RSA RETAIL RESEARCH PAPER4 WEB HR.pdf

PAPER 4:
THE FUTURE OF RETAILING

RSA: THE RETAIL SERIES –
THE FUTURE OF RETAILING
Our fourth paper in RSA: The Retail Series is all about the trends
leading us into the Future of Retailing. In truth, many of these
trends are NOW, and this paper is out of date before it has been
completed! There are many exciting, yet daunting, threads coming
together to make up the retailing arena of the future. We have
endeavoured to provide you with a fl avour of these in this, our
penultimate paper.
The Future of Retailing is being shaped by a number of
trends, which we have highlighted in previous papers in our
series, including:
• Consumer demands and needs evolving due to population shifts,
knowledge and changes in society
• The impact of Retail Globalisation on the way that consumers
buy in an increasingly homogeneous manner
• Economic challenges driving more discerning and frugal
customer behaviour
• Environmental pressures and sustainability challenges for retailers
generating new ways of building stores, managing logistics and
creating or buying goods
• And, of course, Technology.
Technological advancements have meant that the way
consumers buy has changed forever. As the main driver of
future changes, we have focused on this area in particular in
this paper. We have featured a number of exciting examples
of truly innovative Retail implementations that are changing the
face of shopping.
At RSA, we are always researching and fi nding ways to understand
our customers’ needs. We focus not just on today’s needs, but also
aim to understand what the future holds for the organisations that
we work with. This enables us to create the kind of partnerships
that retailers of the future will demand. We look forward to
hearing your views and working with you in the future,
CHRIS SMITH
Written with the support of Liz Machtynger of Customer Essential.

“The future is called ‘perhaps,’ which is the only possible thing
to call the future. And the only important thing is not to allow
that to scare you.”
Tennessee Williams, Orpheus Descending, 1957
DRIVERS OF CHANGE FOR THE FUTURE
Predicting the ‘Perhaps’ of Retail is possibly a little more concrete
than we might think. The ways in which innovative retailers are
setting out their approach to stores and online retailing shows
us the art of what is now possible. This opens the door to the
potential trends of the future.
There are four main threads coming together to drive the changes
we are seeing in Retail. You will have read more about the fi rst
three areas in our previous papers. This paper will take the fourth,
the innovative use of technology and how this leads to the
potential future Retail model, as the main focus.
1. ECONOMIC PRESSURE
The global recession, unemployment and subsequent challenges
to consumer budgets have changed the emphasis of shopping
for many. There is more focus on buying what is essential, at
reasonable prices, and understanding the true value of items and
how they compare with other items. ‘Knowledge’ and ‘comparison’
have become essential to the customer and understanding these is
fundamental to the way in which the retailer operates.
Showing value, creating knowledge, providing product and
service comparisons, and acting swiftly to convince customers
are crucial in the future for retailers.
2. ENVIRONMENT AND
SUSTAINABILITY
The impacts on and changes in the global environment are driving
retailers to take more initiative and change the way they locate,
build, source, partner, deliver and sell. The consumer is also waking
up to sustainability and beginning to make purchase choices for
durable, reusable, degradable, recyclable and charitable reasons.
Global availability of key resources water and food will put
pressure on and challenge retailers in the future.
Innovating sustainable retailing experiences and products are
key to the future for retailers.

3. ‘CONSUMER DRIVEN’
CHANGE
4. TECHNOLOGICALLY ENABLED
INNOVATION
People are living longer, moving around more, family units are
varied, women are making more fi nancial decisions. Work
is more segmented and carried out from remote as well as
specifi c locations. Social connectivity is happening more between
geographically distant friends and contacts. These are just a few
of the changes in society that impact directly on the way that
customers buy and what they need.
Unemployment pressures, poverty, healthcare challenges, an
increase in homelessness and pressure to fi nd homes, social
welfare changes, legislation and taxation shifts are all changing
some of the basic needs for consumers in the future.
There is a whole world of technological advancement enabling
creative connectivity, product development, process design and
new experiences. Customers are increasingly making a shift to
driving their own shopping decisions. They gain access to products
and knowledge through whichever means they wish,
and increasingly whilst on the move.
Retailers at the forefront of key technological advancements in
mobile, location-based, and in-store visualization and experience
and content as well as mechanisms will steal a lead on their
competition in the future.
Getting closer to customers, communicating and understanding
needs and changes in requirements are essential to the retailer
in the future.

A SHOPPING EXPERIENCE...
NOT SO FAR AWAY
The seasons have changed fast in London, and Emily has realised
she needs some lighter clothes for work. It is only two or three
years ago (2012) that she would have waited until the busy
workweek was over and headed off on a shopping expedition in
search of the right outfi t.
She remembers seeing something she liked in the magazine she
was reading the day before. She picks it out and scans the code.
Now all she needs to do is call up her personal shopper on video
phone. The shopper will know all her usual preferences and start
the search. She passes the scanned code on to her too. Within
the hour she will have some image recommendations for her in
3D shown on her own body shape.
From these, Emily can link to customer reviews, and best prices.
She can look up the closest place to try them on and book a
slot in the next break in her schedule.
When she goes to the store, the assistant already knows her;
she has received her reservation information and a picture
on her in-store mobile. She greets her warmly by name. The
dressing room already has her items set out, and matching
shoes and accessories.
Whilst trying them on, she notices another customer with a
handbag she likes, she takes a photograph of the bag to look up
later. She scans the belt and fi nds the same one online with a
better price. The sales assistant is very helpful and makes a
better deal.
She notices her friend has become available on the contact list
on her mobile. Emily sends her a quick video clip of the outfi t for
a fi nal bit of advice. Her friend likes it and sends a smiley face.
Emily pays with her mobile there and then and decides to take
the outfi t with her rather than asking the store to deliver. She
receives a receipt on the mobile and a recycling code should
she wish to pass the outfi t on to the store’s recycle department
later on.
On the way out of the store, a ‘thank you’ message with
the image of the store assistant on it arrives. It also has a
coupon for her next purchase, and there is a set of three
photographs showing items she might like to spend the
coupon on. She is also offered double coupons for feedback
on her purchase experience and any items she might not
have found at the retailer.
Back at the offi ce, her friend loves the outfi t so much and asks
her if she can scan the code with her mobile to buy the same in
blue. Her friend orders it and has it delivered to a pick up point
near to her home.
When Emily wears her new outfi t to work, she notices it on a
picture board at the train station as she walks by and smiles.
All of the things set out in this picture are possible and available
today. All of them are being trialled somewhere in the world.
They haven’t quite all come together yet to make the complete
experience for the customer.
Read on to fi nd a number of developments that would make this
experience work in the near future.
CUSTOMERS FIND WHAT THEY
NEED WHERE THEY WANT IT
HOME DEPOT – SCAN QR CODES TO FIND OUT MORE
A QR code is a two dimensional barcode that provides
information to the reader on the whereabouts of further
content relating to the code. These codes are now evolving
to enable the retailer or company using them to incorporate
their own logo or imaging ideas to be easily recognisable.
Home Depot in the USA has been trialling the use of QR
codes to allow customers to scan products or images and
gain immediate information and video footage on hand-held
devices. This has worked extremely well for them and they
are now rolling out the approach. The link also provides
customers with the comments of previous customers
relating to the items scanned.
“We know our customers are already using their mobile
devices to assist in the purchasing process, and now Home
Depot is embracing this technology to more closely connect
our stores and customers to our digital content,” Tom Sweeney,
Senior Director of Online Strategy for Homedepot.com, said
in a statement.

IN-STORE BODY SCANNER –
TELLS THE RIGHT SIZE
AND CHOICE
Scanners have been produced by companies such as MyBestFit
or BodyMetric to measure the body of the customer in three
dimensions. It then provides them with their body image and
sizes. This can be used to select correct sizes or make bespoke
items, suggest clothing selections or show images of the customer
wearing specifi c items. The images can be stored for the customer
to buy items more easily online without trying them on.
KRAFT FOOD – SCANS
CUSTOMERS IN-STORE
TO WORK OUT THEIR MEAL
Kraft in the US has installed scanners to scan customers when they
approach; it identifi es their gender and age group to guess the kind
of menu they might like. The screen advisor then provides recipes.
If the customer is happy to swipe a store card or show their
mobile, the scanner can provide more specifi c meal suggestions
based on previous purchases or preferences.

INTERACTIVE SCREENS BROADEN
THE RANGE AND OPENING
HOURS – ADIDAS
Interactive screen technology is enabling companies such as Adidas
to create an experience in the store for the customer to select the
item (shoe), modify the design of it and see it in three dimensions.
They can get more information on the items they are looking at,
change design aspects of products, and order them. They can look
up history and recommendations on products too.
This technology enables broader choice, a more interactive
experience, but enables the retailer to improve supply
management and merchandising. If sizes and stock are kept beside
the screen in-store, the customer can still try things on and touch
them before they buy.
The Frauenhofer Institute in Germany is trialling a way to
include similar technology in shop windows. This will enable the
interactivity and purchasing to go on outside shop hours.
“Gestural and gaming interfaces will become necessary in reaching
a younger demographic. Interactive content can have as high as
a 53% increase in attraction rate over static signage and 11%
increase in average revenue per customer.”
Jonathan Hull, Razorfi sh
This technology has been advanced by virtual reality used in the
online games industry, and is becoming able to recognise human
movements, expressions and input. This gestural technology would
enable interactive games and information to be exchanged with
customers like Emily in the story above. The customer experience
becomes more personalised and much more of an emotional
connection can be made between the customer and the brand.

OFFERS MADE –
HERE AND NOW
STARBUCKS
Retailers can now fi nd out the whereabouts of customers by
using location based technology. If the customer allows them to
use this information, they can make suggestions to customers
on local offers specifi cally for them.
Starbucks has been using the social media network Foursquare
to identify where its regular customers are and rewards the
‘mayors’ with a barrista badge and $1 discounts in store.
WHERE TO FIND
IT IN-STORE
IKEA
Continuing with the location theme, IKEA has provided its
customers with an invaluable in-store service. Teaming up with
google, it has provided the ability for customers to fi nd items in
their stores by navigating using a google map.
To view, visit,
http://www.youtube.com/watch?v=T8niWVcLEgw
WHAT’S IN STOCK?
Some retailers are testing out the use of aisle411, which is an
application enabling customers to fi nd specifi c items they need
in-store. The application could also enable customers to build
shopping lists from recipes, and fi nd out what is in stock in the
stores nearby. Customers can check in at the store to receive
offers using this app too.
Applications like this can make it much easier for more local stores
to attract business if they maintain good deals and information
on their products.

CUSTOMER EXPERIENCE
THE RETAIL STORE
THE REAL STORE EXPERIENCE – APPLE
The importance of a branded and recognisable store experience is
growing and in the future will become more important, not just for
fun, but also for utility.
Despite many other competitors selling products more cheaply
and online, Apple has created a remarkable store experience that
customers are willing to travel for and pay for.
Apple has a brand that is all about ‘cool, innovation, friendliness and
quirky’. Human interaction and the delivery of outstanding service
is key to the Apple brand. Apple’s staff are well trained and go out
of their way to assist customers. The customer is encouraged to
hang out and try products before buying them.
CHANGING ROOMS
When a customer wants to try something on, rather than just
looking at a 3D image on a screen, they can go to a store and
try the items. Some stores have outstanding changing rooms to
enhance the in-store experience. Bloomingdales in Santa Monica is
one example: it has special pods that come down from the ceiling
to become changing rooms.
Customers will want to return to the store to try things out and
buy because there is always a real focus on service and assistance
for the customer.
“67% of customers who try on items buy them. Only 10% of
customers make a purchase that they haven’t tried on. That’s
why stores have begun to make changing rooms more attractive
to customers.”
Laurel Tielis, Retail Reporter
UK retailer Oasis is adding special digital technology to changing
rooms with ‘look books’ to fi nd items to try.
Gap and Banana Republic are beginning to install call buttons and
delivery doors to changing rooms so that staff can serve them with
items to try.

A STORE INSIDE:
PRADA, GUCCI, DIOR
Retail stores are also providing more of an experience to
customers by adding special stores inside the store. This creates
a mini department store. These provide the customer with more
specialised products and a broader experience whilst the store
gets to try things out. The specialist (usually higher-end) retailer
can set its own, differentiated, branding and pricing.
Another is Shopbox in the US, also built by using containers. Here
it is all about interactive technology, no assistants. The temporary
store is set up to enable customers to experience products and
buy interactively.
POP UP STORES –
BOXPARK / SHOPBOX
Temporary or quick build stores or malls are popping up to create
a different experience for customers. These are often small, low
cost units and set out for more local or specialist brands to inhabit.
Boxpark Mall is one example in the UK.
PROVIDING CUSTOMERS
WITH THE ABILITY TO PAY
HOW THEY WANT
It is built based on stripped and refi tted shipping containers. Low
cost box shops are then put together containing lifestyle brands.
They have also created a place for people to hang out and meet,
thus extending the customer experience.
There is already the opportunity to allow customers to checkout
goods themselves at checkout machines. A number of retailers
that have tried this have found that customers wish to go through
a checkout where a person assists them. In the Apple case, there
was a clear decision to make stores more human and payment
easy but with assistance.
Apple has introduced a system of self-checkout for those who
prefer it. The customer logs via the Apple ID already set up in
order to pay as they would for other Apple items online.
Payment using mobile phones and devices will shortly be in use.
There will be the option to offer pre-pay and call down on devices
if appropriate for some items. Customers will need to feel that
what they are doing is managed securely.
Paypal has now launched a new credit card reader, which will
enable payment without a wallet, and enable smaller retailers to
accept payments easily through the PayPal system.

ONLINE RETAIL – OMNIRETAIL
SUCCESSFUL ONLINE – AMAZON
A small number of online retailers have become well established
and strong. Brands such as Amazon have emerged as successful
due to the ease of access and purchase (sourcing items, reasonable
pricing, delivery that is second to none, and returns policies).
Amazon has also successfully used technology to learn and predict
customer needs and suggest items that customers may wish to buy,
and communicate with customers directly. This online activity has
put the sales of traditional, store-based retailers under threat.
The research fi rm Forrester estimates that e-commerce is now
approaching $200 billion in revenue in the United States alone
and accounts for 9% of total retail sales, up from 5% fi ve years ago.
The corresponding fi gure is about 10% in the United Kingdom,
3% in Asia-Pacifi c, and 2% in Latin America. Globally, digital retailing
is probably headed toward 15% to 20% of total sales, though the
proportion will vary signifi cantly by sector. Moreover, much digital
retailing is now highly profi table. Amazon’s fi ve-year average return
on investment, for example, is 17%, whereas traditional discount
and department stores average 6.5%.
Harvard Business Review – Dec 2011 – Darrell Rigby.
BUILDING A SOCIAL FOLLOWING – HERMES
Social media is a growing way for retailers to engage and sell to
communities of customers.
Hermes has built up its social following by developing its social
media campaigns. As an example it ran a campaign in 2011
showing the journey of four girls in different parts of the world
with their Hermes scarves. Hermes encourages its customers to
upload images of their own precious scarves.
Hermes has also created an associated website to show the
making of its products on videos.
The value of the social network to a retailer can be enormous,
it can create a much larger following and demand for specifi c
products as well as attract customers to specifi c stores or time
limited offers.
There will, undoubtedly, be a number of retailers who continue to
succeed online and enhance their online stores and services. Sales
will continue to rise online due to convenience and transparency.
For the customer in the future, it is more likely that they will
shop in different ways; online, mobile, in-store, and not
differentiate between these, particularly when dealing with the
same brand. Therefore ‘omnichannel’ retailers will need to think
through in the future how their model will work well for their
customers on and offl ine as well as mobile, and connecting
these for maximum benefi t.
COMPARISONS
The customer’s need to compare prices and information prior
to purchase decisions means that it is likely that aggregation sites
providing comparisons will grow. They will most probably include
more information on stores and location based pricing. This will
put further pressure on retailers to monitor well and keep
information up to date.
“The recession became the great equalizer of ability to purchase vs.
desire to purchase. The consumer shifted to a more frugal buying
pattern, yet they still want the best quality for their dollar. Word
of mouth and social media validation are necessary parts of a
manufacturer’s marketing make-up.”
Mike Peck, Starbucks

GROUP BUYING – GROUPON
Another more recent phenomenon to rise out of the Internet
and social media is that of group buying. Groupon, as an example,
provides sales offers to groups of customers. Users sign up and
provide their location and offers are sent to them on a regular
basis. The offers are made if there are enough people signing up
to the deal within a time limit.
KEEPING CUSTOMERS ENGAGED
AND THANKING THEM – KOTEX
Loyalty mechanisms and cards are in use worldwide. Customers
can collect points for purchases and use these to redeem benefi ts
or awards. The data gathered assists the retailer to build more
appropriate offers and sell more.
Retailers such as Tesco have been successful in driving these
schemes. Looking forwards, the use of social and community
engagement information enables very specifi c and surprising offers
to be made to customers. An example of this is a recent campaign
by Kotex. Kotex decided to pick out a selection of infl uential
women on Pinterest (the social media sharing site). It looked at
their interest boards for things that infl uence them. It then set to
work and created an individualised gift box for the women based
on their boards. The only thing the customers had to do in order
to receive the gift, was to send back a photograph of it. Almost
100% completed the campaign and it also created thousands of
conversations on social media.

MANAGEMENT SUMMARY
The world of Retail has changed and is evolving at a rapid pace.
Technological developments have unlocked a completely new
way for retailers to engage customers:
• Show them products
• Let them try things on
• Facilitate consultation with others
• Provide access to relevant deals
• Locate and direct them to products
• Offer product comparisons
• Offer more enjoyable shopping experiences
• Provide very relevant offers at the right time
• Allow them to pay how they want
• Support them in sharing success with others
• Make shopping quicker
• Recycle products they no longer need or want
• Enable sales assistants to have the most up-to-date
knowledge on customers and products.
The winning retailers of the future will be working now to
understand the application of technology for their brand, customer
base and sales teams. They are keen to use this knowledge to
provide innovative new experiences for their customer base.
The multichannel retail experience of the future should combine
the benefi ts of physical stores for an exciting and innovative
experience with information rich online retailing supported by
the immediacy of mobile.
We look forward to working with you to carefully plan for
and manage the risks and challenges associated with this future
Retail model. Please email smc.europe@uk.rsagroup.com for
more information.
The major changes in consumer habits have been underpinned by
the increased uptake of smartphones and access to the Internet on
the move. Statistics in the UK show that over 60% of consumers
research online before they transact in-store, what’s interesting
is that this online research can now take place within the store
where the subsequent transaction takes place (or not) as a result
of such things as:
• Checking prices / promotions / offers / vouchers
• Checking online review content relating to the item.
There is a continuing trend to purchases being infl uenced by
the consumer’s own social network as the peer-peer review and
recommendation becomes a greater factor in brand loyalty than
the brand’s own outbound marketing messages.
Finally, the reality of the multi-channel shopping experience has
arrived – whilst sales from bricks and mortar appear to have
dropped off and the Internet continues to build, research has
proven that those customers who can engage with multiple
channels during their purchasing decision making process are
worth 130% of the value of a single channel customer. This statistic
seems borne out by the fact that over 10% of UK online sales are
now completed for in-store collection.
So into 2012 it’s clear that retailers need to focus on the following:
• Competing on service, not price – avoid becoming
commoditised
• Engaging your loyal customers and building true brand advocates
to recommend and refer your brand to their social network
• Ensuring your operation is truly an integrated multi-channel
experience and NOT a series of multiple, disconnected channels
• Leverage the increased uptake of technology, specifi cally
smartphones, to ensure your customer gets an engaging,
interactive and immediate experience.
Clare Rayner, the Retail Champion

APPENDIX
Websites
• http://www.msnbc.msn.com
• http://www.mobilecommercedaily.com/wp-content/uploads/2011/03/THD-Newspaper_tight_HR.jpg
• http://www.fastcompany.com/1716684/whats-for-dinner-intel-and-kraft-can-help-with-that-video
• http://www.ecouterre.com/mybestfi ts-full-body-scanner-tells-you-what-size-clothing-to-shop-for/
• http://www.dailymail.co.uk/femail/article-2050421/3D-Bodymetrics-bodyscanner-Find-perfect-pair-jeans-trying-on.html
• http://www.newelectronics.co.uk/electronics-technology/interactive-shopping-in-the-retail-industry/32008/
• http://vimeo.com/3384040
• http://www.psfk.com/publishing/future-of-retail
• http://mashable.com/2010/05/17/starbucks-foursquare-mayor-specials/
• http://www.enforbusiness.com/news/shopping-smartphones-growing-popularity-20128164
• http://fashionablymarketing.me/2011/11/hermes-launches-paris-mon-ami-scarves-in-the-city-campaign/
• http://www.lesmainsdhermes.com/en/livre-d-or#jsFilm
• http://mashable.com/2010/11/22/aisle411/
• http://www.forbes.com/sites/forrester/2011/05/26/apple-store-2-0-why-customer-experience-leaders-should-care/
• http://www.businessweek.com/videos/2012-03-07/the-apple-store-experience
• http://www.psfk.com/2011/08/pods-drop-to-become-instant-dressing-room-raise-the-spectacle.html
• http://www.youtube.com/watch?v=UVCoM4ao2Tw&feature=player_embedded
• http://articles.businessinsider.com/2012-03-15/tech/31195882_1_paypal-card-case-google-wallet#ixzz1qLxX9vOI
• http://www.boxpark.co.uk/