The 451 Take
This mixed bag means that retail is often stereotyped as an industry that is devoid of innovation and digital adaptation. Shoptalk provided clear evidence that while retail may be in early innings from an evolutionary standpoint, many of the largest players are aggressively embracing digital technology to reimagine their businesses, and the way they deliver value to customers. Here, we provide a glimpse into some of the transformation strategies and trends being pursued.
From brick & mortar to brick & mobile
Retailers must understand that their physical storefronts can be an asset not a burden, to be used to drive customer engagement. To do so, a heavy infusion of digital technologies that augment and elevate the shopping experience is required.
Google flexes its contextual commerce muscle
Google is well-positioned to play a more pervasive role in commerce, but to date, many of its attempts to expand its influence across the shopping journey have been limited in success. The search giant unveiled its latest commerce play at Shoptalk, called Google Shopping Actions, which we believe has potential. We also view it as the most important announcement stemming from the show.
Voice commerce garners attention for speed, convenience
While it's still early on, voice interfaces are seeing growing use by consumers. Our VoCUL Q4 2017 Representative Survey shows that 19% of consumers are using Amazon's Alexa on at least a weekly basis, and 21% are doing the same with Google Assistant. By 2027, 451 Research expects the average person will have more daily conversation with bots than other humans in their work and personal lives. This change in interaction preference has profound implications for how retailers must engage with shoppers and enable purchases.
Google is fast becoming the partner of choice for retailers in voice commerce. Mark Berinato, Panera Bread VP of digital experience, noted that voice ordering via Google Assistant is already yielding promising results for the restaurant by decreasing average order times by 80% compared to ordering via its app or website. Panera is considering furthering the personalization of its voice interactions with customers by bringing in professional writers to help it better define and convey its brand personality.
Sephora and Walmart have also launched voice commerce experiences on Google's platform recent months. Sephora launched its app on Google Assistant in France late last year, allowing shoppers to book beauty services, with plans to expand functionality further this year. Walmart currently allows consumers to shop more than two million Walmart products via Google Assistant.
Alternative financing goes omni-channel
What we especially like about Klarna is its transparency in interest rates, and the added flexibility it provides shoppers in funding their purchase. These factors have helped Klarna's merchants increase order value by an average of 58%, drive up conversation rates by 30%, and increase repeat purchases by 25% compared to other payment methods, according to the company. Klarna has plans to broaden its financing offering to the in-store POS in the US (it's already live in Europe) later this year.
Affirm is another major player in the alternative financing space that intends to extend to physical storefronts with the launch of Affirm InStore. Retailers can directly integrate the Affirm InStore API with their POS system; or for those preferring the path of least resistance, allow customers to pay via an Affirm virtual card provisioned in Apple Pay.
Affirm cited Simply Mac as a partner that has seen a 20% increase in average order value since integrating Affirm InStore. Interestingly, Simply Mac chose to ditch its private-label credit card program when it went live with Affirm InStore, signaling the growing threat that alternative-financing providers pose to large private-label providers like Synchrony Financial and Alliance Data Service.
Jordan McKee is a Principal Analyst leading 451 Research’s coverage of the payments ecosystem. He focuses on digital transformation across the commerce value chain, with an emphasis on the major trends impacting payment networks, issuing and acquiring banks, payment processors and point-of-sale providers. His research helps vendors and enterprises assess the key implications of emerging technologies driving the digitization of the end-to-end shopping journey.
Sheryl Kingstone leads 451 Research’s coverage for Customer Experience & Commerce, which covers the many aspects of how customer experience is a catalyst for digital transformation. She oversees the company’s coverage of a variety of customer experience software markets spanning ad tech, marketing, sales, commerce
Matt Aslett is Research Director for the Data Platforms & Analytics Channel at 451 Research. Matt has overall responsibility for the data platforms and analytics research coverage, which includes operational and analytic databases, Hadoop, grid/cache, stream processing, search-based data platforms, data integration, data quality, data management, analytics, machine learning and advanced analytics.