Throw out Generation Z stereotypes and make friends with Alexa - NRF retail market insights

Profile picture for user jreed By Jon Reed February 20, 2018
Summary:
At NRF 2018, the retail apocalypse gave way to a more optimistic narrative. But as the data from NRF's consumer behavior panel showed, today's consumer has raised the bar. How can retailers close the expectation gap?

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I've already published my retail takeaways from NRF 2018, AKA The Big Show. But there's still room for deeper dives and data surprises. During a second day media panel, NRF and its partners shared new research on consumer behavior.

The data amounts to a good news/bad news situation for retailers. Good news if you can act on data at the speed of customer expectations. Bad news if you can't. Moderator Katherine Cullen, NRF's Director, Retail and Customer Insights, opened the panel on an upbeat note:

The retail sector closed out the year with one of the strongest holiday seasons since the end of the recession, 5.5 percent growth year over year.

Retail transformation is working, but your competition is now global

Positive consumer sentiment in part of it. But Cullen says retailers are finally hitting their stride on transformation efforts, and seeing results. Panelist Mark Matthews, NRF's VP, Research Development and Industry Analysis, hit back on the tired "retail is dying" mantra:

I love seeing retail sales up five and a half percent, because I've spent the last six months of my life, maybe a year of my life, combating the idea that the retail industry is dying. And my pushback is, "How can the retail industry be dying when it's growing at three and a half, four percent a year, and five and a half percent over the holiday period?" So there's a disconnect there.

But not so fast. Matthews quickly poured cold water on retail euphoria:

What I have also mentioned is that - even though we're doing well - it's a highly competitive environment. It used to be retail was what your competition was at the local level. That's changed. Your competition is now global. Consumers can buy whatever they want, whenever they want, and therefore, it's incredibly important for retailers to create a compelling customer experience.

Matthews shared new NRF data on consumers' shopping preferences:

  • 58 percent said finding what they want quickly and easily. "So today's consumer is shopping with intent."
  • 73 percent said they go into the store to buy something specific. For online, it's 54 percent.

Research online -> buy in store is the trend. That puts more pressure on retailers. Consumers aren't walking in to mess around:

We're seeing a continued trend towards researching and finding your products online, and when a consumer goes into that store, they go into that store with a laser focus. They know exactly what they want, and they are going to get that item.

Retailers don't have unlimited budgets to get this right:

The challenge for the retailer is to figure out what it is that you do. You only have so much capital that you can spend, so many human resources you can throw at these things.

Customer experience - forget about virtual reality and get the simple things right

About that bloviated, over-flogged term "customer experience": it's not about transcendent moments or extravagant extras. As Matthews says, it's about getting the simple things (consistently) right:

When we talk to consumers, they say what they're looking for is not necessarily the bells and whistles. They are looking for things that make their life easy. They're looking for the simple things. Buy online; pick up in store. They're looking for store planograms. They're looking for digital payments.

Don't fall into the dazzle-consumers-with-new-tech trap:

So far, with virtual reality, augmented reality, all that stuff - it hasn't made it up the adoption curve. That's not to say it isn't going to, but right now, the consumer is very focused on having a quick, easy, efficient, seamless, painless consumer experience.

One of the hardest parts of keeping it simple? That old Amazon-eats-the-world bugaboo: free shipping. As per NRF:

  • Over two billion packages shipped this holiday season.
  • Four in ten online shoppers expect retailers to offer free, two-day delivery.
  • 25 percent of consumers expect free same day delivery. For millennials, that number jumps to 40 percent.

Today's consumers are conditioned to expect free delivery almost irrespective of price point, and that creates a problem.

You can't ship a gallon of milk across the country at a competitive price. That's also hampering local retailers from getting into the grocery delivery trade. The logistics are doable; the pricing is not.

Alexa says that mobile is the future of retail

For panelist Phil Rist, Executive Vice President for Prosper Insights & Analytics, getting things right comes down to one word: mobile. According to Prosper's data, more than 34 million consumers used their mobile phones to shop on Cyber Monday, either browsing or making an actual purchase.

Rist confirmed what retailers are thinking: the path to purchase begins on mobile. Prosper's top mobile use cases:

  • 55 percent of shoppers said they were using mobile to browse for a product or service.
  • 53 percent were looking for store hours.
  • 43 percent were receiving text messages with special offers.
  • Tied for fourth at 37 percent was comparison shopping, checking prices, reading product reviews, and, finally, making a purchase.

But the most striking data point was about mobile obsession:

We asked smartphone users about how they feel about the about their phone, and the things they do with it. 31 percent of them said, and this is just from January, "It's my life."

That mobile obsession has spilled over into voice assistants. Rist says we're still in the early adopter phase, but those early adopters are passionate:

We posted questions on "How would you respond to 'Alexa is like a friend to me, or OK Google is like a friend to me,'" and this was just from December: 38 percent of the Alexa users said "Alexa is like a friend to me." And of the OK Google users, that number was 32 percent.

That sets the tone for AI/voice/personalization in the future:

The key with artificial intelligence will be, from the consumers' point of view, being helpful and relevant. But be careful not to cross over the line of being creepy.

Throw out the Generation Z retail stereotypes

The other big theme of the panel? Generation Z retail behavior. Panelist Laurence Haziot, Global Managing Director for Consumer Industries at IBM, is an expert in Generation Z. She shared some surprising data on Generation Z and storefronts. In a joint study with NRF, IBM interviewed 15,600 Generation Z member globally:

  • 98% of those surveyed they say they still want to buy in a store.

But Generation Z is also mobile-savvy. More than any other generation, they expect retailers to interact with them on social channels. That puts the pressure on retailers to get the mobile and store experience synced. For Generation Z, it's got to be fluid - and fast. Slow online shopping equals no online shopping - and back to Amazon they go.

Generation Z also has a surprisingly heavy influence on family spending. This may point to more egalitarian family structures, where the head of family doesn't call the purchasing shots in the same non-negotiable manner. That impacts how to market to Generation Z. As Mathews said:

I talked probably about twenty different retailers about Gen Z and what they were doing to target Gen Z... Brands that sell almost exclusively to Gen Z were telling us, "We're targeting the grandparents; we're targeting the parents." The fact of the matter is that Gen Z has become a very profound impacter on parental spending.

My take

It's always dangerous to over-generalize about generational behavior. Haziot had good points on differences between Chinese and U.S. "Gen Z" shopping habits. The full discussion warrants another article. So does the potential of AI to address personalization (You may want to check Barb Mosher Zinck's True 1-1 marketing isn’t segment or persona-based - Conversant’s AI personalization story). I get further into voice shopping trends in Capgemini's Warner on the AI voice imperative - brands are falling behind on conversational commerce.

Aside from Gen Z storefront preferences, I didn't hear many outright surprises from this panel. What I did hear was a major caveat to retail optimism. Yes, the retail apocalypse narrative has been discredited. But winning in retail is going to take imagination - and savvy use of tech to make that mobile/store experience fluid. When you consider rampant data silos in marketing alone, that's a tall order.

Solving the growing knowledge gap between savvy consumers and, all too often, under-informed/under-motivated/underpaid store employees is another vexing piece of the puzzle even successful retailers are struggling with. I'll have more on addressing that conundrum next.