The Future of...

The Future of Holiday Retail is Blended Experiences

Not brick and mortar or digital, but both, powered by interconnection

Dan Eline

It’s that time of year again – will the holidays make or break the retail industry? The demise of brick and mortar has actually been heralded for more than a decade. Dubbed the “retail apocalypse”, trends such as massive store closings and the rise of e-commerce are often cited as leading indicators. But has brick and mortar retail really expired?

While it is true that there have been some troubling signs such as store closings and an increase in the number of retailers filing for bankruptcy, they don’t quite tell the whole story. Ninety percent of retail sales are still spent at a physical location and holiday retail sales are forecasted to increase by up to 5% this year.[i] Even more telling is a new wave of store openings by digital natives like Amazon and Casper – up to 3,000 of these “clicks to bricks” stores may open within the next three to five years.[ii]

What is changing is the retail experience. No longer an either/or proposition, leading retailers are swiftly evolving to digitize the entire customer experience – in-store and online. To compete, retailers will need to provide a seamless, personalized and convenient experience for shoppers, driven by insight. Whether that means tracking in-store shopping patterns with sensors to improve inventory management or sending custom email offers based on consumer purchasing behavior, there is one common denominator – data exchange. As data is captured, it needs to be analyzed and exchanged between different systems and partners to be useful. This is driving demand for interconnection, which is the direct and private exchange of traffic between key business partners.[iii] In fact, the Global Interconnection Index (GXI) Volume 3, a study published by Equinix, projects that the private interconnection bandwidth in the retail sector[iv] will grow by 68% annually between 2018 and 2022.

Up to 3,000

“clicks to bricks” stores may be opened by digital natives within the next 3 to 5 years.

What the future of retail will look like

The winners of this holiday season will be the retailers who can harness data insights to deliver better virtual and in-store shopping experiences, improve operational efficiencies and create new sources of loyalty and revenue. Some examples of what this may look like include:

1. Personalized: By aggregating data from multiple sources and applying advanced analytics and machine learning, retailers will be able to provide hyper-personalized offers to consumers the minute they walk into a store or begin browsing the web. A customer with school age children might receive an email discount offer on toys for Christmas. A teenager might receive a pop-up alert on their mobile phone to go check out the new “grammable” opportunity on aisle 6 (where the retailer has a holiday display of merchandise targeting the Instagram crowd). Yet another customer who is handy with tools might receive an ad from a local retailer for upcoming home improvement classes in their Facebook feed.

2. Convenient: Mobile apps enable local retailers to provide convenient services like curbside pickup, in-store pickup or returns of online orders, and cashier-free checkout, while deepening insights about and engagement with customers. Partnerships with other brands and services can expand the opportunities – for example, offering Amazon Counter or in-store health and wellness services.

3. Exclusive: New reward and loyalty programs can be created based on deeper insights about what customers value. One customer may value a reward program for sustainable product purchases, while another one would be more engaged by opportunities to unlock in-store and digital experiences.

4. Timely: Sensors and radio frequency identification (RFID) tags on items can help retailers track in-store consumer shopping behavior for better inventory management. Using automation and machine learning, retailers can pair these insights with online browsing and purchasing patterns to ensure that stores have just what consumers want when they want it.

Retailers are seeing investments made five and even 10 years ago begin to pay off, particularly those in technology, omnichannel capabilities and digital. Now, companies are turning to the next wave of investments, including those in advanced data and analytics, artificial intelligence and product curation. The goal is to better understand the customer and deliver the products and experiences they want, laying the foundation for success over the next 10 years. Matthew Shay, President and CEO, National Retail Federation
3.8x increase

The global retail insights market is projected to nearly quadruple between 2018 and 2026, opening the door to new data monetization opportunities for retailers.

All of these trends underscore the reality that “in-store” and “online” are now intertwined. Consumers expect a seamless, convenient experience tailored to their values and preferences regardless of how or where they shop. While many retailers have built a strong foundation in omnichannel to address these trends, staying in the game will require broader capabilities. Providing that kind of experience depends on having 360-degree insights that can only come from harnessing multiple data sources, partnerships, ecosystems and digital technologies. Better customer insights can also unlock data monetization opportunities for retailers, a market that’s expected to nearly quadruple between 2018 and 2026, reaching $13.3 billion by 2026.[v] Interconnection offers a proven path to success by removing the distance between people, systems, applications, data and clouds at the digital edge. By deploying direct, private connections at the digital edge, retailers will be able to integrate and exchange data with partners, providers and their own systems to automate and scale insights for new value creation.

Read the GXI Volume 3 to learn more about how private interconnection is powering retail and other industries around the world.

You may also be interested in reading the Retail Digital Edge Playbook to see how retail organizations can leverage a marketplace of ecosystems (cloud, financial, advertising, social, mobile) to offer compelling new capabilities and experiences.

 

[i]Digital Commerce 360, Bloomberg News, Why digitally native brands keep opening physical stores, Oct 2018; CNBC, Holiday retail sales could climb 5% despite ‘unprecedented uncertainty’, Sep 2019.

[ii]Retail Dive, Digitally native brands set to open 850 stores in 5 years, Oct 2018; Business Insider, Amazon’s new line of stores is its latest huge bet in defiance of the retail apocalypse, Nov 2018.

[iii]Interconnection bandwidth is defined as the total capacity provisioned to privately and directly exchange traffic, with a diverse set of partners and providers, at distributed IT exchange points inside carrier-neutral colocation data centers.

[iv] The retail industry in the GXI includes Wholesale & Retail. Retail is the sale of merchandise in small quantities directly to the consumer. Wholesale is the sale of goods in bulk at a discount to businesses for resale.

[v]Fortune Business Insights, Retail Analytics Market Size, Share and Industry Analysis 2019-2026, Oct 2019; Business Application Research Center, How do companies monetize their data?, Aug 2019.