What Sephora did on smartphone to transform its brick and mortar retail

When we think about how smartphones have changed the retail landscape, it often revolves around how e-commerce is banishing traditional brick-and-mortar establishments to obsolescence. At least, that’s what you would gather from sensational news reports about the current mall crisis in US and the shutdown of several stores locally such as book store, Page One and fashion brand, A&F.

Here’s a story that’s less newsworthy, but equally true.

Rather than being the harbinger of doom and gloom of physical retailers, the smartphone also has enormous potential to transform physical retail for the better. The smartphone has made shopping a breeze with apps for fashion, groceries, electronics and food, with the likes of Zalora, HKTV Mall, Price.com.hk and Foodpanda.

If implemented effectively as part of an omnichannel marketing strategy, smartphones could somewhat ironically be the key to survival for physical retail outlets.

For the uninitiated, the idea of omnichannel marketing is simple. Brands need to provide customers with a seamless experience, regardless of channel or device. Whether it’s in-store, online, via social media or through a smartphone app, the consumer’s experience should be consistent and complementary.

A one-size fits all approach does not work though as shoppers behave differently by country. That’s why it’s essential for retailers to have market research intelligence on shopper needs and behaviour, to tailor retail strategies for the local market.

45% of all shopping is influenced by mobile

In GfK's 2016 Connected Consumers Report, we referred to the smartphone as the ‘hub of the consumer's’ life’ – a nexus where their offline lives meet their digital ones.

Smartphones are the top choice for online shopping (it used to be the desktop) as they give shoppers numerous benefits and convenience. GfK’s research shows that 45% of all shopping is influenced by mobile, and without having to enter the physical stores, shoppers can avoid queues, order ahead and enjoy customised offers.

Smartphones are also beneficial for e-commerce sites that want to move offline, for example Amazon - which has recently been making headlines for opening seven bookstores and two grocery stores. Amazon has been using mobile technology to track customer preferences and sales, and enabling shoppers to grab groceries and walk out of the store as the order gets posted to the shopper’s Amazon account later. Closer to home, we’ve seen homegrown brands like fashion store Novelty Lane, dessert shop LamLamLi and restaurant BE JUICED+BAR extend their online presence offline to the physical world.

let customers step through the door, let mobile seal the deal

In our global GfK survey on consumers’ activities with mobile phones in stores, we found that globally, 40% of shoppers use their smartphones while in a physical store to compare prices and contact a friend for advice while 23% and 22% buy products through an app or through a website respectively, proving that once customers step through the door, even more can be done to seal the deal.

Beauty retailer Sephora for example, has successfully used augmented reality and lip-mapping technology in it’s app - Sephora Virtual Artist, to instantly and effortlessly help users figure out which of 3,000 lipsticks shades suits them most – a typically time consuming task.

Shopping malls such as Langham Place and apm have been experimenting with proximity marketing and mobile location analytics to reach out to shoppers who are surfing nearby, in a more targeted manner while showcasing offerings effectively. Through proximity alerts, patrons are able to enjoy exclusive deals, purchase and redeem their items immediately.

Winning consumers with customised mobile services

One of the most valuable resource of a smartphone, is that it can provide retailers with information, which is key to capturing brand loyalty – a trait that today’s spoilt-for-choice connected consumers are lacking.

Brands can leverage customer data and point-of-sales (POS) analytics to offer more personalised services such as customised offers. In turn, this presents an opportunity to generate long-term relationships.

Manulife, a leading insurance company, has launched a rewarding program for its members called ManulifeMOVE in Hong Kong. Based on the amount of sports activities tracked by a smartwatch, the program offers participants up to 10% premium discounts on eligible insurance plans when they renew their membership.

Starbucks too, has seen massive success in the past six years by taking its popular loyalty program to the mobile platform, resulting in higher sales, customer loyalty and foot traffic. Last year, 25 percent of the chain's transactions in the United States were from a smartphone.

Mobile Order & Pay, the company's mobile order-ahead service has been lauded for providing convenience, but the code behind it – the data-driven algorithm to predict, personalise and recommend individual offerings at checkout shouldn’t be understated either as it’s a data-driven Artificial Intelligence (AI) algorithm based on consumers’ preferences and behaviour; and behaviours that Starbucks is trying to drive.

In the age of the connected consumer, omnichannel shopping is becoming the new normal. Therefore, understanding the shopper’s purchase journey is crucial – and this is one of the toughest challenges faced by retailers today. However, armed with research insights on the route shoppers take when making a purchase, ways in which different online and offline touchpoints influence their purchase decision, and the type of media they are exposed to; retailers can optimise their omnichannel strategy.

Contributions: Karthik Venkatakrishnan, regional director, GfK Asia