Paul McElroy, partner at Kinnersley Kent Design shares his thoughts on current trends and shifts in consumer behaviour and how the millennial generation will affect all retailers across all markets.
We all hear the phrase ‘store of the future’ so frequently it has become almost meaningless. It’s more helpful to think of it as the ‘store for now’, because the right time to create the ‘store of the future’ is not in three, five or 10 years’ time – but today.
But you can’t design either the store of the future or the store of today without understanding the target customer first. And while there is no single, generic future customer, current trends and shifts in consumer behaviour mean that the millennial generation will bring changes that will affect all retailers across all markets.
The big spenders of the future
Millennials are a highly desirable target audience for retailers right now – and their spending power is enormous. According to Standard & Poor, US millennials, who number more than 80 million, spend $600bn annually. Now entering their peak consumption years, members of this demographic are set to account for $1.4tn in spending, or a third of US retail sales, by 2020.
Changing shopping habits
Consumers today are always connected. This means their attention is constantly divided. With the decline of the work-life balance, free time is becoming ever more precious. As such, we’re seeing shopping habits starting to fall into two broad categories: wants and needs. The global trend is that people looking to source their needs online, saving their precious free time for wants. In the UAE alone, the total value of e-commerce is expected to reach $10 billion in 2018 (Frost & Sullivan, 2014). And increasingly, the wants are experiences and not possessions. What we try to convey to our retail clients is that they are not just competing with other retailers – they’re competing with an afternoon at the theatre, tickets to see Beyoncé, or a great meal out. The blur between retail and hospitality is ever more blurry.
The trend towards valuing experiences above possessions is already impacting retail. Innovative brands are responding by creating environments that pull customers back in-store, blending a sense of theatre with memorable content. In doing so, many are looking to the leisure and hospitality sectors for inspiration.
Meet the Influencers
Millennials are digital natives. They grew up with technology and simply don’t see the difference in channels that older shoppers see. A one-off, seamless shopping experience is their norm. The most desirable sub-segment of this demographic is the Gen-narrators, the leadership group defined by their topics of interest, their ability to influence and their desire to share.
As identified by The Economist’s Global Report on Millennials (2015), they make up 19% of millennials – a bigger share than influencers in social groups before them. They are disproportionately influential not only to their peers but also to younger and older generations.
For millennials in particular, personal online profiles are a significant part of their identities. Social approval from peers in the form of likes and comments is a real form of social currency and there is huge kudos in sharing online. This drives millennials to seek to create and share eye-catching content – such as selfies or action videos of themselves participating in extreme or unusual experiences – to elicit affirmation from peers. Brands who understand the power of this drive for social affirmation, and who respond by offering opportunities to share exciting content that improves the customer’s own image, will drive preference and loyalty.
So how do you create the ‘store of the future’ today?
1. Offer unforgettable experiences
Retail brands need to redefine the shopping experience by introducing discovery, surprise, flexibility and partying to their shopping environments. Doing this will make the difference between creating an ordinary store or a memorable destination. The ultimate aim is to become more than just a brand that people like and become an integral part of people’s lives. In other words, be the social gathering space customers choose to invest in emotionally.
2. Create community hubs that build trust
Millennials are more likely to hold business to account on social issues than previous generations, with 87% believing the success of a business should be measured in terms of more than just its financial performance (2016 Deloitte Millennial Survey). By creating hybrid community-retail hubs with flexible, multifunctional spaces, retailers can help build relationships and foster trust with millennials who are deeply cynical of big businesses.
3. Don’t think in terms of channels
In future there may not be words like ‘omni-channel’. Instead it will just be called ‘shopping.’ Full integration will not be a convenience, just the norm. The ‘store of the future’ will have many fully integrated channels, each being a seamless extension of the other. This will be driven by data, so retailers need to invest in collecting quality data in innovative ways at every touchpoint to personalise the customer experience. However, brands need to be aware that data is a commodity that consumers expect payment for, whether monetary or in the form of another obvious benefit.
The bricks and mortar ‘store of the future’ may not be a shop at all; at least not in the way that we define it today. The millennial-focused retail destination will be as much retail as a leisure and community hub; a place to eat, a place to be entertained, a place to hang out and be sociable. And of course a place to buy things!