail players like Alibaba, Target, Walmart and Amazon are focusing on providing an integrated, seamless customer experience by leveraging new technology trends to stay ahead of the game.
One such technology that is widely used is augmented reality (AR).
The power of AR is such that it enables customers to gain an interactive experience of a real-world environment using computer-generated perpetual information. This offers the following benefits:
AR enhances the customer experience. Through AR, customers can try on products before buying them. By simply sitting at their home, they can try different variations of the products, e.g., sizes and colors. Once they are satisfied with their selection, the exact item is delivered to their doorstep. It basically offers the convenience of online shopping with the experience of physically interacting with the product.
It reduces the need for in-store staff. Retail shops can use AR to cater to customers' needs to try out different products without in-store assistance.
AR reduces in-store inventory. With the use of AR apps, retail stores can reduce in-store inventory, thus minimizing costs for shipping and storing a large inventory.
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Retailers embracing the power of AR have a lot to gain. Enhancing the customer experience ultimately reaps business benefits, leading to an increased number of customers and increased revenue.
Here are some examples of retailers already into the game and how they are using AR to their advantage.
In 2016, Ikea, the world's largest manufacturer of furniture, generated a global revenue amounting to approximately 35.7 billion euros, a massive increase in revenue compared to previous years. Much of the credit for this increase is due to Ikea's AR app that saved people a visit to the store.
Ikea Place takes the guesswork out of the shopping experience by allowing a user to scan the area of the home they want to buy new furniture for. The app then shows the user how the furniture will look in their space.
The North American clothing brand took a bold, yet intelligent move by launching their augmented reality app. Using the app, a user can scan the physical image of the in-store item. The app then provides information like customer reviews, color and size options, and more. Customers can also purchase the item and have it delivered to their doorstep.
The French clothing brand Lacoste enables customers to virtually try on the brand's shoes. By using their app, customers can see the fit of different shoes and try on different colors. This helps Lacoste greatly reduce the need of in-store workers while enriching the customer experience at the same time.
Using its Shoe Sampler app, customers can simply point their phone camera at their foot, scan their foot and then see how different types of Converse shoes would look.
Leveraging AR for Small Businesses
Because AR is currently being used by large enterprises to offer novel customer experiences, the concern is that it is too expensive for small businesses. However, building basic AR applications like virtual tours and object recognition are not exorbitantly priced. While enterprises have their own technology teams, SMBs can collaborate with freelancers or small development firms to build low-cost AR applications.
The key for SMB retailers is to choose basic AR functionalities but leverage them in a creative manner. For example, a boutique apparel store can build a simple object recognition app that gives users the ability to click images of clothes they like on the screen and find similar options available at the store. So while the basic tech being built is simple and relatively low cost, the level of interactivity and convenience it brings to its customers is highly valuable.
Yes, AR applications will need more investment by the SMBs in comparison to their other channels, but it makes business sense for them because:
An AR app is a novel addition/offering that can make you stand out from your competition. Also, if you have an e-commerce app, the existence of the AR component gives users more incentive to download your app over those of your competitors. In the process, your brand is now able to stay front and center for the customer, especially when you offer regular deals and notifications, not to mention it can increase brand loyalty.
The use of AR technology can integrate both online and offline retail to provide the best possible user experience. The next step of retail transformation will be retailers expanding from brick-and-mortar or online identities and working to offer this integrated experience.
Much like the physical retail outlets offering digital experiences, Amazon and Alibaba are and opening stores. In the near future, we are bound to see more of these expansions, and AR is one of the primary technologies bridging the online-offline divide and being leveraged in innovative ways.
Have you ever hit a point where your business seemed to fall flat? Processes are humming along, but without that oomph, you perceive roadblocks and friction that prevent your customers from getting the most out of your products or services, or maybe you want to expand or innovate but don't quite know how. Despite wanting to improve, as an entrepreneur and business owner, you sense that something is wrong or missing. How can you find it? How can you fix it?
One way is to employ design thinking techniques to analyze the state of your company from the perspective of its clients and customers to determine your next moves. Design thinking has evolved as a respected nonlinear problem-solving protocol that applies professional creative design principles to general business strategy. Google, Airbnb, Apple, Microsoft, SAP, Netflix and many other companies employ this technique.
Design thinking means taking the time to analyze what you need to change and deciding on specific steps that structure and tailor your approach to suit your company's goals. It concentrates on first identifying problematic issues in your operation and then focusing on implementing solutions.
Design thinking approach
There are many corporate and industrial permutations to getting started with design thinking, but most of them involve some form of the following activities, as outlined in the Design Thinking Bootleg, published by the Hasso Plattner Institute of Design at Stanford (also known as the Stanford d.school): empathize, define, ideate, prototype and test. You don't need a large team to achieve this – even solopreneurs can benefit from this concept.
In seeking solutions to business challenges, the most important part of gathering insights is to delve deeply into your customers' experience with your product or service – to put yourself in your customer's shoes. This part of the research involves both observing customer interactions with your product or service and questioning users on the barriers they face that make their experience with your company less than rewarding. You want their views on how you can improve your product.
The most important part of empathizing is to uncover the emotional connection your customers have to your company. Let go of your own preconceptions and value judgments as you listen to customers and immerse yourself in their needs and points of view.
Stating exact problems makes it easier to search for solutions. After examining responses from your customers, narrow down the issues you need to address and clarify the exact problems you want to solve. A combination of user feedback and company-based interpretation helps you to formulate a problem statement – a vision of your company's problems that will lead to solutions.
This is another way of thinking conceptually and imaginatively – outside the box. This phase of design thinking encourages gathering a wide sweep of ideas, often through brainstorming, that generate radical proposals and methods of solving the problem. At this stage, all ideas and an attitude of experimentation – regardless of immediate practicality – are welcome. Seek to challenge assumptions and heighten awareness as you start to explore possible solutions.
The ultimate goal at this point is not the be-all, end-all answer, but to explore and eventually settle on a prototype to test with your customers. This ensures that your future solutions will work the way you want them to.
By the time you get to the prototyping stage, you have identified the problems you want to solve and considered a wide range of solutions. Now it's time to start considering a rough draft of your vision using a whiteboard, stickies or index cards.
The best way to prototype is to pull in all participants, including the customers who helped you with their views as well as your in-house team. This launches a second conversation with customers at a point where you have taken their concerns into account. Here is where you find out what they think of your proposed solutions.
Consider this stage a way to reinforce empathy, refine results, and explore multiple approaches and constraints. Where does your solution fall short? Does it need more of something and less of another thing? Prototyping helps you narrow down what works and what doesn't in a setting where all interested parties have input. You can even tease out a single variable first to test user responses or just let users lead the way to the prototype.
Each stage of the process presents another opportunity for you to empathize with your customers and gain greater insight into your business issues. Testing reveals whether your interpretations of the issues are true, letting you further refine your prototypes and retest them until your solutions are satisfactory to your clients.
Just because you have reached this stage doesn't mean the problem is solved or the solution will work. Sometimes it means the opposite: You may have to go back to the drawing board – to circle back to the empathy and define steps and start the process all over again, perhaps with a different emphasis to synthesize what you have learned so far. These iterations continue in a loop until everyone is satisfied with the results. In fact, at each stage, you may find the need to return to square one.
Testing with users is critical to refine your solution and better understand your customers. Allow users to experience the prototype and follow up with additional interviews about what works for them and what doesn't.
How do you find out what customers think and feel? You ask them. If you're in design thinking mode, there's a bit more to an interview than just asking a question and getting an answer. With design thinking, you are exploring customer views with a purpose and listening for key elements from which to draw specific conclusions for solution-oriented prototyping and testing. Use your team – if you have one – to plan interviews, carefully group questions into categories and allot time for free conversation.
Questions can be framed as "Why?," "Tell me about …" and "How do you feel about …" regarding how customers interact with your product or service. Empathy is a primary goal here too. You want questions to sound neutral, you want to encourage background information, and you want to set up opportunities to interpret body language.
The Bootleg document recommends paying special attention to extreme users – people who demonstrate special or unusual needs, interests, and behaviors – and pair them with parts of your operation that you want to explore in an extreme way. The purpose is to expose fresh ideas and approaches that will work well for all users. Then, gather your notes to group and prioritize results and share them with your team.
Point of view
Before you start to think about specific solutions, state the problem based on your research so far. The POV statement should be written in plain language and perhaps focus on a specific customer or user as opposed to a broad demographic. It should emphasize a change in overall direction rather than a specific solution to a problem.
As you gather ideas, try to seek alternative influences from different industries to gain perspective about analogous problems. This analytical exercise may give you further insight into the challenges your company's users face.
Brainstorming is useful throughout the design thinking process. While gathering as many ideas as possible, select which ones to follow up on for prototyping. First focus on ideas that excite, charm or fascinate, and then redefine your user base by characteristics, such as age group or nationality, that may cast a different light on the information and uncover new patterns and themes.
Because design thinking is productive and often successful in inspiring innovation, it's not just a convenient concept for a project but a way of life for your company that will add value over time. It starts with understanding your clients or customers, but it translates to teams and entrepreneurs who recognize that the company exists not only to prosper, but to create products and services that people genuinely love.
General Motor’s announcement that it plans to idle five North American factories and cut 14,000 jobs has sparked much discussion in the media and outrage in Washington. While the job losses are a terrible blow to those workers and the families they support and the local economies where the factories are located, the decision could prevent the kind of crisis that resulted in it seeking bankruptcy protection in 2009 and a $50 billion bailout by the U.S. government. It is far better for GM to reallocate resources now, while it is healthy, than to wait until it is trouble. And the same applies to the affected workers: The tight labor market means there are opportunities for those who go through retraining.
GM has good immediate reasons for its decisions. Car sales in the U.S. had a boom period thanks to all individuals and businesses who deferred buying new vehicles during the Great Recession. But car sales are now probably past a cyclical peak, not only in the U.S. but in China as well, and there is too much global auto-assembly capacity chasing that demand. Another problem is demand for small and mid-size cars in the U.S. has plunged, and consumers haven’t been flocking to buy GM’s hybrid Chevy Volt.
All those factors have been taking a heavy toll on the plants in question. For example, the Lordstown, Ohio, factory that makes the Chevy Cruze is running one shift a day, down from three a few years ago, and last year produced 180,000 vehicles, down from 248,000 in 2013. Capital-intensive factories have a high-fixed-cost, low-variable-cost operating model. If you greatly reduce the production volume, the cars that do come out have to absorb more of the fixed costs, and that eventually sends the product into a profitability death spiral. Every day GM operates such factories, it expends more resources that could be redeployed elsewhere.
Another issue involves reallocating resources in the face of fundamental market shifts. When and how are the best ways to do it? These questions that doesn’t get asked enough. It’s important because companies build assets and capabilities to deliver products and services to a market of consumers that values them at some point in time. But markets and tastes shift, and changing assets and company processes is hard. Given the shift in immediate U.S. demand from small and medium-size sedans to to light trucks and SUVs and the long-term need for GM to make the transition to electric and self-driving cars, I think that GM is smart to act now while its cash flow can sustain the shutdown of these facilities and reinvestment in new products.
Then there is the question of how to reallocate assets. Many firms — and GM is a notable example — have used bankruptcy as a way to shed assets. When it initiated the process during the heights of the Great Recession, it eliminated the Pontiac, Oldsmobile, Saturn, and Hummer brands, along with countless other obsolete assets. GM also used bankruptcy as a way to get out of dealer agreements, renegotiate labor contracts, and sweep away decades of ways of working that were no longer in step with the market’s needs.
I believe a far-better path is to restructure the operations in question way before they threaten the company’s survival. That is what GM is trying to do. Another way to do this is to sell off pieces that no longer are sustainable to someone who has the political ability to restructure them. A major rationale for a great deal of outsourcing activity has been to put assets in the hands of somebody who can restructure them. The Detroit Big Three did this with a significant portion of their component operations.
A separate question that the GM announcement raises is who is responsible for retraining the displaced workers and helping them to find a new way to support their families? The tragedy in America is that there is no consensus among leaders in business and government. Should retraining be a public or a private good? Most employers no longer seem to take primary responsibility for this, and the debate at different levels of government tends to confound the question with the provision of “welfare.” As is the case with education, I think it is a public good. Both individuals and companies benefit, as do the communities around them. A capable workforce with up-to-date skills makes a community or region attractive to prospective employers. What is gratifying is local leadership at the grassroots level is finding effective solutions for retraining — the topic of a recent article I coauthored.
So, all in all, it is better for both GM and the affected workers that it is acting now rather than waiting until the problem gets worse. Yes, the workers have a tough road ahead of them. But they should ask themselves whether they are better off holding on to an unsustainable job as long as possible or trying to change now? I learned from my jobs in industry that most problems don’t get better over time; this one almost certainly won’t.