October 1, 2008 | Written by: IBM Research Editorial Staff
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Switzerland’s top retailers looked into the “day after tomorrow” in retail at the Zurich Research Lab’s ISL
Retail is a tough business. For years, prices have been the differentiator. “Price competition is becoming fierce in an industry in which margins are already extremely narrow. But this will not be sufficient in the future,” predicts Moshe Rappoport, executive technology briefer and expert for retail trends at the Zurich Lab’s customer briefing center, the Industry Solutions Lab (ISL).
“Retailers who place an individualized customer experience at the center of their business model will win in the future marketplace.”
Facing this challenge, 65 top retailers from throughout Switzerland attended the IBM Retail Conference 2008, where experts of IBM’s Zurich ISL demonstrated fascinating new technologies that promise to provide future opportunities for growth. “At the ISL, we look at the day after tomorrow in retail,” explains Rappoport. “To succeed in the future, retailers need to see emerging trends and think about how to respond to them in creative new ways. Retailers who place an individualized customer experience at the center of their business model will win in the future marketplace.”
The new “retail experience” demo area in the Zurich ISL.
Digital divide – Shopping with digital natives
Around the world, younger generations are growing up with technology as an integral part in their lives. Technology shapes their way of thinking and doing things. These generations are referred to as “digital natives”. They are accustomed to being digitally connected and having access to information anytime, anywhere. Technology will also play an increasingly important role in their shopping preferences. They will inform themselves about products by consulting the Internet as they shop. Their buying decisions will be strongly affected by other users’ ratings, reviews or recommendations.
There is also a trend towards social shopping. This means that, in the future, more people will no longer shop alone but will contact their family, friends or colleagues via cell phone or using mobile videoconferencing devices before making purchasing decisions. “The mobile phone will become the primary communication device of the future,” says Rappoport. “For retailers, this will open up numerous fascinating new possibilities.” For example, location-based sensing could trigger the automatic sending of targeted advertisements to alert consumers to special offers upon entering the corresponding area of the store. RFID tags or barcodes could provide consumers with product information, and mobile phones could track digital shopping lists in real-time.
Another major—and growing—consumer segment is the so called “Generation 60+”. This age group has markedly different shopping behaviors and preferences. With regard to technology, these consumers are “digital immigrants”, meaning that they have become accustomed to technology, but did not grow up with it. Therefore, they tend to use and perceive technology differently and
attach a higher value to personal interaction with sales personnel. They tend to prefer shopping in stores that offer personal service. They will use technology if it facilitates their lives and provides them with useful information. Some such technologies were demonstrated in the ISL, including intelligent scales, which determine automatically the sort of item being weighed, information screens that provide important health or allergy information, and self-checkout facilities.
Changing the “last mile” of retail
Shoppers of practically all ages are increasingly under time pressure. Many are not willing or able to travel long distances to shopping malls, nor do they like having to carry home numerous bags of purchases. Retailers will be challenged to offer a wide variety of sales channels to accommodate future buying preferences, including providing virtual stores on the Internet, maintaining smaller local shops, and arranging the timely delivery of purchases to customers’ homes.
Green and healthy
The extent to which products are organic, “green” and healthy will be of ever greater importance to many future shoppers. They will tend to buy products that are not necessarily cheaper, but of higher quality and produced in an ecologically sustainable manner. Consumers are becoming increasingly better informed and responsible buyers who want to feel good about the products they purchase.
Over the course of the event, the central message became clear: technology is only part of the answer to how to succeed in the future. “How retailers use technology and integrate it in their overall business model is what will make the ultimate difference,” says Rappoport.
Creating a new customer experience at the Zurich ISL
Retail is one of the areas in which the ISL provides thought leadership. The “ISL Retail Experience” showcases a futuristic store with a group of realistic, interactive exhibits. These exhibits include novel in-store displays, remote access from the store to food or subject-matter experts, personalized health information at the point of sale, and of course self-checkouts and electronic payment options. The Retail Experience corner is a new feature of the major remodeling and transformation currently underway at the Zurich ISL.
For more information concerning this article, please contact Herfurth, Nicole (NIH@zurich.ibm.com).