by Ajay Chowdhury, Chairman of ComQi
Ten years ago the received wisdom was that cinemas were dead. The rise of Blu-ray, home surround sound, 50-, 60-, 70-inch screens in the home and the fall in DVD prices as contrasted with the inexorable rise in cinema ticket prices were all factors that had everyone convinced that cinema theatres could not survive.
Ten years later, cinema box office takings are at record levels, films are regularly breaking records for opening weekends, ticket prices are even higher and a carton of popcorn costs as much as a full meal in a restaurant.
What happened to the doomsayers?
What happened was that cinemas reinvented themselves. They stopped being a place to just go and see a film and became a community experience. It was no longer about just seeing a film, it was about the experience of a night out with friends in a plush, comfortable environment. Cinemas now offer comfortable seats that lean back, huge IMAX screens, amazing sounds, sofas, food that is served by waiters at your seat, alcohol and much more. They are also getting clever about pricing – different prices on a weekend, lower prices for families with babies during the week, a different experience for seniors and so on.
What they got right was that it was not about the film, it was about the experience.
Today, rumbles are being heard about the death of bricks and mortar retail. No less a visionary than Marc Andreessen (co-founder of Netscape and one of the savviest investors in Silicon Valley) said a month ago “Retail guys are going to go out of business and ecommerce will become the place everyone buys. You are not going to have a choice.” And this is apparently being borne out on the high street. Large brand name chains that have closed include Borders, HMV, Jessops, Circuit City, Virgin Megastores, B. Dalton, Woolworths UK and the list gets longer every month. And for those retailers who are surviving, they face the threat of ‘showrooming’ (consumers checking out goods in the store and then buying them online or on their mobile), increasing rent, reducing store sizes, lack of qualified staff, customers wanting to order online and pick up in store and so on.
When we speak to retail CMOs, the top two concerns on their mind are: ‘How can we be more like Amazon?’ and ‘Should I get a mobile app?’ But are these the right questions? Amazon is a unique company that is truly visionary and has reached an amazing scale with very forgiving capital markets. (It was loss making on $61bn of revenues last year and is capitalised at $125bn. Contrast this with Target that made a profit of $1bn on $22bn of revenues and is capitalised at a third of Amazon…).
Similarly getting a mobile app is also not necessarily the answer. There are 775,000 apps in the iPhone App store and 80% of them get less than 100 downloads. Of the ones that do get downloaded the majority get used less than five times a year. Not quite a recipe for success. (As an aside, on these numbers, 620,000 apps get less than 100 downloads. If we assume they cost an average of $10,000 to make – that is $6.2bn wasted in app development effort.)
So what should retailers be thinking about? Well, the threat from e-commerce and mobile is real. Although forecasts do say that in five years over 90% of shopping will still be in bricks and mortar retailers, there is a huge variation in this number. A majority of music and book sales is now online. Electronics and white goods are moving the same way. Fashion remains largely a high street activity but e-commerce is certainly beginning to eat into this as well. (See the success of Zappos' and Amazon’s move into clothing…)
Grocery, food and drug are still largely done in person but a small minority is moving online. So what should retailers be doing to ensure they maintain their brands and hold onto their customers? We believe that retailers should be looking at three core principles to succeed over the next decade.
- Provide a superb in-store experience
- Link your online, social, mobile and in-store media experiences
- Use the data generated by your customers to provide real insights
1) Provide a superb in-store experience
"Stores will become more theatrical, more immersive, and more of a life experience rather than simply a place to get something. As much as they are selling products they will be selling a good time, a lifestyle.” Christopher Studach, creative director, KRS
Just as cinemas reinvented themselves over the last decade to provide a great experience, retailers need to do the same over the next decade. Walk into Victoria’s Secret on Herald Square in Manhattan and you will see a true brand experience. Media and technology are cleverly used to move the customer through the store and get them to make a purchase. We believe the in-store experience is about mapping the customer’s journey base on their frame of mind and then providing the right media and incentives to make shopping a pleasurable experience and getting them to buy more. The experience starts outside the store with the show windows using dynamic video projection, holograms and the like to entice people into the store.
Once they are in the store, the use of touch screens for wayfinding, linking to customer’s online accounts and making recommendations can be powerful. As they move through the store the use of videowalls, digital signage, music, virtual mannequins and so on get them to a decision point where they want to buy and buy more. Other technologies like Delay Mirrors in the dressing room (a screen with a camera showing a live reflection of the customer, yet delayed by a few seconds to see themselves in an outfit from all angles) provide an experience that cannot be had anywhere else. Finally, linking these screens to the customer’s smartphone allows them to get recommendations, find out more information or link to loyalty cards providing a truly holistic experience. This is what makes them come back and recommend it to their friends.
2) Join up your online, social, mobile and in-store media experiences
Most retailers have e-commerce sites, a Facebook or Twitter presence, mobile sites and some media in-store. But these are all in silos and not linked up. Imagine the immense value of recognizing an online customer as they enter the high street store. You can offer tailored promotions as they enter your store and give specific recommendations based on their shopping habits. We believe you can do this by using one technology platform for your in-store media to manage your experiences effectively. This platform then links to your external systems such as your e-commerce site, Facebook, loyalty card systems, smartphones, EPOS systems etc. to provide one view of the customer.
We provide a cloud based platform that does exactly this. It allows our retail clients to manage different digital media on a global basis and collect information on their customers. Using our technology we can link customer smartphones to digital media in a store without an app so customers can check in as they enter the store and be identified so that tailored offers can be made to them. The platform links to Facebook, Twitter, Instagram etc. so it provides a bridge between the online and offline worlds. This allows two things to happen: The retailer has one view of the customer: Whenever the customer interacts with you, you know exactly who they are, where they are and can make the appropriate offer based on their shopping history The customer has one view of the retailer: Whenever the customer interacts with you, they have the same brand experience and can seamlessly move from one medium to the next.
3) Use the data generated by your customers to provide real insights
Finally big data. This is a real buzzword these days. Retailers have a huge amount of data on their customers but only a tiny fraction of this data leads to insights. Working with companies like Dunn Humby, DS-IQ and Path Intelligence allows retailers to take the data they collect and create real actionable insights which then feed back into the in-store strategy to create a virtuous circle. The world is changing and as the consumer has the power retailers also need to change.
”Steve Jobs didn't ask, 'How do we build a phone that can achieve a two percent market share?' He asked, 'How do we reinvent the telephone?’ In the same way, retailers shouldn't be asking, 'How do we create a store that's going to do $15 million a year?' They should be asking, 'How do we reinvent the store to enrich our customers' lives?'”
- Ron Johnson, Apple’s ex Head of Retail