Recalibrating the Retail Experience

The face of retail is changing – and it’s not just because of e-commerce. Across Asia Pacific, the industry is being reshaped by powerful new demographic trends.

21 Oct 2019

By Rebecca Pearson

 Recalibrating the Retail Experience
The face of retail is changing – and it’s not just because of e-commerce. Across Asia Pacific, the industry is being reshaped by powerful new demographic trends.

Global millennial spending power is poised to overtake Generation X in 2020[1], transforming the dynamics of the retail sector. As millennial consumers take centre stage, understanding their shopping habits and preferences is essential for any retailer worth their salt. This digitally savvy generation, well versed in e-commerce and on-demand services, is more willing to spend on travel, leisure and entertainment than their Gen X counterparts.

So what does this mean for retailers?

This demographic shift doesn’t mean that brick and mortar retail is going extinct – far from it. In fact, on average only 20% of retail sales in Asia Pacific take place online[2], indicating that most consumers still prefer to go to stores to shop. For all the convenience afforded by e-commerce, people still want to touch and try out products before buying them.

Brick and mortar stores continue to play a vital role in raising brand awareness. For instance, opening one new store in a market results in an average website traffic increase of 37% - what is known as the “halo effect”[3]. This statistic is heartening for retailers, and certainly helps explain why more online brands are moving to offline expansion as part of their retail strategy.

While all signs point towards the fact that physical retail is here to stay, retailers cannot afford to be complacent. With millennial consumers increasingly asserting their influence in the retail sector, now is the time for brands to recalibrate their strategies and embrace innovation.

Investing in experience

More than any other generation before them, millennial and Gen Z shoppers are placing a premium on personalized, memorable retail experiences. When surveyed, more than three quarters of Gen Z consumers said that physical stores provide a better shopping experience than online platforms[4]. The message for retailers couldn’t be clearer: create innovative experiences that cannot be replicated online, and consumers will come.

Tiffany’s first concept store in Japan epitomizes this experiential retail trend. Located in Harajuku, Tokyo’s youth culture hub, this 5,000 square foot store features a perfume vending machine, photo booth, and café inspired by a retro American diner. The store also offers instant customization counters, where shoppers can personalize jewellery by engraving their own messages or drawings. By incorporating these interactive elements into its concept store, Tiffany is looking to provide a stand-out consumer experience, one that transcends the more commonplace reality of shopping for products.

Technology as enabler, not disruptor

Retailers are increasingly embracing technology as part of a two-pronged strategy: enhancing in-store engagement and gaining invaluable consumer insights.

Many brands have started to deploy technology in innovative ways to elevate the consumer experience. One such example is Hai Di Lao, a hugely popular Chinese steamboat chain, which opened their first “smart” restaurant in Beijing. This AI-powered restaurant has a futuristic feel to it, with delivery robots serving food, an automated cold room, and monitors displaying real-time information. Diners can even personalise their soup base, with their exact preferences being saved in the smart system for their next visit.

On the analytics front, retailers are increasingly using big data to make strategic real estate decisions. Advanced consumer analytics platforms like CBRE’s Calibrate can offer a multitude of data-driven insights, such as who a mall’s customers are, when they visit, and which stores they choose to enter. These tools can also track footfall over a long period of time to understand how a particular mall or shop is performing. Brands can leverage these insights to help determine which locations are best suited to their retail strategy – whether they are opening a new flagship store, launching a pop-up, or evaluating their existing store network.

Fortune favours the bold

As we have seen, the rise of millennial and Gen Z consumers doesn’t mean that retailers need to throw out their playbook. Despite their digital savvy – or maybe because of it – millennials still place value on brick and mortar stores. That being said, brands shouldn’t rest on their laurels. Millennial consumers increasingly value unique experiences just as much as (or more than) physical products, and retailers need to adapt their offerings if they want to remain competitive.

In this shifting landscape, brands that are willing to embrace technology and innovation are the most likely to thrive. If you can create personalised, stand-out retail experiences that shoppers cannot find online, then you will be well on your way to capturing the hearts and minds of the next generation of consumers.

[1] World Data Lab
[2] Forrester
[3] ICSC
[4] ICSC

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