McKinsey & Co.’s “Store of the Future” Yields Retailing Insights in Real Time

McKinsey & Co., the global consulting giant with $10 billion in annual revenue, opened a pop-up luxury goods store this fall in the Mall of America in Minneapolis. It’s a laboratory where the firm’s clients are studying consumer behavior and experimenting with the digital tools that will define the future of retail.

McKinsey’s research approach is novel and, after just two months in operation, has produced some surprises, uncovered tantalizing clues to retailing’s future, and confirmed what we’ve been saying this year—that the retail apocalypse is a myth and online commerce is not a mortal threat to bricks and mortar. Quite the opposite, in fact.

In a recent interview, McKinsey partner Praveen Adhi told me that one of the early findings is that consumers express more interest in discovering products that appeal to them and having a personalized shopping experience than they do in the relative seamlessness of checkout.

The purpose of McKinsey’s Modern Retail Collective (the name on the door) is to “serve as a showcase for how to leverage technology, bring it to life, and commercialize the art of the possible.” Adhi, an expert in the application of analytics in retail efficiency, said that, “Going in, we expected checkout to be the consumer’s top concern, so that has been the biggest surprise so far.”

The Modern Retail Collective is a learning lab for clients but it faces out as a traditional luxury goods store featuring products from recognized brands such as Elevé Cosmetics, Kendra Scott, type:A deodorant and ThirdLove. It incorporates leading-edge technology like smart mirrors and fit predictor software that allows consumers to virtually try on products that aren’t available in the store. Retail participants will change every few months, with each rotation centered around a theme—product discovery, service, personalization, and productivity.

One of the most innovative aspects is that McKinsey selects participating clients to assess how they work with other retailers. “We want to understand how to get brands to play together and learn how to quickly respond to what they’re learning in real time.”

Adhi says McKinsey and its clients have so far identified a dozen or so principal challenges. The top three:

1)   How to effectively help customers with product discovery

2)   2) How to personalize the shopping experience

3)   3) What will be the next wave of innovation

“We’re focusing on how to engage the customer the right amount in the store,” he says, “and what aspects of this engagement drive an actual conversion (a sale) – in store or online. The hardest part is figuring out how to get the various technologies to integrate in a way that helps understand the customer journey.”

The next big wave, he says, will be deciphering how to tie online behavior to what happens in a physical store. The key is mobile—cell phones, tablets, and laptops. These are devices that I’ve dubbed the consumer’s “digital twin.” Today our relationship with our mobile devices is more intimate than those we have with humans. For most of us, our mobile device is the first thing we touch in the morning and the last thing we touch at night. It is always with us. It knows everything about us—where we’ve been, what we’ve been thinking about, what we’ve looked at, how long we looked at it, where we were when we looked at it, and so on.

Studying consumer behavior through the lens of our digital twins reveals a much more nuanced consumer profile than the one we’ve been working with up to now. It turns out that we consumers are much more than the sum of our parts.

According to Adhi, while making the transaction easier was not a top consumer concern, making the transaction at all proved to be a major challenge at first. It’s not enough that a retailer’s website drives traffic to the store if, once there, consumers can’t find or discover products that interest them.

Retailers have been working with inventory visibility, such as searchable store map applications that show shoppers in which aisle they’ll find bras and how many are supposed to be in stock. But what happens when inventory reports lag or, as often happens, a consumer picks up an item and has second thoughts on the way to checkout. The item finds itself marooned in the wrong aisle and is undiscoverable.

The store worked on this problem and solved it, says Adhi, with radio-frequency identification (RFID) tags. Inventory became visible in real time and location. Thus, a sales associate can help a customer looking for a blouse that another customer has abandoned in a dressing room, much more efficiently.

Instead of a battle between online and physical commerce, McKinsey’s store of the future aspires to bring the best of both worlds together to produce a consumer experience that can’t be had online—“in-person product discovery, on-demand service, and tactile experiences within a highly social environment”.

Posted March 5, 2020 by & filed under E-Commerce, News, Uncategorized.