The Consumer is King:
Canadian Retail
Today & Tomorrow

The Retail Council of Canada’s latest report by KPMG pays tribute to the last 50 years in Canadian retail and sheds light on its current and future state. The following post covers the report’s most valuable findings and brings an added layer of opinion from industry experts at PayPal, Canada Post, Magento, and AffiliateTraction. If you are a Canadian retailer looking for insight into the future of the industry, this post is for you.

A BRIEF OVERVIEW

Retail Council of Canada KPMG Report Demac Media
Today, retail is almost synonymous with eCommerce, as online shopping has increased dramatically thanks to Canada’s fondness for consumer technology. Embracing the online world has allowed Canadians not only to shift the balance of power into the hands of the consumer, but consequently transformed the way retailers operate their businesses. Equipped with their smartphones, tablets, and the technological savviness that comes with living alongside these devices, Canadian consumers can compare prices, assess quality, and access product reviews, during their shopping trips to brick-and-mortar stores. For this reason, trends disrupting today’s consumer behaviour are largely centred around knowledge.

CANADIAN RETAIL IS POISED FOR GROWTH

Approximately one out of every eight workers in Canada has a job in the retail industry, which in turn makes up about 6 percent of the country’s economy. By comparison, nearly two out of every eight workers in America work in retail, which accounts for 18 percent of the US’s GDP. Canada’s less saturated market is a primary reason for US-based companies to expand north of their border.

Current projections predict a more modest growth rate of 2.9% versus the ones closer to 4% seen between 2011-2013. Analysts attribute the slower growth rate to Canadian household debt, which now represents 165% of the average Canadian’s disposable income – leaving Canadians more indebted than Americans and Brits.

Canadian retail sales

A RETAIL RENAISSANCE

Despite Canada’s technological adoption and it’s shift towards an environment where the consumer is empowered by knowledge at their fingertips, there always seems be a need for human interaction. Case in point: Ever find yourself mashing the numbers on your smartphone’s dial-pad until the soothing voice of a customer service agent is heard on the other end? Yeah, same here. A little side note while we’re on this topic: Check out this website if you want to get through any company’s automated phone prompts faster.

All of this to say, the current wave of technological advancements in retail has highlighted a lingering desire for genuine human interaction and carved out a niche for the independent retailers who seek to fulfill it. Tech-inclined or averse, what is evident today is that the overarching ideology happens to be consumer-centric.

COMPETITION BREEDS HAPPY CUSTOMERS

The growth of online shopping has permitted new brands to enter Canada and Canadian brands to serve customers abroad. The rise in cross-border shopping has changed the dynamics of Canadian eCommerce, inviting foreign competition and turning the industry into an international affair.

According to the RCC’s report, certain experts anticipate foreign retail to occupy 50% of all Canadian retail space in the future. Despite the likelihood of increased competition, having foreign retailers in Canada will also fuel the economy and help create jobs. This trend will favour consumers most, offering them more choices and better pricing.

6 TECHNOLOGIES TO WATCH OUT FOR

The Consumer is King: Canadian Retail Today and Tormorrow
Technology has not only empowered consumers, allowing them to make informed decisions in real time, but altered the retail landscape as a whole. To adapt, merchants have begun implementing these 6 technological trends:

1. SOCIAL MEDIA

Whether Facebook, Twitter, or Instagram, consumers typically used these platforms to check what products to buy and where to find them. Beyond customer service, retailers have begun using social media to promote and sell their products to its target audience.

2. MOBILITY

Shoppers are increasingly searching for products and buying them on smartphones and tablets. Alexander Peh, head of Market Development at PayPal, brought the facts to support this rising trend, as the popular online payment service is looking to process 1 billion transactions globally on mobile devices alone this year.

PayPal is focused on helping retailers engage more genuinely with consumers. During this process, Alex has been able to witness the prevalence, growth and future implications of mobile devices, anticipating smart watches to fall into the mix and prove themselves as powerful tools for eCommerce.

3. CLOUD COMPUTING

The rise of SaaS (Software as a Service) has become increasingly popular with retailers, as it allows them to efficiently collect, store, and use their data on the cloud. In addition, cloud computing enables retailers to scale their infrastructure and make it accessible anywhere to anyone at a much lower price than traditional software licensing.

4. BIG DATA

The information that consumers generate through their time spent online has led to a large amount of data. Once the information is collected, retailers have been using big data to analyze it. As a result, valuable patterns can be uncovered, offering merchants insight into consumer behaviour and trends, which can then be used to grow their businesses.

5. AUGMENTED REALITY

Location-based augmented reality applications are allowing retailers to add a fourth dimension to their brand experience. A great example of this would be Yelp’s Monocle feature, which allows users to find listed retailers by pointing their smartphones in a store’s general direction, regardless if it’s in plain sight or not.

6. EMBEDDED SYSTEMS

New labelling technologies, such as RFID chips are becoming widespread. Their potential to expedite the shopping process by allowing items to be rung up and paid for seamlessly is of great interest to retailers looking to optimize their customer experience.

NEW TECHNOLOGIES, NEW CONSUMER PRACTICES

New technologies have caused rapid shifts in consumer taste, which have in turn been responsible for today’s shorter product life cycles. Practices like “showrooming” (i.e. when shoppers visit brick-and-mortar stores solely to examine items) have emerged and challenge retailers to effectively cater to millennials. To put the matter into perspective, the RCC reports that one in four Canadians says they now participate in showrooming on at least some of their shopping trips. Concurrently, shoppers are increasingly joining online communities to access recommendations and review additional product information. As a result, 52% of RCC members agree that consumers researching products online before purchasing has had a major impact on their business.

RETAILERS ADAPT: FROM MULTI- TO OMNI-CHANNEL

The Consumer is King: Canadian Retail  Today & Tomorrow
Given today’s broader array of sales channels, transactions can start on a mobile device, take shoppers through a physical store, before ending on a desktop, or any combination thereof. In the past, retail involved selling via two or more channels, typically brick-and-mortar stores, eCommerce, and direct mail or catalogue. This practice is known as multi-channel retail. Each channel is treated independently, and as a result is often inconsistent with one another. In-store and online inventories don’t always match, promotions lack consistency and pricing can differ. By consequence, a brand’s personality and message stands a chance of being diluted.

The advent of mobile commerce and social media has made this point clear, as today’s breed of outspoken consumers have demanded coherence across all sales channels. This evolution in consumer behaviour has prompted a shift towards the omni-channel paradigm, which offers a more optimal shopping experience thanks to a seamless relationship between a brand’s sales channels. Omni-channel stands as a testament to the consumer-centric state of retail today, where technology and the consumer interest into what is known as the “converged lifestyle.” 

Omn-shopper cycle

Ian Francis, CRO and Managing Director of AffiliateTraction, explains that for those who made the omni-channel push, two things are apparent. Firstly, retailers are observing a surge in revenue with very little increase to their marketing spend, as omni-channel retail can increase the number of touch points with customers. As an example, shoppers can start online, purchase a product for in-store pick-up, only to make a secondary purchase when visiting the brick-and-mortar store. Secondly, retailers who integrated omni-channel are able appeal to the consumers’ demand for immediate gratification, instilling an improved perception of the brand and overall satisfaction during the transaction process.
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Despite current trends and paradigms being evident, there isn’t a “one-size-fits-all” category when it comes to shopping preferences. Consider this unlikely fact as an example: 90% of Canadian shoppers consider flyers their top source of ideas for shopping trips. That said, the goal for retailers is to remain as customer relevant as possible.

Adapting to your customers by anticipating their needs is the first step in doing well within the omni-channel environment. It will help set the groundwork for good service and ensure shoppers are informed about important sales events, receive efficient fulfilment, and benefit from flexible return policies. Despite the shift of power to the consumer, technological opportunities are equally present for retailers. By leveraging social media, in-store technologies, and the extensive data that comes from interactions with consumers, retailers have the tools to stay ahead of the curve. Overcoming omni-channel challenges can also be addressed by strengthening ties with manufacturers and brand owners to provide a more effective fulfillment infrastructure.

THE FUTURE OF RETAIL

VALUE & LUXURY BRANDS WILL THRIVE

Growing household debt and economic uncertainty has driven the focus towards cost and value. The RCC report predicts that value brands will thrive and so will high-end ones, leaving middle market labels to feel the most pressure. Why does this matter? It could force out players or create opportunities for those looking to dominate these market segments. Otherwise, shoppers will have less time to spare and become more self-focused, demanding the same efficiency from retailers. To maximize their experience, consumers will shop high and low-end retailers during the same outing and will increasingly want access to information simultaneously. This is precisely why retailers who integrate new technologies will find themselves one step ahead of their competition and able to reap the first-mover advantage.

OMNI-CHANNEL IS HERE TO STAY

Canada Post’s eCommerce Partnership Development Manager, Aurelien Leftick, expects retail channels to harmonize and complement one another. Retailers will come to understand which channels work best for what products, in an effort to optimize their sales potential. As an example, mobile devices will have their own strengths and limitations, allowing certain products to sell better on smartphones and tablets. Think toothpaste or other quick purchases that don’t need a lot of customization on the buyer’s end. Whereas purchasing clothing or computers, which inherently require picking colours, sizes, and other components, is more effective on a desktop.

With time, channels will also evolve, providing more opportunities to retailers. As an example, Twitter’s “Buy” button could become an ideal platform for quick purchases.

SELF-SERVICE AND SMART TECHNOLOGIES

In stores, vending machines will sell items beyond snacks and drinks. From luxury items to basic goods, these dispensers will offer an efficient alternative to the on-the-run shopper. Meanwhile at home, smart appliances will allow you to determine which repeat, but low-interest purchases will need to be made. Light bulbs running low? Your home will place an order so new ones arrive before your current ones go out.

6 TRENDS TO LOOK OUT FOR

The Consumer is King: Canadian Retail  Today & Tomorrow

1. Cashless Payments

Near field communication and web enabled smartphones are becoming a subject of great interest, especially when speaking about tomorrow’s payment systems. Until we become completely cash and card-less, the next few years call for the widespread implementation of the EMV (Europay MasterCard, Visa) Smartcard Payment System. According to eBay Enterprise/Magento‘s Head of Partner Marketing, Jeff Herrera, the accelerated adoption of EMV enabled cards by October 2015, will certainly aid retailers in their fight against fraud. Bolstering eCommerce business security will be an equally big topic going forward, as the introduction of payment tokenization will diminish merchant PCI compliance, alleviating related costs and the potential liability that goes with storing sensitive payment information.

2. Digitally Supported Activities

Whether it be IKEA’s MÄNLAND or the implementation of virtual fitting rooms and mobile apps that could mimic the feel of fabric, technological interaction within retail spaces is highly anticipated. The future of digitally supported activities intersects the gamification of retail, offering consumers playful and game-like mechanisms in products and services to stimulate their interaction with brands.

3. Aversion to Marketing

People will still dislike getting sandbagged with ads and will become increasingly adept at recognizing them. This begs the question: how effective will tomorrow’s marketing be? What methods, beyond today’s more novel methods (ie. content marketing, native advertising and experiential campaigns) will consumers respond better to? One thing is certain, as consumers get smarter, marketers will have to as well.

4. Temporary Ownership

As seen with companies like Zipcar and Bike Share, the growth of the rent-borrow-exchange-recycle business model is evident. Airbnb is also a great example, as it has allowed countless homeowners to easily commodify and promote their property on its popular platform.

5. Polarization of Loyalty

Embracing consumers’ commitment issues with friction-free loyalty programs will be the next challenge for retailers. Today, we already can already sense the direction these programs are going in with apps like Snap that offer rewards every time you snap a pick of a grocery item you purchased.

6. Informality

The dialogue between consumers and brands has become increasingly more open and informal. What kind of relationship will there be between brands and consumers? How will retailers speak to their customers? Will they interact with customers as friends and do spontaneously surprise them with perks and rewards? Maybe as partners, in an effort to work towards a common goal or possibly share a stake in their venture under an equity crowdfunding platform?

CONCLUSION

The Consumer is King: Canadian Retail  Today & Tomorrow
Despite Canadian household debt and contending economical factors, Canadian retail and its converging eCommerce space are set for growth. Thanks to an avid interest in consumer technology, Canadian shoppers are becoming increasingly knowledgeable and demanding of retailers. As a result, the market has evolved form a product-centric to a consumer-centric ideology, where good service is noticed and rewarded. Scalability and barriers to entry are less of a challenge than before thanks to the rise of accessible and user-friendly eCommerce solutions. Incited by a consumer-driven shift from multi- to omni-channel, brands are lending an attentive ear to consumers and crossing borders to offer them more choice in an increasingly competitive and technologically-inclined marketplace.