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7/31/2019 Future of Retail Digital Natives White Paper Sept 11
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An Oracle White Paper
September 2011
The Future of Retail:Through the Eyes of Digital Natives
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Introduction ........................................................................................... 1Survey Overview ................................................................................... 2Analysis of Key Findings ....................................................................... 3Key Findings ......................................................................................... 3
The role of stores remains an important element of the shopping experiencefor young consumers today and will continue to be in the future..... 3Price is the most important element of the shopping experience for digitalnatives ............................................................................................... 4If price is the primary motivator, product range is second ............... 5Despite the growth and importance of social networking, using these networksfor purchasing is relatively rare......................................................... 6
Methodology.......................................................................................... 7Conclusion ............................................................................................ 7
Differentiated and personalised customer interactions .................... 7Differentiated products, pricing and services based on their preferences.......................................................................................................... 7Differentiated interactions based on how and when they want to interact
.......................................................................................................... 7A seamless, connected experience where the retailer is aligned across allbusiness operations and decisions: ................................................. 8
Appendices ........................................................................................... 9
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Introduction
Digital Natives...are all native speakers of the digital language of computers, videos games
and the internet. - Marc Prensky, Digital Natives, Digital Immigrant (2001)
By 2025 the first generation digital natives - those reared on all pervasive technologies will be
the most connected retail consumers yet. Combining high digital literacy with immediate
access to all their favourite and most valued retailers, digital natives will be some of the most
powerful consumers the world has ever known.
Born in the digital age of the 1980s onwards, digital natives adoption of technology is
instinctive and easy. This generation is used to immediate results, thrives on instant
gratification and frequent rewards. They can effortlessly multi-task and function best when
networked. Although environmental factors like reaching economic maturity during a recession
and the issues of online security and identity theft become a reality, their consumerism is
unquestionable.
Digital Natives are as familiar gathering in malls and shopping centres with their friends, as
they are with using the internet to shop. The growth of online shopping is rapid and ongoing
but digital natives can also be seen queuing for hours to get hold of the latest product
phenomena or regularly visiting their favourite stores to purchase the latest outfit or accessory.
Recent figures (from Verdict Research) calculate that the age group 15-24 years contributed
10.8% of the global consumer spend in 2010. Of the $14 trillion spent on global retail,
approximately $1.5 trillion came from this group, and combined with the age group 0-14 years,
digital natives contributed almost 20% of the global retail spend.
So what does this mean for retailers? What should retailers be doing to meet the expectations
of digital natives now and in the future when this generation really hit their buying potential?
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Survey Overview
In July 2011, in an attempt to understand this group for the first time and inform tomorrows
retail strategies, Oracle commissioned a survey to examine the attitudes of digital native
consumers between the ages of 19 and 23, to current shopping needs - both in store and
online - and their expectations of these needs in the future. The study asked digital natives in
three European countries: the UK, Germany and France, about the role of retail in their lives,how they use technology and channels when shopping, the importance of new media in the
shopping experience, and how they feel retailers, technology and stores must adapt to best
support this group moving forward.
The goal was to identify how this current generation interacts with retail today, the role of
technology in facilitating these interactions and how they perceive this will change by 2025.
Specific topics covered by the first part of the survey included the following:
The role shopping plays in the lives of digital natives today
How this group use multi-channels and retail technologies
How digital natives want to interact with retailers
The importance of price, choice, service, stores, advertising and personalisation
The role of social media and mobile phones in the shopping experience
The second part of the survey revealed digital natives perceptions and expectations of their
retail environment in the year 2025 exploring:
Time pressures that will effect store and channel choices in 2025
The factors that might contribute to stores dying out
The role of technology in making retail businesses successful
Those retailers digital natives expect to develop well with technology
The results of this research are presented in this white paper, along with the critical findings
that will enable retail organisations to market their products and services more effectively today
and inform their plans for the future.
Digital Natives...are all native speakers of the digital language of computers, videos
games and the internet. - Marc Prensky, Digital Natives, Digital Immigrant (2001)
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Analysis of Key Findings
Contributed by Daniele Pederzoli, Professor of Marketing at Rouen Business Schooland member of the Research Centre in Consumer, Retail & Supply Chain Management
The results of this study concerning young consumers in the three biggest consumer marketsin Europe are very interesting, not only because they allow us to analyse the future of retail,but also because it shows relevant differences in shopping habits among the three countries.
One important result is that all retailers should operate a cross-channel presence now, but thiswill be critical in 2025. The cross-channel presence helps retailers to build a strong brandawareness and reputation, creating a clear differentiation and allowing them to extendrelationships with their customers. Social networks, even if they remain predominantly aboutsocialising, are an essential part of this relationship strategy for retailers.
The function of shopping as a leisure and entertainment activity is clearly confirmed by thisstudy, but in this field too we can find relevant differences among countries. Brick and mortarand online retailers should carefully consider this leisure dimension of shopping in theconception and design of their physical stores and the construction of online sites. Stores mustprovide the customer not only with range, value and services, but also with a shoppingexperience.
Another result of this study clearly shows that consumers like technology, but they wanttechnology to be user friendly and convenient. The role of technology should be to helpconsumers to find and buy products at both brick and mortar and online retailers; and thisresearch reveals some online retailers have built a strong reputation in this field, especially forBritish and German consumers.
Key Findings
The Future of Retail: Through the Eyes of Digital Natives survey results reveals the following:
The role of stores remains an important element of the shopping experience foryoung consumers today and will continue to be in the future
For the digital natives group, shopping is a leisure activity and a form of entertainment, seen as
both relaxing and a means of socialising with friends. French respondents most strongly
identify with shopping as a leisure experience (69% to the UKs 64%) and as a way to relax
(59% compared to 39% in Germany) (Figure 1). The role of stores in the shopping experience
is still important, exceeding preferences to shop online, with 92% of French respondents
topping the list of those preferring to shop in store over other channels.
Although respondents of all three nationalities use multiple retail channels vociferously,
researching products and getting the best deal is a natural extension of internet search
behaviour that this group has been reared on. German respondents are the most internet
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savvy with 81% choosing to shop online (Figure 2). This result can only serve to strengthen
demand for an always-on approach to retailing. If consumers are using a mix of store and
online channels to search, compare and buy products at a time that is convenient to them,
then retailers must ensure that their businesses operate in a 24/7 environment. The shopping
experience must become seamless across channels.
When it comes to online retailers and their use of technologies to support the search and
purchase process, it was perhaps unsurprising to see global pure-play retailers heading the
pack, particularly in the UK and Germany, while in France the preference is for local online
retailers. When it comes to fashion, a more equal mix of multi-channel and pure-play retailers
dominate the online world of this group.
While technology is important to the experiences of young consumers online, the survey also
revealed that technology is equally important in the store. FNAC, Media Markt, H&M, Tesco
and Ikea were all listed as retailers considered to have the best technologies and the use of
technology in the store environment differs by geography. French and German respondents
are most likely to use in-store promotions technologies, with over two thirds of French
consumers using in-store technology for coupons, loyalty programmes and promotions (Figure
3). More recent innovations like QR codes and electronic shelf labels have yet to be
wholeheartedly accepted by this generation with generally less than 10% usage across
nationalities.
To this end, technology would appear to expedite the shopping experience. If consumers can
find information on product, price and promotions from their mobile phones or information
kiosks within the store, then retailers must take responsibility for optimizing their operations
and delivering an experience in store that is fit for purpose whether that be through improved
efficiency, better product availability or empowering sales associates to facilitate sales.
These results suggest that as retailers develop their multi-channel capabilities, it is important
not to de-emphasise the store environment and the role of technology within it as a key
facilitator of the shopping experience. Although pure-play retailers can remain focused on
selling extensive ranges of goods, multi-channel retailers need to focus on providing a
seamless connected experience across channels to support stores and drive their businesses
forward.
Price is the most important element of the shopping experience for digitalnatives
This group of young consumers has financially come of age during a period of economic
downturn. How much this has affected the importance of pricing in their minds is unclear butfor them, price remains a critical component of any shopping experience (Figure 4). This group
claims to be more financially independent with generally less than a fifth relying solely on their
parents for income support. 51% of UK and nearly half of French respondents have little or no
financial help from their families describing themselves as financially independent. This
independence is perhaps backed up by the importance these consumers place on pricing. It
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also may explain why the top five retailers visited across Europe were all grocery retailers
Tesco, Carrefour, Auchan, Aldi and Lidl.
That said, the survey revealed considerable differences in the use of channels and in
particular, online channels to research products for purchase (Figure 5). 46% of youngGerman consumers use the internet for this purpose, compared to only 31% in the UK and
only a fifth of French respondents search for the best deal online before visiting a store to buy
the product. Digital natives in Germany are most engaged by the products from their favourite
retailers (Figure 6), while the French are motivated by a combination of best price, product and
choice. British respondents are more driven by pricing, and uniquely, are more motivated by
seasonal sales, something of little importance to other regions.
While this group is currently focused on price, looking forward to 2025 and they see service as
becoming a more important factor in the shopping experience as they mature. Two thirds of
French and British consumers believe that online security and identity theft fears will still be a
major concern in 2025 while only 40% of German respondents felt they will not be concerned
about these threats.
As stated previously, stores remain important in the shopping experience of the future, with
around 40% of all respondents estimating they will spend the same amount of time in stores as
they do today, while only a third of Germans believe they will spend more time shopping
online. Product price and range are perceived to be the main factors influencing the choice of
outlet, while the most important purchasing criteria in 2025 is thought to be price and
promotions (Figure 7).
Over three quarters of consumers can envisage purchasing directly from manufacturers in the
future to save money, stated by more than two-thirds of respondents. Around 10% felt that this
would give them a closer relationship to a particular brand and give them more immediate
access to products. To remain competitive, retailers must customise their offering better. It
suggests that consumers believe that retail in 2025 will become just as much about price, as it
is about assortment, range and product information and that retailers need to focus on these
elements in order to interact more effectively with customers. This type of actionable insight
can help retailers make smarter decisions around merchandise, planning, supply chain
management and marketing.
If price is the primary motivator, product range is second
The survey asked respondents to consider purchasing a pair of trainers from universally well-
known, aspirational, quality brand favoured by both genders (Figure 8). The goal was to
establish whether this group would buy this item in an outlet that offered multiple brands;purchase on a website that offered multiple brands; buy from the particular brands store; or to
purchase on that brands website, which provides options forpersonalisation and
customisation of the product.
Overwhelmingly, feedback from the majority of respondents was that consumers would choose
to go and try the item on in an environment that carried multiple brands and a wide range and
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assortment of goods. The second most popular choice was to visit the brands own store.
Around one fifth of German and British respondents would prefer to purchase the item from an
online site with multiple brands, while 72% of French consumers would much prefer to try on
different brands in the store, compared to only half of UK consumers and 56% in Germany. As
weve demonstrated above, the results suggest that brand is less important than price, range
and assortment to this generation.
Reinforcing the message that the store maintains the magic for this group, it is still perceived to
be the place to purchase items, providing the price is right. Interestingly, retailers should
consider that this is the group that has grown up with the breadth of range offered by the likes
of Amazon and therefore, they enjoy a broad product assortment. For retailers, the challenge
is in balancing assortment expectations with physical space in store and profitably managing
inventory holding costs on slower moving lines. Technology, yet again holds the key to helping
retailers to manage these challenges and better optimize their operations by delivering real-
time visibility to inventory throughout the process, from planning to the point-of-service.
Despite the growth and importance of social networking, using these networksfor purchasing is relatively rare
While shopping is a social activity in that it is a way of spending time with friends, the survey
revealed that only 15% currently purchase through their social networks. Today, social
networking is for socialising with friends, particularly in the UK with 82% respondents
confirming this is their purpose for using social media (Figure 9). UK digital natives discuss
products, trends and gossip on social networks, sharing information and opinions but continue
to purchase goods in a relatively traditional way. At least half of consumers share product
information with friends but fewer than a fifth of them do so regularly. And despite the old
adage that bad news travels faster, twice as many respondents admitted to sharing positive
experiences more than negative experiences (Figure 10).
While the UK sees more communication between young consumers and retailers through
social networks, email is the preferred communication channel between stores and
consumers, though French respondents are open to being contacted by text message (Figure
11). Only a small percentage use mobiles to purchase goods currently.
Only half of respondents are receiving or responding to personalised promotions today, and
merely a fifth feel that personalised recommendations are generally useful, although more than
half indicated that they are sometimes useful (Figure 12). These responses suggest that
consumers are not yet receiving that personalized experience at every touch point, which
raises questions about what retailers are missing when it comes to personalisation of offers?
Do retailers simply not have the actionable insight on customers to make and execute
decisions to target offers and communications, and to give consumers better visibility to store
inventory and order information?
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Methodology
Responses to the Future of Retail Through the Eyes of the Digital Natives survey were
generated from 1,514 European consumers aged between 19 and 23. The survey was
conducted using Redshift Research in July 2011 using its online consumer panel. The study
compiled online responses from 506 respondents in the UK, 503 in Germany and 505 in
France.
Conclusion
The findings of this survey reveal that the expectations of the digital natives generation are that
shopping experiences should offer:
Differentiated and personalised customer interactions
Each consumer is an individual with their own requirements, preferences and opinions.
Retailers can no longer offer a one size fits all approach and expect consumers to accept this.
In a highly competitive retail environment, consumers can choose where to shop. So retailers
must interact with their customers in the way the customer chooses. The findings suggest that
technology plays a key role in helping to deliver that differentiated customer experience
whether by using in-store technologies for coupons, loyalty programmes and promotions or in
ability to compare similar items from several retailers on a mobile. And the relationship
between technology and customer satisfaction can only become stronger as the technology
used become more personalised, intuitive and insightful.
Differentiated products, pricing and services based on their preferences
This generation of consumers has shifted from the mass consumption of the early 21st
century. They are making choices based on quality, price and differentiation and are
considering each purchase more carefully than ever before. This group researches and
evaluates products, considering a number of factors including price, range, brand, channel etc
before making purchasing decisions. While retailers may not necessarily be getting
personalised promotions and interactions quite right yet, if they can gain actionable insight into
how their customers make and execute purchasing decisions, the technology is available to
better interact with customers through targeted offerings.
Differentiated interactions based on how and when they want to interact
The continued growth in online retailing is nothing new but it is the way in which retailers must
now operate, providing an anytime retailing shopping experience that has changed. Anytime
time retailing is always on, enabling the consumer to browse, evaluate and purchase goods
through the channel that is convenient to them and at a time that is convenient to them. By
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aligning every aspect of their business to gain efficiencies and economies, retailers can
optimise their operations and work in support of customer priorities. For some, it might be
crucial that the latest dress be bought and delivered within 24 hours. For others, priorities may
lie with transparency of pricing and ranges across channels. Whatever a customers focus,
retailers must be fit for purpose and able to understand their product and how it is consumed.
A seamless, connected experience where the retailer is aligned across allbusiness operations and decisions
The growth in online, not only as a channel in its own right, but also in the influence online
activity has in driving sales in retail outlets, means that retailers must offer a consistent
shopping experience. The provision of a cross-channel retail model is no longer enough
digital natives in particular are now blending retail touch points. Customers can be in-store
comparing the pricing of retail competitors on their handheld devices or they can check product
ratings online before they purchase a product. It has become even more vital that retailers
transcend individual channels to ensure that each customer interaction and touch point isconnected seamlessly, providing that consistent, quality shopping experience.
To drive and maintain growth in this complex and changing retail landscape, retailers need to
provide the superior experiences that customers are demanding and align these with smarter
decisions and processes. Through its offering of a complete, open, and integrated combination
of software applications, technology infrastructure, hardware and industry expertise, Oracle
supplements retailers strategies and expertise with the tools to create an experience platform.
Tuned to each retailers specific business and growth objectives, this experience platform
enables retailers to:
provide actionable insight to make smarter decisions in planning, forecasting,
merchandising, supply chain management and marketing etc;
optimise operations to gain efficiencies and economies, align KPIs to eliminate
strategic conflicts, and focus on customers;
connect customer interactions across all channels and touch points, and every
customer lifecycle phase to provide a differentiated customer experience that meets
consumers needs and expectations.
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Appendices
Figure 1. Question: What role does shopping play in your life?
Figure 2. Question: How do you prefer to shop?
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Figure 3. Question: Which of these retail technologies do you currently use?
Figure 4. Question: What is it you like about shops?
75%
66% 62%
46%
38%
25%
36%
49%
40%
18%
79%
86%
76%
42%46% 48%
26%
35%
22% 23%
77% 77% 76%
42%
26%
32%
42%
17%
36%
30%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Price Products Choice Onlineoffers
The way thestores look
and feel
Speed I canbuy things
Salespromotions
e.g. BOGOF
Seasonalsales
Brandimage
Loyaltyschemes
UK
Germany
France
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Figure 5. Question: When you look at retailers online, are you most likely to be?
Figure 6. Question: Why can you see yourself shopping at particular stores in the future?
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Figure 7. Question: In 2025 which of the following will most impact your purchasing choices?
Figure 8. Question: If you were buying trainers from a brand like Nike, would you prefer to?
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Figure 9. Question: What role does social networking play in your life?
Figure 10. Question: Do you ever share information about products or promotions with your friends via email, text or
social networks?
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Figure 11. Question: How do you prefer retailers to contact you?
Figure 12. Question: Do you find personalized recommendations from retailers useful?
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Digital Natives
September 2011
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