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Retail, Disrupted: Pressure and Potential in the Digital Age

What Consumer 3.0 Really Wants

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It’s not just online shopping but a customized and individual consumer experience that millennials and Gen Z shoppers want, says the Euler Hermes special report on the retail industry...

Allianz SE
Paris, May 23, 2017

Few of us can resist the lure of shopping online. A few clicks and you’re done – no struggle for parking space, no waiting at cash counters and no elbowing your way through other shoppers. At the same time, high-street retailers close doors every day.

Does this mean this is the beginning of the end for brick-and-mortar stores?

Not by a long shot, shows the Euler Hermes ‘Retail, Disrupted: Pressure and Potential in the Digital Age’ special report. What Consumer 3.0 really wants is a customized and individual consumer experience, be it online or in a brick-and-mortar store, says the report.


The Why

The 2000s saw the rise of a digitally-native generation with unique aspirations and lifestyles. Smartphones and social networks are integral to the lives of millennials - those born between the 1980s and the mid-1990s. This has shaped their buying behavior, while their purchasing power is expected to supersede baby boomers’ as soon as 2018.

When shopping online, more than two thirds of consumers are influenced by social media. Active users can write or read reviews, and some aspire to become influencers. Less proactive participants may opt-in for promotions or follow the lead of trendsetters. Fueled by sheer numbers and speed, social media has evolved into selling channels.

Also, millennials and the younger Gen Z shoppers - born after 1995 and set to represent nearly half of the workforce by 2020 – crave something their deal-seeking parents never sought in mega shops: a customized and individual consumer experience.  

The result is a return to a specific type of in-store shopping. An estimated 80 percent of Gen Y and Z shoppers are more likely to visit a store that offers entertainment in the form of virtual reality or artificial reality. Millennials care about and for the local economy, put family and friends first, and prefer subtle and understated brands, which influences their buying patterns.

The What

For companies, a strong digital presence can strengthen their brands. Companies need to treat the online world as a means, not an end; a strategic tool, not a strategy. The trick is to find the right balance between digital and physical.

Interestingly, e-commerce accounted for only 7 percent of total retail sales in 2015. Most retailers were pushed to invest online, but actually failed to reshape the customer’s journey and the seamless experience that customers have grown to expect. The influence of digital touchpoints is undeniable, but physical stores are just as important. Digital tools such as social media allow retailers to build a personal and customized relationship to customers.

A good example is Instagram, a photo-sharing app where fashion influencers promote products, give insights into their lives, show how cool it is to use a product and give sneak peeks into upcoming product launches.

For companies, it’s a whole new opportunity of product placing. The first thing potential customers do when they see a post is click on the link in the bio and visit the shopping website.

It gets even more interesting. Most customers browse through the website, willing to be inspired by maybe even more than just what they’ve seen on Instagram, but then they go to a physical store to buy the product. Eventually, they want to experience the product before making a decision, liking the tangible and sensory elements of a purchase. So how about in-store entertainment in the form of virtual reality – interactive, touchscreen mirrors in fitting rooms that show you a shirt in different colors; visual and auditory senses that makes you feel like going through a forest while looking for a new, fall seasoned coat? 

For retailers, the key is to combine online and offline shopping – the best of both worlds.

Top Challenges Faced by Retailers Worldwide


The How

Retailers must master three major tools to attract the new-age shopper

#1. Omni-channeling

Simply put, approaching potential customers through more than one channel to meet their need for flexibility - online (mobile or desktop), phone or a brick-and-mortar shop. For customers, it is not just about where and what to shop, but also about how to pay and where to have the item delivered. Retailers struggle to tackle this massive challenge, break silos and de-compartmentalize digital and in-store channels of distribution.

#2. Mobility

Make yourself accessible to potential customers wherever they are, whenever they want. Most shoppers browse through their social media channels and shopping websites while sitting in a tram or relaxing on the couch. A retailer, by imagining customers’ live situations and adapting its accessibility to them, can stimulate a comfortable experience. Two important questions have to be answered here: ‘where’ (to shop or choose delivery) and ‘how’ (to pay or be informed, for instance). Developing a mobile customer journey can be achieved by digitalizing the offer and the spread of Internet of Things. Mobile devices are more affordable than desktop or laptop computers, compatible with nearly all platforms thanks to applications, and require less infrastructure development.

#3. The cost of online presence

Connected objects and digital platforms create a lot of data and the last thing you want is to be overwhelmed by heavy process costs and messy operations. Especially when you already have to deal with the duality cost of having a store footprint and online selling platforms. A data strategy can help – one which includes what information to keep, how to store this information and determine its purpose: Inventory and delivery management are, for example, two essential business operations that need to be handled in a structured and organized way.

For international retailers, force-fitting a global idea might not quite be the way to win over customers across geographies. Be ‘glocal’ instead – act global and think local.

To help navigate this ever-shifting landscape, Euler Hermes has developed the 'EH Retail Score'. It provides a benchmark for 12 countries, testing the pressure to change and adopt innovative retailing models and the ability to undertake change.

This score divides the global field into four groups.

So how do you walk the fine line between borderless and local? Let the ‘Retail, Disrupted: Pressure and Potential in the Digital Age’ report tell you.

About Euler Hermes

Euler Hermes is the global leader in trade credit insurance and a recognized specialist in the areas of bonding, guarantees and collections. With more than 100 years of experience, the company offers business-to-business (B2B) clients financial services to support cash and trade receivables management. Its proprietary intelligence network tracks and analyzes daily changes in corporate solvency among small, medium and multinational companies active in markets representing 92 percent of global GDP. Headquartered in Paris, the company is present in over 50 countries with 5,800+ employees. Euler Hermes is a subsidiary of Allianz, listed on Euronext Paris (ELE.PA) and rated AA- by Standard & Poor’s and Dagong Europe. The company posted a consolidated turnover of 2.6 billion euros in 2016 and insured global business transactions for 883 billion euros in exposure at the end of 2016.

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