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Next Retail Strategy: Implementation of Digital Technology

Info: 7800 words (31 pages) Dissertation
Published: 9th Dec 2019

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Tagged: TechnologyRetailBusiness Strategy

Introduction

In a challenging market where consumer spending is being squeezed and costs are rising, retailers need to invest in developing smarter and personalised offers in addition to rethinking the roles of their stores (Deloitte, 2017). Previous research highlighted the need for retailers to look at developing technology as a way of combining the growing online retail space and in-store experience to attract consumers and drive sales (Appendix A). This retail strategy aims to provide a rationale for the implementation of digital technologies into the retail landscape of Next, as well as a framework to help guide the retailer and ensure it is able to meet the demands of the environment that it is situated in, within the current U.K. retail market. Innovation within the department store sector remains on creating a compelling in-store environment to ensure both products and in-store merchandise resonate with the consumer. (Dover, 2018)

Methodology

A wide range of relevant research has been covered to ensure that the conclusions of this proposal are appropriate to the retail structure of Next and their consumer. Primary research was conducted to further understand the benefits of the implementation of technology, how this would benefit Next and to gain consumer insights. The purpose of conducting primary research, combined with secondary research and the use of theoretical elements enables the triangulation of the finding to ensure that the proposed methods are well informed and have sufficient evidence to support the idea.

Interviews

Structured interviews, via email, were used as means to identify general patterns from industry experts to the proposed strategy. (Saunders, et al., 2016) note that when research design uses a deductive approach, in this case to test the retail strategy, the standardised nature of the data will make it easier to test the proposal. It is noted that due to prior knowledge or perspective of the topic, interviewee bias may occur.

Karen Fletcher

Former Senior Womenswear Buyer, Next

Gain insights into the business perspective of Next, relevant to the application of digital technologies.

To clarify how technology would fit into the retail structure of Next.

To gain credible support and suggestions of improvement of the proposed retail strategy.

Dr Charlotte Shi

Lecturer in Fashion Marketing and Branding, Nottingham Trent University

Expertise in fashion retail and the future of fashion retail.

Gain insight into the future of retail in the U.K. and any issues that may arise in the future.

To gain clarification on how the proposed retail strategy would fit into the future of retail and any areas of improvement.

Gain an understanding of how consumers would benefit from digital technologies in-store and why this would be.

Online survey

A survey was conducted to gain understanding around consumer behaviour relating to the proposed technologies and buying influences, looking specifically at the consumers of Next, Marks and Spencer, Debenhams and John Lewis. A Sample of 94 respondents were asked to select from pre-determined choices, to maximise the feedback and carefully selected wording was used so that the results are applicable to the research. Due to being distributed online, controlling the demographics that access the survey may prove difficult, therefore respondents were asked to state their age, and which market level they shop at.

Target audience: Customers of Next and Competitors

Sample Size: 92

Observation

Structured observations were carried out to gain an understanding of consumer behaviour in relation to the use of technology in fashion retailers. Structured observations are a form of ethnographic investigation that help the researcher to obtain first had experiences of the area of study (Chapman & McNiell, 2005), in this case the focus was on the ease-of-use of in-store technology and the rates of engagement from customers. (McLeod, 2015) finds that strengths of being able to study participant behaviour in its natural setting ensure that the findings have greater ecological validity, it is also noted that as outer variables cannot be controlled the findings may lack in reliability.

Rationale

Changing consumer needs – Experience driven

Due to strong consumer confidence in the industry, the movement towards right-sized storest and improvement in retailer activity, Savills forecasts massive growth in 2018 for the UK retail market (in spite of Brexit). However, there will be a lot of new players coming into the market to take advantage of this growth. Therefore, existing retailers would need to be innovative and highly adaptable in order to grow and beat the competition.

Consumers are now adapting more ‘fluid’ behaviours, and are expecting the retailer to mimic this idea of flexibility and immediacy. “People have shorter attention spans than ever before. To keep them interested is all about the here and now, it is about things appearing in unexpected location, causing a storm and disappearing before people have the opportunity to get bored” as stated by Ross Bailey, founder of Appear Here. Consumers are now driven by experiences, opting for brands that offer them more than a transaction, but also a journey. The 2018 Brand Still Matter conference (Euromoniter International , 2018) highlighted how today’s consumers are changing. Younger generations expect more from brands and are actively choosing brands that are able to anticipate their needs and help them discover new products. Faced with these changes, retailers need to transform their business models to be able to serve the lifestyles and demands of today’s consumers (Grant, 2018).

In recent years there has been a rise of consumers who desire unique, spontaneous and immersive entertainment, wherever they are (Lazarus, 2017). This rise in ‘experiential shopping’ is in part a reaction to the growth of online shopping. Year on year sales, in 2016 and 2017, online sales grew by 15% (Centre for Retail Research, 2017) in the U.K., with a similar increase forecasted in 2018. This increasing digital way of shopping means that retailers have fewer opportunities to meet their customers and are looking for new ways to connect, (Beck, 2017). Experiential shopping provides consumers with an opportunity to connect with a brand, which is increasingly important in a time where consumers find themselves with more shopping options than ever before as a result of e-commerce and omni-channel retailing.

The year 2018 will see consumers expecting and demanding more personalised service. According to an interactive study by Accenture, over 56% of customers are more disposed to shop at retail stores and online marketplaces that recognise them by name. Studies have also shown that there is a high likelihood that 86% of shoppers who receive a posotive customer experience will become return customers. Although personalisation has been employed for some time in the retail industry, customers have become aware of the tactics used by most retailers. Some of these tactics (such as the use of first names when addressing emails and other correspondence to customers) have become transparent and outdated and need to be revamped and revitalised. (DisplayMode, 2018)

As a result of the need for experiences, combined with an ever-expanding choice of retailers, consumers are increasingly opting for brands who can offer them a personalised shopping experience. With more work and social demands, customers have less time to shop and therefore have high expectations for speed and convenience which is often achieved from a personalised service (Flood, 2017). Findings from the “State Of The Connected Consumer” report by Sales Force (2016) show that consumers are craving more customised marketing, more personalised in-store shopping experiences as well as product recommendations that match their needs.

The Role of the Physical Store

Research has shown that despite the recent boom in online sales, 70% of consumers still prefer to shop in-store (Timetrade, 2016). “The bottom line is customers value the personal experience of the physical store,” said Gary Ambrosino, CEO of TimeTrade. “We found that shoppers have done their shopping or discovery online, then go into the store to get help with their final purchase decision.” Consumers still value the tactile experience offered by the physical store, the ability to see, touch and feel products as well as take them home ranked highest among the reasons consumers choose to shop in store versus online, according to Retail Dive’s Consumer Survey (Skrovan, 2017).

The opportunity provided to the consumer in-store allows for a stronger brand connection to be established through personalised services and the in-store experience, which is not possible through online platforms. Nevertheless, when looking to the future of the ‘brick and mortar’ stores Steven Dennis, brand strategy consultant, believes that shopping in the future will need to be an amalgamation of both online shopping and physical stores, where customers are able to move seamlessly between the two (Beck, 2017).

The Retail Life-Cycle

the retail life cycle is based on the product life cycle theory. The RLC theory suggests that retail institutions also have a life-cycle, which can be divided into four phases: innovation, growth, maturity, decline (Cox & Brittan, 2004)

This strategy will focus on ensuring that Next Plc have sold place within the innovation and growth stages as this means that the retailers will have few competitors from utilising new technologies while sales and profitability will be high due to the retailers being a well-known brand with existent loyal consumers.

The Role of Technology in Retail

In an increasingly competitive environment, customer loyalty and repeat buying is now key to establishing a successful and economically sustainable business model (Bhattacharya, 2016). With this in mind, it is important to consider the new opportunities being offered to retailers by new developments in technology and digital products.

With e-commerce growing year on year from 2015-2018 (Statista, 2018), retailers are recognising the need to develop their multi-channel offering, by merging the boundaries between the digital online world and the physical store to offer an omni-channel experience to the consumer. Consumers have followed developments in technology to an online landscape, retailers are now utilising this technology as a tool to attract consumers back into stores.

Rapid advances in machine capabilities, combining both AI and robotics, promise to transform the economics of retailing and help improve the outlook for retailers (The Consumer Goods Forum , 2017). Achieving the right balance between automation and human interaction will be crucial in winning consumer loyalty and making stores more appealing to the consumer. Tech Crunch (Schneble, 2015) finds that there are three requirements for successful technology adoption in retail; first is that the technology must aid in the customer’s journey of finding and experiencing products. Second, the return on investment for the retailer must be clear and compelling. Finally, the experience must enhance the real-world retail experience, not distract from it. Central to this is ensuring that the customer experience is easy and enjoyable.

Another element of technology that can benefit retailers is the use of data to understand the consumer and provide a more personalised consumer experience. According to (Mckinsey & Company , 2017) organisations that leverage consumer behavioural insights outperform peers by 85%  in sales growth and more than 25% in gross margin, showing that consumer data should be seen as a strategic tool for businesses.

Technology is beneficial to retailers and their consumer’s as it helps to facilitate a better flow of communication. In a business, the roles of technology and humans must be clear and consistent with the goals and style of that business. Although technology can facilitate customer service, it may become overloaded and breakdown. It is also viewed as impersonal by some customers. New technology must be set up efficiently with minimal disruptions to suppliers, employees and customers.  (Berman, et al., 2013)

Retailers are adopting the use of A.I. computing technology to take orders by mobile app, messaging, email, text and voice. Furthermore, the experimentation with A.I. enabled in-store assistants has seen positive progress in helping customers get relevant information while shopping at a physical store.

In response to changes in the way consumers are shopping, retailers are embracing in-store technologies to deliver an advantageous, personalised and innovative in-store experiences. A few retailers have already begun implementing solutions to cater to new consumer expectations and enable a true omni-channel approach by developing services, rethinking their commerce platforms and point-of-sale systems, and investing in the integration of digital systems. The benefits of using mobile technology in the store are represented in the form of better customer experience and engagement, enhanced support for store employees and increased operational efficiencies (Usablenet , 2013).

Current Application of Technology in Retailers

Amazon have recently opened the first ‘cashier-less’ store, it is partially automated, with customers being able to purchase products without using a cashier or till (Wingfield, 2018). According to Amazon, the store utilises several technologies such as “computer vision, deep learning algorithms and sensor fusion” to automate the process of browsing and purchasing. The store concept is seen as a revolution model that relies on smartphones and geofencing technology to streamline the customer experience, as well as supply chain and inventory management (Grewal, et al., 2017). However, public access was initially delayed due to issues with sensors relating to tracking users and objects (Johnston, 2018). The use of the Amazon go app by customers provides Amazon with large amounts of data about consumers’ product preferences, time spend in the store and how much money they spent. This is beneficial to amazon as they can utilise this data to identify the needs of their consumer and their shopping habits to improve the in-store experience.

Luxury fashion retailer Farfetch’s store of the future aims to dramatically improve retail productivity by capturing valuable customer data and enhancing human interactions between shoppers and sales associates (Kansara, 2017). The concept store involves technologies such as the ‘connected rail’ which recognises when an item has been removed from the rail, the product information is automatically sent to the customers app ‘in-store wish list’ (Glimpse the Store of the Future, 2017), giving the customer a personalised shopping environment, while ensuring a seamless omni-channel shopping experience. As the store is a concept it is still in beta, meaning that consumers attitudes towards the technologies are unknown. However, Rebecca Minkoff has opened a Soho store integrated with similar technologies, such as digital mirrors, which is open to use by customers. According to (Dishman, 2015)the brand has seen a rise in sales at the stores showcasing the technologies, with 30% of customers asking for additional items form the dressing rooms with mirrors. Furthermore, customers who have been reluctant to buy while in-store are using the notification form the app to make e-commerce purchases at a later time. Data shows that year over year sales in the three cities with connected stores have risen 50%, says Uri Minkoff, CEO of Rebecca Minkoff.

Another brand bridging the gap between online and in-store to create a fully personalised shopping experience is sportswear brand Nike. Nike’s experience approach to its new store has created an activity centre where sports and fitness fans can get advice and product tailored to their specific needs. The store is a retail destination above all else, but one that is optimised for the purpose of encouraging shoppers to try out the products on sale in a personalised fashion.

These technologies provide new experience elements capable to influence consumers shopping buying decisions and the in-store service as well as to give retailers constant feedback with clients, which can be used for the development and implementation of more efficient and customized marketing strategies (Pantano, 2010). Technologies can greatly benefit retailers but it is important that when integrating them the needs of the consumer are considered as the most important. A recent IBM Survey (IBM, 2017) comparing  the attitudes of executive and consumers on digital-experience technologies found that the executives misunderstood what consumer want, which was mostly a faster, more convenient process in-store

Primary research into in-store technologies supports this claim as when looking at the use of iPads in-store for the use of finding out more product information, exploring styling ideas and ordering products.

The retail market in the U.K.

The U.K department store sector remains challenging, with a number of the leading retailers struggling to maintain sales in a crowded retail market. Mintel estimates that the value of the UK department store sector rose 1.5% to £13.5 billion in 2017. Furthermore, they believe that there will be modest growth in the UK department store sector to be sustained over the next five years. Appealing to a broad range of demographics, this sector is highly influenced by trends in the wider economy and growth is shaped by disposable incomes and consumer spending. As UK consumers face uncertainty (Appendix A), growth in the market could be impacted further if consumers adopt more cautious spending habits. This again shows how important is will be for retailers to ensure they are meeting the needs of their consumers, to attract new customers and ensure existing customers return.

Consumers finances were under pressure in the UK throughout 2017 with high levels of inflation outstripping wage growth throughout the year (Chu, 2017). However, with consumer confidence reaching highest levels since January 2017 (Jahshan, 2018), consumers are proving to remain positive. Mintel (2018) estimates that total consumer expenditure in the UK increased 3% in 2017, with growth in core department store categories, fashion, beauty, electrical and homeware, up 2.9%.

While premium department stores have experienced a boost in sales as a result of the devaluation of the sterling. As the pound remains week, there has been an increase in oversees consumers are taking advantage of exchange rates (Sandle, 2016). However, mid-market retailers have struggled to maintain growth as they battle to define their USP in an increasingly crowded retail sector. M&S, Debenhams and House of Fraser have all lost significant share in the market in 2017, with M&S, House of Frasier and high street retailer New Look all facing significant store closures in the first quarter of 2018 (Graham, 2018), while John Lewis has continued to grow with a clear position in the market and a strong understanding of its core customers and what they want (Statista, 2018).

Traditionally the USP of department stores was its breadth of range (Cox & Brittan, 2004), but e-commerce has taken over that proposition. As a result, retailers have increased investment into stores in an attempt to use experiential retailing as an advantage point and a way to get consumers back in.

Next Overview

Next PLC is a multinational retailer offering clothing, footwear and home products. Next has around 700 stores, 500 of which are in the UK and Ireland and 200 in continental Europe, Asia and the Middle East (Next , 2018). Being the largest clothing retailer by sales in the UK, Next distributes through a number of channels, these include:

  • Next Retail, a chain of stores in the UK and Ireland.
  • Next Online and Next Catalogue, their home shopping division with over 4.9 million customers in the UK and oversees.
  • Next International Retail, showcasing around 200 franchised stores in international locations.

This strategy will be focused on the Next retail division, however due to the intention of merging the online and in-store experience the strategy will influence all the channels that Next distributes through. Next are currently developing plans for a new flagship store to be built near their headquarters in Fosse Park, Leicester, which is to replace an existing Next store in the retail park (Pegden, 2018). The expansion indicates that next sales are doing well enough to warrant the costs of an expansion.

In the Next Annual Report for 2017, Next state that 2017 was their most challenging year for 25 years. This was due to a difficult clothing market combined with “self-inflicted product ranging errors and omissions” (Next , 2018). Whilst it has been a difficult year it has prompted the company to re-evaluate themselves; “from the structure of our store portfolio, the in-store experience and the generation of retail revenue streams…. our online systems, marketing and fulfilment platform”. As a result, the report outlines a clear direction for the investment of online systems and marketing development for the year ahead. Such investments include targeted marketing roll out with the goal of an 12% increase in return on advertising, an artificial intelligence based search engine, personalised promotions to target consumers as well as the introduction of product personalisation services.

Next business model:

  1. Next products are developed by an in-house design team.
  2. Over 140 million products sourced form around 40 countries.
  3. A network of warehouses and international hubs deliver product cost effectively and efficiently.
  4. Providing value for money and excellent customer service is key to the Next brand.
  5. Highly cash generative, allowing them to invest in the business and return value to shareholders through dividends, share buyback and earnings growth.

Next identify their business objective as the aim to create long term value through the pursuit of the following strategies:

  • “Improving and developing our product ranges, success in which is measured by sales performance.
  • Maximising the profitability of retail selling space. New store appraisals must meet demanding financial criteria before the investment is made, and success is measured by achieved profit contribution and return on capital against appraised targets.
  • Increasing the number of profitable NEXT Online cash and credit customers and their spend, both in the UK and internationally, complemented by our LABEL offering of branded products and the credit facility (next pay) we offer to our UK NEXT Online customers.
  • Managing gross and net margins through efficient product sourcing, stock management and cost control.
  • Focusing on customer experience and satisfaction levels in both Retail stores and Online.
  • Maintaining the Group’s financial strength through an efficient balance sheet and secure financing structure.
  • Generating and returning surplus cash to shareholders by way of share buybacks and/or special dividends.”
The Consumer

Next maintains a diverse consumer group as a result of the vast geographical locations of the Next stores (SOURCE). Emma Willis has recently been announced as the new brand ambassador, indicating that she is the prime example of the target consumer for Next, on the collaboration Next said “being a TV personality and mother of three, she understands the importance of practical yet fashion-forward dressing, her own style is ‘comfortable with a modern femininity’ which makes her a perfect fit for our brand.”

Demographic
Age: 25 – 50
Gender: female
Social Grade: ABC1 (YouGov, 2018)
Psychographics
The typical Next consumer is an early and late majority, when looking at Rodger’s diffusion of innovations (SOURCE). They are majority working mothers, who are very time conscious with busy lifestyles. Personality traits include sociable, trends, family orientated and tech savvy.
A primary research survey found that those who shop at Next, also buy from M&S, Debenhams and Zara (Appendix B) showcasing how their buys lifestyles require a ‘one-stop’ destination as well as the need for a fashion forward clothing.

Mintel (2018, p. 3) state that in order for a retailer to sustain growth share in their market they need to establish a strong understanding of their core customer and what they want. The main target market for Next would be mid-market consumers between the ages of 25-45. This wide ranging demographic is a result of a diverse product offering that appeals to all ages of fashion conscious women and men, enabling loyal consumers to remain purchasing from next for many years. A primary research interview (Appendix C) found that the majority of Next consumers are women, often working mothers whose main priority when shopping is their time. Combined with the changing consumer needs outlined in the Next Annual Report (2018, pp. 21-25) as a shift in consumer spending to experience sectors, a decline in real incomes as inflation continues to rise and a move to online retail.  These factors all indicate that in order for Next to maintain their loyal consumer base, as well as attract the new age of consumers, the retailer needs to ensure that they are providing an experiential retailing service, personalised to the needs of each customer in order to provide a solution to the consumer.

Looking at the generational differences between the Next consumers, who are a combination of millennials and Generation x it is important to understand the differences in needs and motivations to buy. Deloitte’s ‘What Make Millennials Spend More’ report finds that more than half of millennials are likely to buy in-store, this is due to being able to feel and touch the products as well as try them on prior to purchasing. Furthermore, millennials are used to being able to access the information about products and services, living in a growing era of ‘brand-transparency’. However, there is no preferred channel of information, with millennials making buying decisions based on information from multiple sources. Research by Lipowski (2017, p. 163) finds that both millennials and generation x show high levels of preferring to find pre-purchase information online, with generation X being slightly more likely to find pre-purchase information at the point-of-sale. Furthermore, both the online purchasing levels and Point-of-sale purchasing shows very similar results.

Marketing Mix

Product

Next offer a wide range of products including womenswear, menswear, accessories, children swear and homewares. The retailers prides itself on an extensive product portfolio which aims to appeal to a wide range of consumers. The products are designed in house and are sourced by the specialist Next sourcing team. Working with buyers and suppliers to map their supply chain, ensuring that they have a traceable supply china that doesn’t not harm eco-systems and respects human rights. (Next, 2017)

Price

Next prices are mid-range from £10 to £200 plus for clothing and accessories. Prices are matched based on the quality of the product, combined with weather it is classed as basic item or more trend led. The pricing strategy maintained by next is situated between market penetration and marker skimming, focusing on reinforcing the idea of quality and design that is suited to their target customer. This pricing strategy is an important element of the Next retail strategy as it offers their consumer continuity and familiarity as their consumer know what to expect, while maintaining perceptions of quality. Deloitte (2018, p. 6) finds that 53% of department store consumers are expectant of frequent discounts in store and believe that they rarely need to buy products at full price. This is particularly a worry for Next who have become known for their infamous sales. The result of this is that department stores need to rebuild trust, ensuring that value for product is effectively communicated to the customer.

Place

Next operates a multi-channel approach, offering customers the option to purchase products in-store, via their catalogue and through the website and mobile app. Multi-channel customers are more valuable to a retailer (Cuddeford-Jones, 2011), this is because the customer journey does not only exist in the store but is able to continue once the customer has completed their purchase. With the option of browsing further products and re-ordering online, consumers are able to re-establish their brand connection through digital devices. This is more evident with the target consumer (millennials and generation x) as research by Mintel found that those aged 25-35 are most likely to engage with multi-channel retailing, as well as being the demographic most likely to have used a department stores click-and-collect services in the last year. Although online purchasing remains behind in-store within the department store sector (Mintel, 2018, p. 6) research has found that over 35% of UK department store shoppers are now researching online before going into a store to buy a product. Therefore, the ability for consumer to access Next via a range of sources is vital for the retailer to remain relevant and on the same level as its competitors.

Promotion

Next are currently taking advantage of the rise in online marketing, as well as having a dedicated next Blogger Network, they also have their own online blog and regularly create videos for their YouTube channel. This works to their advantage as their target consumer is more likely to trust sources online, specifically influencer marketing as it makes the consumer feel as though the advertisements is more of a recommendation form a friend rather than from a business (Arnold, 2018).

Current Performance

Key Performance Indicators (KPIs) are used to measure the development, performance and position of a business. In march 2018, Next reported a first fall in annual profits after what was described as “the most challenging year” the retailer has endured in 25 years (Elias Jashan, 2018). For its fiscal year ending in January, Next’s operating profit dropped 8.2% and profit before tax dropped 8.1% from £790.2 million in 2017 to £276.1 million in 2018, however this performance was in line with direction from the Christmas trading update. FIGURE  Meanwhile, Next Directory (online and catalogue) sales continue to grow, with full price sales growth almost tripling in 2018 from 3.6% to 11.2% year on year. FIGURE However the overall profit decline was a result of a fall in profit from the bricks-and-mortar retail, which dropped 24% in 2018. However, the physical trading space occupied by Next has increased by 0.6% despite 10 store closure throughout 2017. This demonstrates how Next are focusing more on the value and quality of their stores not just the quantity.

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Implementation Strategy

­Introduction

As one of the biggest retail chains in the UK, operating over 500 stores, this offers a huge potential to take the enhanced consumer experience to the next level with the integration of technology across the Next retail landscape. As a retail group Next is advanced in embracing the technological shifts, as they were the first retailer to introduce online shopping in 1999, therefore development of in-store technology and the integration of digital platforms would fit Next’s strategic direction and enhancing the customer experience at the same time (Chi, 2018, see appendix D). Despite being an established brand with a clear idea of their target customer, the retailer needs to ensure they are embracing the way consumers buying habits are changing, and the market shift from multi-channel retailing to omni-channel, which consumers are expecting from brands more often (Chi, 2018, see appendix D).

The following chapter outlines three forms of digital technologies that, if implemented correctly, would greatly benefit the retail environment and the consumer of Next Plc. Successful implementation of these technologies would drive foot fall into stores, thus increasing sales and profitability. However, it is crucial that when implementing these technologies they are used as an enabler for sales and not just an added on top of the existing retail framework (Benton, 2018). The focus should be on enhancing the consumer experience, providing an element that is not just an extra piece of the consumer journey but is something that adds value and is integrated seamlessly.

The 2018 Global Consumer Insights Survey (PWC, 2018) finds that consumers want in-store digital features; 68% want the ability to check stock availability and 59% want the ability to see and order and extended range of products that may not be available in-store. The survey also finds that for a 4th year in a row, consumers are increasing their shop in the physical store environment.

The consumer is the focus of retailing; it is therefore important to understand how consumers make their buying decisions. Cox and Brittan (2004, p. 78) outline The Buying Process theory as a decision making process, designed to provide solutions to problems. The first stage is the awareness of a need or want; this is followed by an information-processing stage and finally the purchase decision. This strategy focuses on ensuring that the consumer is provided with enough information during the ‘pre-purchase activity’ that feel satisfied, and complete their purchase.

Element 1 – virtual reality mirrors to try on clothing (on the shop floor)

Primary research highlighted that convenience is key for the Next consumer (Appendix C), moreover PwC finds that instead of a practical task, consumers are seeing shopping increasingly as a sensory and social experience (PWC, 2018). Providing consumers with a practical, immersive experience while at the same time proving them with suggestions and solutions is a clear way of establishing trust between the Next and their customer. This is because it shows the customer that Next understands their needs (experiential and convenient shopping) while being able to personalise the experience to their shopping journey with product suggestions. Furthermore, the higher levels of trust a consumer has with a retailer, the higher the likelihood of them sharing their data with that retailer and in a time when data is so powerful this should be a priority for retailers.

Cisco have developed their ‘Style Me’  mirror, which gives customers an interactive and personalised way to try-on clothing and accessories virtually. Cisco Describes the technology as a life-size mirror that overlays the customers image with pictures of clothing they select, using gesture and touch based interfaces (Fretwell, 2011).  The mirror allows shoppers to quickly create outfits and explore the Retailers wide range of garments that may not all be available in-store. The digital mirror adds value by providing customers with expert advice and allowing them to receive feedback about their choices. During testing Cisco found that the benefits of being able to try on clothing and receive advice quickly and efficiently outweighed any apprehension the customer may have about the technology. Furthermore, for millennials it was found that using the mirror made the shopping experience both fun and social (Fretwell, 2011).

The use of digital mirrors proved the retailers with the potential to maximise sales by giving consumers access to products that are not available in-store and increase purchases by offering customers styling options with accessories and being able to show the customer a whole outfit which may encourage them to purchase extra products they may not have thought of originally (Appendix C). The use of the data gained form the mirrors will enable Next to make merchandising and range decisions based on insights of actual customer use, instead of estimations.

For traditional retailers, the challenge is using V.R. to enhance the customer experience so that customers value the in-store experience enough to re-visit the store (PWC, 2018). By integrating the digital mirrors into the shop floor, where traditional mirrors would have existed anyway it provides the customer with a familiar experience in regards to the store layout, but enhances their shopping experience with the interactive and personalised elements.

Element 2 – Intelligent changing rooms

The changing room experience is seen by many as “time-consuming faff” (appendix C). Often customers find themselves not being able to see the garment at its best when trying it on or find they have issues with styling and sizing. The implementation of interactive mirrors into changing rooms gives the consumer the ability to completely personalise their changing room environment, request different sizes and receive styling advice. According to research shoppers who use fitting rooms are almost seven times more likely to make a purchase (Townsend, 2017), so by ensuring that customers have a seamless experience when in the fitting room, sales are highly likely to increase.

Oaklabs have developed a dressing room mirror that addresses the main issues experienced by consumer in changing rooms. The mirror allows the customer to change the lightings, request specific items and general help from a sales associate without having to leave the room and even allows the customer to pay for their purchases via contactless payment (Shape Shift Report , 2017). RFID (Radiofrequency Identification) product recognition alerts the mirror of what garments have been brought into the room, which then are displayed on the screen. From here the customer can navigate the touch screen mirror to select a different size or colour, which will be brought to them by a store employee. This is beneficial for retailers because if the customers can find their perfect fit then they are more likely to purchase the product, moreover when looking at larger sized women and men the act of having to request different sizes can often be embarrassing and uncomfortable. So by providing a platform for them to request this through will improve their customer journey.

Next stores are already operating RFID tags, for the use of scanning products with RFID enabled terminals to increase efficiency in-store (Next , 2018, p. 36). Therefore, developing the technology further for use in changing rooms would be aligned with the way that Next are already implementing technology across their retail landscape.

The use of interactive changing rooms would benefit the customer as it allows the shoppers to receive all the advice they would normally get online, such as styling options for accessories and outfit suggestions for events such as weddings and Christmas parties. However, instead of the consumer having to order the products, wait for them to be delivered and then face the possibility of being disappointed they can instantly try on the suggested outfits while in-store. Emphasising the omni-channel experience, but providing the customer with a solution.

Element 3 – Digital signage on the shop floor to influence consumers and guide purchasing decisions

Predictions show that retailers are set to integrate artificial intelligence (A.I.) as part of their in-store and overall marketing approach in 2018 (DisplayMode, 2018). This could mean that the use of traditional predictive analysis methods will be overtaken by ‘prescriptive’ analysis, meaning that consumer decisions based on intuition and opinion will decline and decisions will be based more on data evidence. Reports show that in the year 2020, over 85% of retail customer interaction will be handled by A.I, thus the implementing the use of A.I. into Next store will enable them to remain relevant in a changing market, and ensure a competitive advantage.

Digital signage how shown to promote engagement in store an encourage customers to take the retail experience with them when they leave the store (Ring, 2015). Digital signage connects with content management systems to allow for quick and seamless updates. Digital signage also works alongside RFID and ultrasound to detect what products customers are picking up off the rails and generate personalised advertisements around styling the garment as well as in-store offers. The customer can then have the information sent to their Next app via a QR code on the screen, which they can access at a later stage. Ensuring a relationship between the retailer and their customer through digital technologies provides a platform for the consumer journey to continue once they have left the store. Cicso (Fretwell, 2011, p. 7) finds that this then allows retailers to increase conversion rates through follow-up marketing, for example, sending customers reminders about items they viewed while they were in-store.

Providing targeted content that has been tailored to the customer preferences will allow Next to meet the personalisation trend among consumers. In a survey by Virtual Incentives (2017) found that 56% of shoppers stated that “their consideration to a brand would improve if they receive personalised incentive”, what’s more is that 54% of consumers are willing to share their shopping preferences and personal information with retailers who offer them personalised incentives (Virtual Incentives, 2017).

Acceptance has been extensively investigated through the Technology Acceptance Model (TAM), which has been developed with the initial purpose to predict Internet usage behaviour, on the base of four main constructs: perceived ease of use, perceived usefulness, attitude, and behavioural intention (Davis, 1989). In particular, perceived ease of use is related to the degree to which a subject believes that using a certain system will not require any effort; perceived usefulness is the degree to which a subject believes that using a certain system will enhance his/her performance; both these constructs have an effect on the attitude that represents subject’ assessment towards the system, and the subsequent behavioural intention TAM has been developed from the Theory of Reasoned Action which states that human behavioural intention may depend on his/her attitude towards a certain behaviour and the subjective norms (expectations of others towards performing a certain behaviour, thus they represent to what extent a subject is influenced by others’ perception of his/her behaviour).

  1. Forget Tech for Tech’s Sake: If the technology is not solving a specific problem, it’s likely not worth your time. Let’s step away from the laser beams and holograms, and think about ROI and solving real problems.
  2. First Things First: If the most basic infrastructure is not there (like, say, wifi!), more complex technology will likely fail.
  3. Launch & Forget: Launch is not the end of the road for innovation, it’s likely a mid-way point. Assess, test, revise, rework… take your learnings and continue investing in the improvement of these experiences.
  4. Empower your Associates: The best technology doesn’t need an instruction manual, and the best tool to encourage engagement and compliance is a well trained staff.

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