Retailer/Customer Relationships: What Retail 2012 Can Learn From Retail 1912

Mary walks into her favorite store on her way home from lunch with a few friends. Upon entering the store she’s greeted by name by the shopkeeper and asked how she liked her purchases from two weeks ago. She’s also told that more of her favorite items just arrived and the shopkeeper set aside some of the items just in case she wants them, which she does. After looking around the store for a bit, Mary decides what she wants. When buying the items, the shopkeeper asks if she wants her items delivered and if she wants them charged to her account on file. Without producing a wallet or ID to pay for the items, Mary leaves the store with her two shopping bags in tow and heads home.

Ironically, this isn’t some far-fetched futuristic view of the ideal shopping experience, but rather how things were routinely done about 100 years ago when shopping transitioned from weekly marketplace visits to more frequent visits to storefronts on Main Street. It’s also the experience that everyone in the retail sector — large or small — should be aggressively trying to emulate. Using IP-enabled devices like smartphones is helping consumers make this goal a reality.

Think about it: A century ago, shopkeepers and customers actually knew each other by name since their visits were frequent. Loyalty wasn’t a function of points, deals or discounts, but of service. Relationships were built on trust. Merchants knew their customers’ likes and dislikes and strived to deliver on those preferences. Putting purchases “on account” was done in part because some payments were done via barter and some were handled by the “man of the house,” who settled the account at a later time.

As dreamy as it sounds, shopping then wasn’t perfect by any means. Goods, by and large, were kept behind stores’ counters and required shopkeepers to retrieve them one at a time. Items were bought and stored in bulk, which meant that some items had to be both weighed and wrapped. That made shopping a time-consuming activity. Product selections weren’t plentiful even though merchants tried to stock what their customers wanted. In spite of these drawbacks, what defined this retail experience more than anything was the connection between customers and merchants. It was intensely personal. After all, many were on a first-name basis.

Fast-forward about 75 years and just about everything had changed. People still went shopping, but they visited gigantic malls and cavernous supermarkets where the name of the game was choice, selection and service, but of a different sort. Goods and services were on display in aisles or on racks for consumers to touch and smell and sometimes even sample before they purchased. Consumers served themselves, loading their basket or shopping bag with the goodies they wanted to buy.

Checkout still happened at the counter, but the transaction was largely impersonal between a cashier and a customer who’d already decided what she wanted to purchase. The cashier simply “rang up” the transaction. Still, customers seemed happy to trade personal service for the liberating experience of being independent while in a buying mode.

Retailers seemed just as happy with the trade-off too, as they could serve, or more appropriately enable the service of many more consumers. This transition also allowed retailers to preserve even more of their already razor-thin margins. What defined this retail experience more than anything else was efficiency. What does all of this have to do with retail in 2012 and beyond? Well, just about everything.

Creating a Modern-Day Personal Retail Relationship
What consumers lost when modern-day retailers turned their attention to efficiency is the personal relationship that’s always been at the core of the retail experience. That’s exactly what merchants — large and small — are working vigorously to reclaim 100 years later. That means anticipating what their customers want, letting them know when it’s available for them to buy and providing them with information about that product as they’re making their buying decision. It also means creating a relationship with a consumer that’s far more personal than an email announcement of a sale or deal.

There are zillions of companies circling around this multitrillion dollar retail industry eager to help merchants recreate and modernize the shopping experience of 100 years ago. Some have focused on ways to make shopping more efficient. For example, players like Price Check, Product Graph and AisleBuyer enable merchants to offer price and inventory checks on items in-store, provide product reviews and information, and even enable checkout in the aisle. Other vendors enable retailers to offer coupons or similar schemes to drive consumers into stores to make purchases and begin a relationship (e.g., ordering online and picking up in-store).

Groupon and LivingSocial are the grandfathers of these schemes, relying largely on email to drive foot traffic to local merchants. Apps like shopkick, Scoutmob, Bloomspot and a growing number of retailer-specific apps provide mobile access to offers that can be redeemed in-store. Still others like Apple’s ZipCheck combine service and checkout anywhere the customer happens to be in the store. Pioneers like the recently launched beta version on Facebook of getta!Table, which offers exclusive daily offers from the best local restaurants, are pursuing a vertical strategy on that new commerce frontier to make purchasing efficient (i.e., directly on merchant fan pages) and redemption in-store, again with the hope that new customers will have a good experience with that merchant and eventually develop a long-term relationship with them.

While different, all of these schemes rely on three essential ingredients to make this new retail experience possible:

• mobile phones that provide access to the internet and thousands of apps in the hands of just about any consumer who wants one;
• IP-enabled point-of-sale systems (including tablets) that offer a richer consumer experience in and out of stores; and
• mobile apps that live in the cloud now literally cloud the distinction between online and offline transacting.

After nearly two decades of being able to shop online, consumers are finally comfortable doing so. Transacting on a mobile phone today is as easy and becoming as second nature as shopping on a PC.

3 Online Payment Players
For all of this advancement, the application of technology to make the shopping process both efficient and the consumer/merchant relationship more personal still seems elusive. Three players, none of whom are either a traditional retailer or payment firm, are now working to change all of that.

1. PayPal. PayPal’s portfolio of capabilities is designed to streamline the shopping experience for consumers and merchants alike. Its geo-targeted application serves offers via the phone from merchants when consumers are in striking distance. Other apps such as Milo and RedLaser enable inventory checks and pricing information by scanning a product code inside or outside of a store. Others provide product reviews and other relevant information before a purchase is made.

In-store checkout will leverage the more than 60 million active U.S. PayPal accounts. What’s more, it can be done without a card by simply typing in a phone number and PIN at the POS, leveraging devices that merchants already have. PayPal is perhaps the most powerful force today in blurring the online and offline commerce worlds. It will no doubt use these assets and others to enable merchants and consumers to have a more personal — not just more efficient — relationship.

2. Square. This app has evolved over the last year beyond a micromerchant processor into a consumer and merchant network. Square’s Card Case customers, who opt in, have their faces and shopping histories visible on tablets that operate Square’s register application, enabling that merchant to better serve that customer when they enter their store. Purchases are made “on account” without producing any card or identification since authentication happens via visual identification.

Also, digital receipts promote other Square merchants in the area, helping drive traffic to their storefronts. Square’s “cardless checkout” has less to do with shopping efficiency and more to do with enabling a better experience in-store for consumers and a deeper relationship with that merchant. Square’s road map no doubt includes capabilities for merchants and consumers to both broaden and deepen those relationships.

3. Google Wallet. By comparison, Google Wallet seems a bit out of sync with the other players. It leverages the powerful Google ad platform that technically makes it easier for merchants to reach consumers with offers. Its economic proposition makes it attractive for merchants to play along too. But its value proposition to consumers is wrapped around a mobile wallet technology that only works on certain phones and with certain merchants that can interact with its technology and those phones.

Its wallet is open, so the technology can accommodate a variety of cards, but it still requires the phone to be used at checkout to complete a purchase. Google Wallet uses the power of the web to drive traffic to storefronts, but it’s focused almost entirely on a consumer and merchant value proposition wrapped around ease of checkout. While claims of “customer delight” ground its mobile shopping proposition, at least for now, the experience seems to fall way short of either making the shopping experience more efficient or making the consumer/merchant relationship more personal.

What PayPal, Square, Google Wallet and many others who are trying to reinvent the retail experience must bear in mind is that from a shopping experience the Mary of 2012 isn’t much different from the Mary of 1912. What is different is the set of tools that consumers and merchants have at their disposal to make that experience a cost effective and relevant reality. But tools that create efficiencies alone aren’t enough; they also have to drive a personal relationship between consumers and merchants. Ironically, it will be the IP-enabled revolution that started roughly six years ago that will move consumers closer to the experience that defined retail more than a century ago and that will fuel its reinvention for the next 100 years.

Karen Webster is president of management consulting firm Market Platform Dynamics. Reach Karen at karen.webster@marketplatforms.com.