Today’s customers are changing. They are less loyal and more unpredictable. They switch among stores and prefer experiences over products. There has been a substantial shift in customer mindset when compared to the past, and appealing to this new group of customers is imperative for retailers to thrive. However, many customers feel that their needs are not satisfied in conventional stores. Only the retailers who have succeeded in evolving and innovating their business are being well accepted.
These three business models show the strongest potential to take the retail industry to the next level:
Sharing Economy
The sharing economy is a model in which products and services are shared so that customers can enjoy the benefits without owning the products or paying the full service fee. In addition, millennials are also shifting focus from product ownership towards product accessibility and utility. To catch up with the new trend without giving up their original business, some retailers have adopted rental services.
Nordstrom, for example, a luxury department store chain, has established a partnership with Rent the Runway, an online platform providing designer dresses and accessory rentals. In the partnership, Nordstrom plays the role of inventory provider to Rent the Runway. The two companies are also launching exclusive designs for sale or rental so that both companies can gain insight on future fashion trends.
Personalization Economy
The personalization economy can be thought of as a ‘surprise me subscription,’ where products are specially arranged based on individual preferences and delivered to the door. Typically, this model works better for retailers that deal with customizable products because those customers highly appreciate the surprise and delight element of the products they purchased. Since customization and personalization drive the success of this model, many retailers are using AI and IoT-enabled technology to lower the cost and increase accuracy in driving personalization.
Adore Me is a subscription-based lingerie brand that started off as an online-only store but later on expanded into a brick-and-mortar store to collect more customer data. Their stores feature high-tech elements that collect, analyze and visualize data about in-store customer engagement. The insights retrieved from the stores is then utilized to customize the selection of lingerie for return customers.
Services Economy
The services economy is also known as a ‘Do-It-For-Me’ economy. Apart from purchasing a basket of products, customers are now also buying services to satisfy another part of their needs. As today’s customers are willing to spend more money for convenience and to save time, the ‘Do-It-Yourself’ trend is dwindling and being replaced by the ‘Do-It-For-Me’ trend. With dramatic changes in customer behavior, retailers need to catch up by taking values such as time and convenience into consideration in addition to product differentiation.
Home Depot is one of the first movers that expanded its customer base by building the Do-It-For-Me customer experience. Home Depot has a long heritage of being regarded as a Do-It-Yourself’ type of retailer when it comes to home improvement: customers would visit Home Depot stores to purchase home improvement items from various choices of materials and tools. However, to cater to the increasing number of customers who want a Do-It-For-Me service, Home Depot has started providing consultation and home installation services.
Cyclops is a retail analytics system that can help retailers generate insights into how their customers shop inside their stores. To understand more about how Cyclops can help retailers digitally transform their stores amid the COVID-19 pandemic, visit our website: https://dayta.ai