What’s in-store for the future of retail?

Exploring the changing retail environment, dentsu Aotearoa’s Managing Director of Media, Richard Hale outlines the most significant changes to look out for.

The weather was once Kiwi’s go-to conversation starter, now it’s the cost of cheese or the price of petrol. And, when it comes to retail this is just the start as New Zealand grapples with the effects of war, a global pandemic, supply-chain issues, the cost of living, and the arrival of major players like Costco, IKEA, and Chemist Warehouse. 

However you look at it, retail in New Zealand is getting more complex to navigate by the day.  

In this article we explore some trends identified in our dentsu Shopper DNA: The Future of Retail research project. These are trends that marketers need to consider today and moving forward to respond to the rapidly changing retail landscape, and consumers’ evolving demand.

Delivering under supply chain pressure

We all know buying certain products at the moment is challenging, GIB is being sold on the ‘black market’, the cost of re-building a semi-conductor factory exceeds $2 billion – so the wait time on a new vehicle isn’t going to drop any time soon – and petrol prices are still increasing. 

This creates an environment where retailers have more opportunity than ever before to disappoint the end-consumer.  

And while this might feel like a moment-in-time challenge, there are important lessons to help future-proof brand reputation in times of disruption. 

As such, marketers today need to create strategies for agility. Why? To give the end consumer certainty.  

In the US, ‘in stock’ queries have increased a staggering 700 percent year-on-year. Searches for everyday items such as milk have increased by 800 percent, and, here in New Zealand one of our retail clients has seen ‘near me’ searches increase by over 100 percent year-on-year.  

In other words, shoppers aren’t willing to turn up and walk away empty-handed. They want certainty. Something we’re helping solve for our clients by using technology to manage expectations and deliver confidence through data-led marketing and advertising campaigns. 

For example, we recently solved this very problem for one of our retail clients by creating what we call, ‘Certainty Engine Marketing’. It involved cross referencing sales data from previous lockdowns to identify and predict products that would be in high demand. We then used technology to automate our advertising, so that if less than six products were available, ads would no longer run. 

Alternatively, if products were in stock, we combined inventory and stock-level data with location data, allowing us to send consumers (who weren’t purchasing online) to the nearest store.

By understanding the consumer need for certainty, we helped our client increase their short-term sales, improving their NPS score—helping build a robust long-term business model.

From scrolling to shopping – new media e-commerce

Covid has affected more than just the supply chain. It has accelerated shifts to online living and e-commerce, meaning media (including social media) is rapidly growing as a retail channel in its own right.  

Around two billion people worldwide buy a product through shoppable social content every week (source: www.ecommercenews.co.nz), and it’s no coincidence that global tech giants are positioning themselves to capitalise on this growing trend: 

Google recently launched shoppable video ads in YouTube Shorts, where visual-first results appear to help shoppers buy directly from Search, streamlining the journey to purchase.  

TikTok launched ‘collection ads’ earlier this year, which allow users to seamlessly find and browse products in a full-mobile experience. This runs alongside TikTok Shopping, which provides a way for TikTok users to buy products in-app. It’s also currently beta testing Dynamic Showcase Ads—a product-feed based ad unit, that links directly to your storefront/inventory system.

Meanwhile Instagram is looking to launch advertising on its Shop feature globally, as it seeks to earn more revenue from brands hoping to reach new customers.

Richard Hale.

Change is already happening, so as marketers we need to be ready for it. 

Trialling these new features as they launch allows us to leverage each platforms’ technology to deliver innovative solutions for our clients. Already, we’re seeing ROI improvements of up to 150 percent when using shopping formats.

However, depending on the nature of your business, and the category you operate in, success in this space may require more than just the trialling of ad formats. The development and integration of more bespoke technology solutions to maximise ‘shopping’ and e-commerce effectiveness can reap rewards. For example, we are using product feed technology to manage disparate data sources, ultimately ensuring the most relevant products, are matched to the most relevant customers on a 1:1 basis, generating millions of dollars of incremental revenue in the process. This sounds easy, but it’s not when 40,000 individual products are involved, multiplied by the preferences of hundreds of thousands of customers. Humans simply can’t manage the level of data associated with that, and investment in technology was critical to succeed here 

So, if you’re not investing in ‘shopping’ or broader technology solutions to fuel e-commerce, you should be thinking about it as a key part of any omni-channel approach.

The ongoing data paradox of personalisation versus privacy

The incremental revenue mentioned above is a direct output of personalisation and relevance. People immediately feel heard and valued when the experience is right for them. 42 percent of us expect websites to personalise experiences for us, meanwhile 52 percent of us are likely to ‘click off’ if communications are not sufficiently tailored.  

What we are experiencing in this space is only the start. By 2025, artificial intelligence will be far more sophisticated with smart homes, wearables and digital assistants built into our phones. Intelligent algorithms will disrupt conventional services and product purchases. Brands that can’t deliver personalisation will find it increasingly challenging to get in front of current and potential customers. 

But at the same time we’re facing a data paradox, personalise, but protect my privacy. 

People want to be in control but feel that it’s being taken from them. Sixty-nine percent of people believe they’ll have less control over their own data by 2030, but 83 percent state they want more. 

New Zealand brands are falling behind their Asia Pacific counterparts in balancing personalisation and privacy. Only one third of Kiwis know why a brand asks for their personal information, yet two thirds expect their data to be used to benefit them. How can trust be built when these two data points differ so greatly?

Our dentsu study (across 14 markets in Asia Pacific, including New Zealand), identified four ingredients in a successful data value exchange. One, for what purpose are you collecting my data? Two, what benefit will I receive? Three, how can I trust you? And four, what control will you allow  me? 

So, when considering your data strategy, you need to think purpose, benefit, trust, and control. When these four areas are clear, everyone wins. 

Placing value on having values – utility beyond the product or service

Our final trend is one that is top of mind for everyone. Climate change is real, and the recent Kantar Better Futures 2022 report showed that 86 percent of Kiwis think we should be doing more. But 63 percent also agree that making better choices is difficult as it requires more effort. 

Which is why consumers are increasingly looking for positive societal contributions from retailers and brands, before making a purchase.  

“Almost three quarters of Kiwis agree the behaviour of a company is just as important as what is sells.” (Source: EY Future Consumer Index)

Kathmandu is capitalising on this trend. As a certified B-Corp, the company has set a goal of having 100 percent of its products designed, developed, and manufactured from elements of circularity principles by 2025.Starting with its BioDown Jacket.

But balancing ‘values’ and ‘value’ remains a barrier. Especially in today’s economic environment. Right now, only a quarter of Kiwis agree they will buy more from retailers that benefit society regardless of price (Source: EY Future Consumer Index). And let’s face it, buying sustainably is expensive. A Telegraph UK article noted that eco-friendly products can cost up to 50 percent more. Placing the burden back on the consumer. 

Every person should be able to afford to make the right choices that are good for the planet. Retailers who solve this will not only make a difference to our environment, but they’ll win the love and loyalty of buyers.

Change is coming from all sides of the retail experience as operational challenges, attitudinal change, and technological advancement create a melting pot of new opportunities. The world is changing so fast that staying ahead of these trends reward the few early movers. Will you be one of them?  

For more future focused insights, contact [email protected].

About Richard Hale

Richard Hale is dentsu Aotearoa’s Managing Director of Media.

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