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The evolution of social connection in the retail industry

  • Opinion
  • July 21, 2015
  • Paul Keane
The evolution of social connection in the retail industry

In recent years, our view has been that we have already seen the majority of retail changes that will influence retail spend. However, a few days in the UK where retail is alive and well, has changed that view. Two contrary examples emerge:

Shopping centres as social centres

The first is that their major regional shopping centres play a very important part in community life. More than a shopping centre, in the UK they serve a dual function – as a social centre - a place for people to meet and the environment reflects that. It seems they are a key part of social communication and their popularity continues to grow. We haven't fully realised the importance of this in NZ, where shopping centres are still developing in terms of social communication.

Technology replacing sales assistants

Conversely, it is also apparent that the traditional retail assistant is under threat by new technology. An example is the move by UK McDonald's to install self-order kiosks. All a customer needs to do is to visit a digital kiosk at the restaurant entrance to pre-order and pay for the meal, no human contact necessary. The customer can make and pay for their order without communicating with an employee, and all that is then needed is to collect the meal.

McDonald's, of course, owes much of its success to extremely efficient processes, and consistency of product and experience. Any area where staff interact with customers is one where McDonald’s high standard of efficiency and consistency can be compromised.

Social connection in retail: In summary

It will be inevitable that these tools will expand into NZ, and we can expect any retailer whose business model is built on ‘operational excellence’ principles to trial such technology. We can draw parallels with the "self-service" lanes which are already in most NZ supermarkets - interestingly, The Warehouse tried them and found them less suited to the general merchandise market.

On the other hand, retailers whose offer is based on ‘customer intimate’ principals will look to use technology to enhance the social experience, not replace. Well trained retail assistants who act as brand ambassadors, with excellent product knowledge build positive consumer engagement, and it can make a big difference to the bottom line.

For further reading, take a look at this interesting article “How retailers can keep up with consumers” by McKinsey&Company.

Ironic isn't it? The shopping centre remains the meeting place for social communication, while the fast food industry is by comparison reducing social connection!

Sharewatch | Smiths City

Smiths City’s latest results are a bit of a mixed bag. At the top level, things look good with revenue up slightly and profits almost doubling from $4.1 million to $8.0 million.

On the other hand, trading profit is actually well down – the increase in total profit is driven by an insurance payout from the earthquake-damaged store on Colombo St (now fully rebuilt). And a more detailed breakdown shows that the retail segment of the business actually made a trading loss, which was countered by profits from the consumer finance and property divisions. The challenge will be to maintain and grow retailing profits in the future.

Smiths City is going through change, and perhaps it’s too early to tell whether it will come out better off. The company has closed four appliance-only stores – poorer performers, we imagine – and is seeking to open up other stores. Same-store sales increased by 2.5% for the year, a positive sign, and a more secure store portfolio will help Smiths to boost its retail business.



 

 Paul Keane is a registered property professional and has vast experience in New Zealand’s commercial property industries. He provides retail and property consultancy including development management to many New Zealand property owners, developers and city councils. 

This post originally appeared on RCG's blog.

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