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Retail@ the EdgeNew Opportunities for Customers and Retailers

We are surrounded by sweeping trends and volatile swings in customer behavior, technology, and the economic and political environment. Customers are adopting new technologies and communication channels faster than ever. Governments are changing overnight—succumbing to the power of connected people. And new competitors are popping up at every corner, and at rapid rates.

2 | Retail @ the Edge: New Opportunities for Customers and Retailers

Customers have moved ahead. They expect to interact with retailers in new ways. They are shopping around for the right retailers to meet their needs. They are not interested in the methods of yesterday.

Amid the whirlwind of ever-shifting trends, predicting where the customer will land is nearly impossible. So, what can a retailer do? Now is the time to be at the edge, looking out at the digital world, finding opportunities to adapt faster and ratchet up appeal to customers.

Retailers are often hampered by the burdens

of infrastructure, capital and dated operating

models. They are not stepping up to meet the

needs of customers who long for new ways of

doing business. Right now, retailers have the

opportunity to push the boundaries to create

new experiences for their customers and tap new

value streams for their companies.

This shift means out with the old and in with the

new—legacy is over. Leaders will have to rethink

the next dollar of investment, integrate more

tightly within and across organizations, and

open their minds to unconventional approaches

of engaging with customers and employees.

Companies will need shrewd strategies to gain

insight quicker and turn it into actions that truly

impact the customer. Companies also will need to

reconsider platforms, technologies and operating

procedures. And they will need to be prompt and

disciplined about execution.

To envision the right opportunities to seize

in retail, look no further than the “extreme”

customers who are setting tomorrow’s trends.

Who are these customers? They are the ones

fueling the growth of new, small entrants by

flexing the power of their social network. They

are using technology to overturn traditional

modes of shopping. They keep a constant eye on

the digital landscape, looking for new providers

who can meet their needs better than traditional

retailers can.

Pushing the boundaries of the retail experience

Retail @ the Edge: New Opportunities for Customers and Retailers | 3

Opportunities at the edge. Why not?

Through deep research into retail trends, Accenture identified examples of these extreme customers and envisioned the opportunities that they create for

retailers. When exploring these opportunities, ask yourself the same question your customers are asking—why not? Why can’t I get it the way I want it?

Why can’t you offer the same products in store as online? Why can’t you provide me access anywhere and at any time? Why can’t I be rewarded for the

influence I have on your brands? You can choose to stand still and observe the changes or ask, why not create new experiences and new value?

And why not now?

Accenture sees three distinct opportunities at the edge of retail:

The Influence Marketplace

Context Retailing

The Streaming Environment

1

2

3

A world where the cost of building awareness is negligible and a company’s success is predicated on whether its products and services are noteworthy enough for people to spread the word. Influence is the currency in this model.

The context for customer interaction shifts from stores/channels/our turf to their turf: their home, car or social setting. Companies present products and offers within a dynamic kaleidoscope of demand pockets, wherever the customer is at that moment of need. The challenge is to deliver tangible relevance in distributed, varied contexts.

Retailers become the Netflix of solutions, streaming bundled solutions to meet customers’ specific needs. Delivered through a variety of ownership models, goods and services are relevant for the customer across channel, across time and across company.


Keeping up with the customerNew technologies, new buying habits and newcomers to retail make keeping

up with the customer an ever-changing playing field. Trends include:

Interconnectivity.

Threat of new entrants.

Digital living.

Connected empowerment.

Loyalty is gone.

Redefining stereotypes.

Changing media channels.

New paths to purchase.

In just 20 minutes on Facebook, more than 1 million links are shared, 2 million

friend requests are accepted and almost 3 million messages are sent.

TV is no longer the primary viewing option for those under the age of 35.

Pinterest drives more referral traffic than Google Plus, LinkedIn

and YouTube combined.2

By 2015, South Korean school children will have access to only digitized

textbooks.

Occupy Wall Street donations increased by 301 percent in a 17-day period,

growing at an average of 17.72 percent per day.4

Eighty-four percent of US employees plan to change jobs within a year.1

Internet users over the age of 55 are driving the growth of social

networking through the mobile Internet.5

Eighty-three percent of shoppers make their purchase decisions before

even entering a store.3


The customer experience includes

The role of the retailer is

Loyalty is defined

Investment shifts

Successful companies use

Dramatic change is required

social influence that can be expressed

and accessed at every stage of the buying

decision and in every channel.

to filter feedback and make connections to

relevant influencers that the customer finds

credible.

by “network value,” the degree of influence

on others’ purchases.

from building awareness to creating credible

products and services that generate social

endorsement.

insight from influencers to manage the

business and enable a broad distribution of

social influence.

in retailers’ ability to integrate influence

factors into operations and into marketing

and merchandising decisions, such as

assortment optimization, store locations,

private labels, service offerings and pricing.

1

67% of shoppers spend more when they have received a recommendation from their online community of friends.6

Recommendation

Good Bad


Influence is the currency in this new world

Signals that customers are at the edge

What does loyalty mean to you? It’s time to

rethink the definition. Rather than focus on

loyalty through total number of purchases,

look at the total value of a customer’s influence

network. The customers with the highest network

value will be rewarded through discounts, free

goods and incentives. Retailers might also offer

incentives within the broader circle of influence.

In fact, it’s happening already. The Palms Hotel

and Casino in Las Vegas is creating the Klout Klub,

which will use social media metrics to measure

the influence of each patron. The Klout Score will

allow visitors to experience certain amenities,

not based only on their spending/betting/playing

but depending on the heft of their social media

footprint.7

Influence reigned king when the Dutch airline

KLM was challenged by a duo of filmmakers,

who wagered they could solicit enough Twitter

followers to fully book a KLM direct flight from

Amsterdam to Miami. In exchange, the airline

would comply and offer this never-before,

nonstop route. Forty hours post-challenge, the

airline conceded and 426 tweeters got their seats.

Influence ratings can be used as a key metric in

assortment and space optimization, and even

to drive inventory levels and replenishment.

Based on buzz, retailers can reallocate product

distribution in real time based on what

influencers deem to be the “hot item.”

Customers themselves can use influence in

making decisions about products. Imagine that

as a customer stands in front of a store shelf,

through augmented reality, that person is able

to see the “ratings” of influencers (including

acquaintances and experts) whom he or she

trusts. If your most trusted friends think a

product is great, likely so will you.

Cautious consumers are thirsty for credibility in products and services. Whether it is credibility in products (such as nutrition and usage information) or

credibility in communication (saying the right thing at the right time based on consumer needs). In short, customers want to believe in what they are buying.

A number of wild fluctuations are compelling today’s consumer to be more discriminating:

Consumers are often mistrusting and want to

know a retailer is doing right by them. These

customers may lean on feedback from influencers

to identify the retailers who are delivering

credible solutions. In fact, according to findings

by Reevoo, more than two-thirds of consumers

(68 percent) trust reviews more when they see a

mix of both good and bad feedback. Furthermore,

95 percent of consumers become suspicious

when no bad reviews are evident, believing the

site to be censored or faked.8

With consumers remaining cautious amid high

unemployment rates in Western countries and

with growth remaining weak globally, retailers

are struggling to pass on cost price inflation.

Deflation also affects consumer spending,

as there is a risk in buying today what may

be cheaper tomorrow. According to the 2011

Accenture Global Consumer Survey, with

uncertainty and lack of predictability becoming

the norm, connecting consumers with sources

and information that they can trust can help to

overcome realities like the high rates of switching

and price comparing that we are seeing in so

many markets today.

Social networking and digital media can build

awareness for fewer bucks. Social networking

continues to dominate. Across a snapshot of 10

major global markets, social networks and blogs

reach more than three-quarters of active Internet

users.9 The ease with which consumers can share

their views online means that if retailers have

a credible product or service, consumers will

advocate and market it. In fact, social networking

is becoming so ingrained in our daily lives that

even media consumption is becoming social. For

example, Get Glue lets participants check in to

their favorite shows or other media forms to let

the world know what they are watching.

Nonbelievers are not buyers.

Volatility is the norm.

The people have a podium.


Moving to the edge of the Influence Marketplace

Retailers tend to dump dollars into consumer and trade promotion. But there’s a better way. The cost of creating brand awareness and generating demand

generation is shifting due to alternative and lower-cost avenues. It’s time to ask, “where can I get the biggest bang for my marketing buck?” Pioneering

companies are looking for ways to capture more value from the influencers that are out there advocating for the brand. They ask, “can we generate greater

return if we identify top influencers, treat them differently and give them something to buzz about?”

Create an influence exchange.

Measure social influence.

Get a return on influence.

How can retailers take steps closer to the edge?

Retailers will need to use sophisticated analytics

enterprise-wide to understand who is the most

influential. Then they can tantalize influencers

by delivering more customized, credible and

relevant messages, promotions and products.

In this marketplace, companies will incentivize

influencers to create buzz about their offerings—

call it an influence exchange—and will reward

those making the most noise.

Social Q&A tools, “Like” buttons and refer-a-

friend discounts are modern-day tactics that

can drive value in the Influence Marketplace. But

you can’t manage what you can’t measure. At

the edge, retailers will measure influence factors

and incorporate social influence measurements

into a holistic influence management approach

that connects back into the organization across

all relevant areas, from merchandising to supply

chain and even to areas like human resources.

To ensure a return on their investment in

influence as retailers tap new channels, they must

have a clear strategy and an operating model

that supports tighter integration of marketing,

supply chain and merchandising functions, and

metrics. Furthermore, as the cost of creating

awareness goes down, spending will shift away

from capturing attention and will be reinvested in

improving the offering itself.




Loyalty is defined

Investment shifts

Successful companies are able


selecting tangible products with the

option to add intangible elements that are

personalized, based on context.

to use insight into the consumer’s needs

to deliver the most relevant products and

services, based on the consumer’s context.

by the number and frequency of points of

interaction the customer has with the retailer.

from creating environments for sales to

creating insight into the customer’s context

and ways to communicate with the customer

outside of the channel, from distributing to

consultative selling.

to derive value by adding intangible

elements such as “findability,” verification or

personalization, based on the context of the

decision to buy.

in developing communication with customers

that engenders trust and helps to capture or

receive information about their environment.

2

Of the 40 percent of consumers who own smartphones, 70 percent use their smartphones while shopping in stores.10

40 %

70 %use their smartphoneswhile shopping in stores

US consumers who own smartphones


use their smartphoneswhile shopping in stores


Innovation in context

Customers observe, interact with and decide on

products and services in a variety of contexts—

at home, in the car, on the street and in the

office. At the edge of retail, there is a symbiotic

relationship between customer and retailer: I

scratch your back, you scratch mine. Customers

share information and preferences with retailers,

and retailers respond by delivering a more

authentic, personalized and therefore richer

experience to the customer.

What does your customer care about, and how

can you respond in context? For example, your

diabetic customers may want to use their mobile

phone to certify that product ingredients comply

with their dietary restrictions. Your socially aware

customer may want to preview a live feed of the

factory conditions where an article of clothing

was made. Your soccer mom may want to see

whether the rug she is considering will hold up to

her family’s foot traffic or whether the makeup

will last throughout her busy day. It’s all about the

context of daily life. Can your customer see him

or herself using—and enjoying—your products?


Several trends are influencing the rise of context retailing:

Digitization has skyrocketed as tech-savvy

consumers have come to expect information

at their fingertips. The appeal of paperless is

apparent in the popularity of e-readers, such as

the Kindle and NOOK. Furthermore, books are

moving off the shelves in national libraries and

in schools. Look at South Korea. They plan to

digitize all textbooks by 2015. Digital interactions

are becoming second nature for customers who

are hungry for more engaging, interactive and

differentiated shopping experiences.

Consumers’ reality is becoming more blended

with virtual reality as they spend more time

connected to digital devices, playing on

gaming systems and interacting via virtual

communication media. The popularity of Wii and

Kinect is evidence that this trend will continue

to be a part of our daily lives. In fact, in its first

60 days on the market, Kinect sold 8 million

units, making it the “fastest selling consumer

electronics device,” according to Guinness World

Records. The Craftsman Experience Store creates

a branded experience accessible across social and

digital channels by combining hands-on work

stations, a live social media studio and project

demonstrations that showcase the innovation

and performance of Craftsman tools. And new

mobile applications like uDecore, String and

Blipper let users view and manipulate products

in 3-D, such as a replica of a shoe or a couch

they are interested in buying.

The online experience is being replicated offline—

and vice versa. Even while shopping in stores,

customers are going digital. Of the 40 percent of

US consumers who own smartphones, 70 percent

use their smartphones while shopping in stores.10

A budding trend is being able to replicate the

offline world more effectively via digital means

to create new and innovative experiences for

shoppers. One example, Google Streetview, is a

project that allows people to explore a store just

as they would if they were physically in the store,

yet do it all online. Another example, Turnhills.

com, uses crowd-sourced photography to enable

consumers anywhere to window shop in New

York. Yet another, Meijer Find-It app, is fusing

online and offline by knowing what store you

are located in and providing the optimal route to

purchase your shopping list.

Go digital or bust.

Very virtual.

Online and offline collide.


Moving to the edge of Context Retailing

In their marketing and merchandising plans, retailers will need to look beyond traditional digital tactics as levers for merchandising and selling. Instead,

they will need to thoughtfully outline in their plans how to manifest the intangible attributes of an offering in ways that are individualized, interactive and

tangible to consumers’ differing needs and preferences. The talent devising the marketing and merchandising plans will need expertise in the innovative

technologies and tactics that can drive value through context.

Understand the tactics.

Take the retail and product experience virtual.

Invest in the technologies.


Retailers will need to understand the tactics and

methods used in Context Retailing and will have

to train employees in how to integrate these

practices into interactions with shoppers. Also

critical will be educating consumers in how to use

various emerging applications to examine and

compare an offering in various contexts.

By overlaying data in a simulated world, retailers

will gain speed, coordination and the ability to

operate and make decisions within the context

of real market conditions and operating realities.

Companies will increase their visibility into real-

time supply chain occurrences, store conditions

and new market realities. With that insight,

retailers will be able to develop products and

services with a view into how, when and where

they will be used.

Context retailing requires both an investment

in ever-evolving virtualization/visualization

technologies and a test-and-learn model.

Tailoring merchandising and communication

according to an individual shopper’s context

will require advanced intelligence engines that

connect to marketing and selling channels and

that can be manifested easily as the information

or experience appropriate to the shopper.




Loyalty is defined

Investment shifts

Successful companies provide


on-demand access to “streaming” products

and services that are accessed and bundled

as solutions.

to be the connector and access point between

the consumer and entities that provide the

products and services to fill a need.

by the frequency and margin mix of what a

customer accesses and by affiliation with a

specific retailer.

from buying, stocking and selling inventory

to providing visibility and access based on

consumers’ needs.

the easiest access to the most relevant goods

and services, earning income not only from

the margin on goods, but also from the value

of access.

in developing a multidirectional flow of

goods, deriving value from the access

model and presenting relevant solutions in

innovative ways to the customer.

3

Grocery retailers in the US have reduced the rate at which they are adding square footage by 56 percent.

56 %


Supply and demand—on demand

I want it now. Do you have it in blue? When can

you get it in stock? Regardless of trends, no one

will ever take the me out of customer. Picture

a multidirectional flow of goods and services

that customers access on demand. Retailers will

act as a conduit that brings together offerings

across multiple organizations and makes them

accessible to customers. This constant stream of

goods will be a departure from the push model,

where retailers select a finite set of products and

market them to consumers. In the streaming

environment, retailers will receive input and

requests from consumers and will provide access

to the goods and services to solve the need.

How do you stream products to customers? The

streaming environment will allow products and

services to be sold, provided as a managed service

over a period of time or rented by consumers.

Retailers will pull the desired products from

within their inventory or access them from

others’ inventories.

In this model, customers will receive offers for

solutions at various price points based on the

components. For example, a consumer requests

a flow of goods for a healthy, low-carb diet

to maintain a blood sugar level at or below

110. Retailers will offer products, information

and services that are derived from their stores,

from other retail locations, from restaurants

or from medical agencies to monitor, measure

and manage glucose levels. Options may

include services (food preparation or nutritional

counseling) or credit toward restaurant meals.

Does streaming work? New entrants are finding

success by adopting early iterations of this model.

Look at Mine-for-Nine. This company gives

pregnant women access to designer maternity

clothes. But instead of purchasing items of

clothing and being able to enjoy them for only

a few months, customers of Mine-for-Nine can

rent the clothing until they want a new style

or size. Another example is ShopyCat, created

by Walmart. It is a social gift finder that will

recommend products from not only Walmart,

but its competitors.


The streaming environment is fueled by consumers’ hunger for constant access to relevant products and services.

With urbanization occurring globally, consumers

are living in smaller dwelling sizes and more

confined spaces. In 2010, the average pantry held

369 SKUs, down from an average of 404 in 2007.11

Smaller spaces are driving smaller basket sizes

and on-the-go consumption. Given those factors,

it is no surprise that retailers continue to invest

in smaller formats. In fact, grocery retailers in

the US have reduced the rate at which they are

adding square footage by 56 percent.12

The digital industry has trained the user to think

about streaming (video, music, etc.) access, as well

as usage for a period of time, not for permanent

consumption. That approach has been expanded

to “rent-and-return” models for product

categories that include apparel, handbags, jewelry

and cars. For example, Spark Box is a personalized

educational toy service (available by subscription).

Consumers also want real-time visibility into what

products and services are available—and when.

Consider San Francisco, where an application

provides drivers information on where parking

spaces are available right now. The application not

only helps the city cut down on traffic congestion,

but also provides real-time streaming access to

drivers for less time and money.

Economic conditions, sustainability and resource

constraints are driving consumers to buy in

increments. Customers derive value from new

funding models such as pay-as-you-go and

group funding. Redbox provides customers

entertainment for $1 a day. Groups are buying in

bulk—whether gifts or even consumables such as

organic produce and meat products from co-ops

and farms.

Shrinking spaces.

Temporary access.

Instant gratification.

Bite-size buying.


Moving to the edge of the Streaming Environment

For retailers to make this opportunity a reality, they must fundamentally rethink the model by which they supply goods across their markets and invent

a model that thrives on fragmentation. Fragmentation will exist in multiple forms—customers, channels, mode of distribution and acquisition type (buy,

rent, exchange, etc.). Managing supply and demand will be core to differentiation and will require leading-class insights, infrastructure and collaboration

capabilities.

Apply customer insights.

Rightsize.

Create multidirectional flow.


Do you know what your customers are doing?

Retailers must track, capture and interpret

customers’ behavior across every available

channel and in their life stages. The ability to

bridge structured and unstructured data, and

integrate it across the organization to apply the

insights toward sales of solutions, will become

more critical. To truly stay in tune with demand

patterns and appropriately manage supply,

retailers—going beyond the traditional sources

for customer insights—will need to tap into social

buzz and collaborate with suppliers and maybe

even competitors.

Successful companies will shift investments from

buying and storing inventory to creating new

solutions and access models. They will manage

store size and inventory flow proactively. It will

also become increasingly important to leverage

the network of industry peers, suppliers, partners

and customers to share assets and infrastructure

in order to achieve a truly flexible, right-sized and

fluid value chain.

The future calls for the ability to aggregate

and create dynamic delivery routes and a

multidirectional flow of goods. Standard

merchandising channels become more complex

in the streaming environment because goods are

not coming from or going to one place. Inventory

is coming from multiple places and is at various

levels of use (e.g., pre-owned). Dynamic delivery

can enable better forecasting accuracy and better

supply chain visibility.


The physical and virtual worlds offer new channels and venues for reaching a wide range of customers. The customer is there at the edge, ready to shop, interact with and advocate your products. Are you there as well, adapting to the digital

consumer, tapping social influence, selling in context and finding ways to continually feed relevant offerings to customers? Get to the edge. Because now is the time to make the leap into the exciting future of retail.

are @ the edge—are you there with them?

The customers

For more information on becoming a retailer at the edge, please contact:

Renee SangAccenture Customer Innovation [email protected]

Allison MullerAccenture Customer Innovation NetworkCo-Lead, North [email protected]

Karen VoelkerAccenture Customer Innovation NetworkCo-Lead, North America [email protected]

1 http://www.mainstreet.com/article/career/employment/more-americans-will-change-jobs-2011

2 http://blog.shareaholic.com/2012/01/pinterest-referral-traffic

3 IRI, Channel Migration: The Blurring of Shopper Loyalty, 2009

4 http://www.dailydot.com/news/new-data-occupy-wall-street-funding

5 http://blog.nielsen.com/nielsenwire/online_mobile/social-media-report-spending-time-money-and-going-mobile

6. Internet Retailer, September 2009

7 http://adage.com/article/digitalnext/marketing-las-vegas-palms-hotel-klout-scores/146189

8 http://www.bizreport.com/2012/01/bad-reviews-good-for-conversion-rates.html

9 http://blog.nielsen.com/nielsenwire/online_mobile/social-media-report-spending-time-money-and-going-mobile

10 Google & IPSOS OTX, April 2011

11 SymphonyIRI Group, New Product Pacesetters: Carving out Growth in a Down Economy, 2011

12 Kantar Research

Accenture Retail Practice


Copyright © 2012 Accenture All rights reserved.

Accenture, its logo, and High Performance Delivered are trademarks of Accenture.

About Accenture Accenture is a global management consulting, technology services and outsourcing company, with more than 246,000 people serving clients in more than 120 countries. Combining unparalleled experience, comprehensive capabilities across all industries and business functions, and extensive research on the world’s most successful companies, Accenture collaborates with clients to help them become high-performance businesses and governments. The company generated net revenues of US$25.5 billion for the fiscal year ended Aug. 31, 2011. Its home page is www.accenture.com.

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