Experts explain how the youngest generations are driving retailers to use data analytics technologies that merge in-store with online shopping experiences.
Seller beware: Much of what you learned about millennial shoppers, anyone between the ages of 20-36, will be turned on its head by Generation Z.
Experts say the increasing buying power and technology-shaped behaviors of the up-and-coming Generation Z, now between the ages 5-19, will force radical changes in retail shopping.
These internet-empowered shoppers will drive retailers to seamlessly integrate reality with the digital world, said Jamie Gutfreund, global CMO at Wunderman, a global digital agency that translates consumer data into creative uses.
“Gen Z has grown up with the world in the palm of their hands,” she said.
“They have access to the best prices, the best styles, the best information — nobody gets excited about average. To engage them, a brand has to do so much more than ever before.”
Gutfreund said if retailers don’t connect with Gen Z early, they will struggle to be relevant when the generation comes of age, embarks on careers and starts families.
The first step in meeting Gen Z shoppers on their terms is for brands to stop trying so hard to be noticed, Gutfreund said. Instead, Gen Z wants to be the one getting noticed.
“It’s all flipped,” she said. “It’s about [Gen Z] being noticed by brands, and that’s where data and marketing automation come into play.”
Beyond Selling to Engaging
The stakes are high as the retail industry is expected to change more in the next five years than it has in the past 50, according to Rachel Mushahwar, general manager of Intel’s Americas Sales for Retail, Hospitality, Consumer Packaged Goods. She sees retailers battling against industry consolidation and shrinking foot traffic in stores, which is declining 7 percent year-over-year.
She said many of the world’s largest retailers in 2008 have dropped off today’s top 100 list. To survive and thrive, retailers are using technology to better understand and react to shoppers on their terms.
“Retailers will want help extending their focus from transaction to interaction,” said Mushahwar.
Younger generations are already bridging digital and physical worlds using smartphones, instant messaging and social media. Studies show that on average millennials check their phones 157 times a day, up from 43 times a day in 2014.
Mushahwar said retailers are figuring out how to use technologies to engage customers and build brand affinity, especially with younger shoppers. One example is the use of artificial intelligence tools like chat bots, which help retailers have online text conversations with shoppers. Retailers can use messaging apps or automated services like Kit to help shoppers find exactly what they’re looking for and direct them to the item in the most convenient physical store or via the online commerce app.
Another trend is “conversational commerce,” where shoppers use voice commands on their personal devices – and new in-home smart devices like Amazon’s Alexa – to make purchases online.
“It goes back to, ‘how do I bring retail to where the consumer is?’” Mushahwar said.
In a recent interview with The Wall Street Journal, Carol Tomé, Home Depot’s chief financial officer, said she’s had to adapt to new shopping behaviors. Over 40 percent of online orders are now picked up in stores.
“We spend on technology that drives the interconnected retail experience,” she said.
Real and Digital Shopping Merge
Seamlessly bridging in-store and online experiences is essential, especially for younger shoppers, according to Gutfreund. That’s because video games and social media shape immediacy and quality standards by which young people judge real life experiences.
“Gen Z is the optimization generation because it relies on technology to bring efficiencies to everyday lives,” said Gutfruend.
Retailers that don’t optimize for these connected shoppers are at risk.
Herschel Portnoy, a high school senior from Albany, California, spends around 20 hours per week playing video games and “a lot of time” Snapchatting with friends and family. His part-time job bussing tables allows him to spend around $300 per month on things like clothing and electronics, most of which are purchased online. He doesn’t tolerate mediocre retail experiences.
“If a site takes more than 10 seconds to load, I’m gone,” he said, referring to online shopping sites.
Gutfreund said this is not rebellious behavior.
“It isn’t about [Gen Z] trying to upend society or trying to make a stand,” she said. “Because they are so visually adept and connected, Gen Z shoppers look at efficiency as a necessary brand characteristic.”
Data That Matters
The quantity of data available to retailers today is incomprehensibly vast and growing. Even five years ago, a mega-retailer like Walmart collected an estimated 2.5 petabytes of data every hour.
Mushahwar called existing and new data collected from the use of sensors and connected devices, “the new oil” that powers businesses. This data helps retailers manage their business and create personalize shopping experiences.
“I’m so fascinated with the Internet of Things,” Karenann Terrell, Wal-Mart’s chief information officer, told The Wall Street Journal, describing the use of sensors and connected devices to manage inventory.
“It could make a huge difference operationally and with the improvement of the experience for customers.”
One example Mushawar points to is a collaboration with JDA Software, a company that specializes in retailer inventory management and store associate efficiency. It showed how the Intel Retail Sensor Platform lets sales associates use portable devices or terminals to view real-time merchandise information.
These technologies target retail efficiencies that can improve the bottom line and customer satisfaction.
“When retail employees know where the goods are – on the shelf, risers or in the back room – they can immediately help shoppers find what they’re looking for,” Mushahwar said.
This kind of tracking system can help retailers improve inventory accuracy from the standard 60 percent to more than 95 percent.
“This generates a significant uplift in sales,” she said.
It’s also helping retailers merge physical and digital shopping experiences across mobile devices, PCs, home TVs, wearables, automobile dashboards, screens in public places, including interactive kiosks and point-of-sale screens. By integrating inventory tracking with shopping behavior data, retailers can bring consumers what they want at any given moment.
Focusing on the right data about shoppers is critical, said Gutfreund.
“Seventy-five percent of Gen Z consumers worry about the information brands collect, but they’re willing to share their info if they get something in return, like personalized or super-efficient service,” said Gutfreund.
She said 57 percent of Gen Z shoppers want personalized emails about product offerings and 41 percent want special discounts for regular shoppers.
“That’s the optimization generation in a nutshell,” she said. “The key for retailers is to use data to go from a general persona to an actual person.”