The retail industry is in a state of constant competition to gain customers and build loyalty. With threats like Amazon, grabbing customers’ attention has never been more important and, in some cases, necessary to survival. As shopper expectations change, and digital continues to evolve online and infiltrate brick-and-mortar, customers are expecting more experiential and service-based shopping from retailers.
The rise of this consumer movement can be attributed to a number of integrated forces. According to data collected by the U.S. Census Bureau’s American Community Survey, the exponential growth of the on-demand economy is estimated to reach $57.6 billion by the end of 2017 in the U.S. alone. Additionally, millennials are more likely to spend money on experiences rather than objects, according to research conducted by Harris and Eventbrite. More directly, there’s the pressing need for retailers to differentiate from the rise of the global generalists, who now own more than 50 percent of global sales, according to a recent report.
As such, it comes as no surprise that retailers are exploring strategies to develop a share of both the on-demand and experiential wallets.
We’ve seen plenty of retailers seek to differentiate themselves by offering new services and experiences — including Nike’s NYC immersive experience with a basketball court and treadmills to track running patterns and strides, Sephora’s in-store makeover service, and even Casper’s Dreamery, where customers can take a 45-minute nap for $25. So how can retailers get started with this growing trend?
The wrap-around service
Ultimately, services are being introduced across verticals to directly increase product sales, for both first time and repeat purchases. IKEA’s acquisition of TaskRabbit in 2017 was an unspoken admission that few enjoy battling through the construction of yet another Billy or Hemnes. Rather than shy away from a perceived customer negative however, IKEA addressed it head on and in doing so, created an opportunity to eradicate a barrier to purchase and potentially deliver a new incremental revenue stream.
To be a category-leader is to make the most of your superior knowledge of your specialism. Helping customers to better select, use and maintain the products you desire to sell is a key defensive strategy in the battle with online generalists.
Increased brand relevance
Upon recognizing the extreme passion for adventure amongst its customers, lifestyle camping and outdoor retailer REI decided to take things one step further by organizing REI Adventures. These outdoor adventures and treks give brand-loyal customers the opportunity to explore different parts of the world, led by experienced REI guides.
To become part of the customer conversation outside of the narrow buying window has long been the holy grail for marketers short on relevance. As more and more retailers rally around the “one-stop shop” strategy, services will be an ever-more-popular tool to extend relevance.
New revenue streams
Many brands are finding success in leveraging their existing reputation and product range to add new, related service lines into their mix, including Amazon. Amazon is utilizing its marketplace setup to quickly acquire a scale of service providers for consumers to progressively rate. The company is banking on the strength of its brand to drive trial of the new service. Time will tell if this proves to be a notable revenue stream.
But not only is the service itself an additional revenue stream, it can also convince customers to spend more time, and money, in the store. For REI, the customers who participate in one of the retailer’s adventures will likely need new gear and they will turn to REI for a full-circle experience.
A new service delivery model
Take a global view of the leading players in the delivery of services online and you’ll see a consistent trend — they typically do not ‘own’ nor directly provide the inventory of services they sell. Whether Uber with taxis or Airbnb with hotel rooms — high-growth companies utilize third parties to offer services and build a better customer experience. Retailers struggling to stand out should consider this approach and provide unique services that will keep customers coming back for a great, all-in-one experience. Welcome to the services revolution.
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