Psychology, Tech and New Retail Standard

Psychology, Technology and a New Retail Standard

Kyle Ferlic, Retail Analyst

Psychology and retail are profoundly intercorrelated. Retailers know they participate in a delicate dance with their customers, so operators seek to create advantageous interactions ending in sales that benefit both parties. These interactions have increased demand for sciences like consumer psychology. More than ever before, technology also has an important effect on a retailer’s ability to offer preferred in-store conditions for consumers. This blog post outlines a new retail standard originating from the intersection of psychology and technology, particularly around consumer choice. Consumer choice is driving the standard for brick-and-mortar retailers, but maybe not in the way most retailers expected. This post concludes with a discussion on how technology fits into the equation.

Decision paralysis and retail

To begin, let us venture into consumer psychology. In Oxford, England back in 2005, psychologist Dr. Barry Schwartz1 argued something radical. He stated that the unofficial dogma of all western, industrialized societies is to maximize the citizens’ welfare by maximizing individual freedom. To maximize freedom, the society should maximize choice. This is so embedded in western cultures, he stated, that citizens do not question it. However, Schwartz poignantly called out the dogma’s flaw: “choice makes us miserable.” He noted an overabundance of choice not only leads to decision paralysis but also decreased well-being. “There is no question that some choice is better than none, but it doesn’t follow that more choice is better,”1 Schwartz concluded. This psychological paradigm has fascinating implications for retail, and coincidentally, undergirds some trends seen in today’s marketplace.

Only a few decades ago, the American retail bazaar was flooded with consumer options. Remember the tremendous number of mobile phone offerings before Apple’s iPhone? To differentiate, brands like Motorola and BlackBerry focused on a phone’s quantity of functions versus ease of function, overwhelming consumers to the point of product abandonment. Not long afterward, the iPhone triumphed, offering front-end simplicity complemented by complex but streamlined back-end technology. The grocery marketplace has also experienced a similar effect regarding SKU count. Shoppers definitely want a selection and preferred brands, but assortments don’t need to be overwhelming—just “right.”

What choices do retail consumers want?

Learning from the Apple effect, one might conclude too many options lead to an overwhelmed retail consumer. Yet, as Schwartz pointed out, retail consumers do want some choice, and they want a coinciding experience. Grocery consumers who once migrated to purchasing at online retailers are making their way back to brick-and-mortar locations to engage sights, sounds and smells while buying.2 “There is still one big reason why so many people are not buying groceries online: they prefer to handpick items themselves.”3 This is different for specialty retailers, who fight the showrooming effect, a phenomenon where consumers venture to specialty stores to test products, then go online to purchase the lowest-cost item fitting their specifications. To increase consumer personalization,4 online retailers are investing in artificial intelligence by analyzing billions of data points from online selections. Thus, specialty retail customers want options, but offered to them in a personalized fashion at low cost.

What does this mean for brick-and-mortar retailers? There may be a sweet spot, an optimal intersection, between information, engagement and personalization. This space utilizes consumer sciences to engage technology in a way that does not numb or paralyze shoppers, but guides them toward flow. According to social science, flow is an enjoyable psychological state within one’s experience that maintains interest, expands self-esteem and maximizes action.5 It can occur when retailers provide just enough information in the right way so consumers make choices they love. RFID manufacturer Avery Dennison6 noted flow is part of the retail paradigm of the future. By our measurement, technology vendors play a major role in creating flow-optimal environments.

Technology options for a new retail paradigm

With the right types of technology, brick-and-mortar retailers will offer their customers an experience of flow through information, engagement and personalization. In doing so, they might battle their ever-growing list of online competitors. Generally, two types of technological options are available for physical retailers. The first is customer-facing technology. Technology vendors offering smart mirrors, virtual reality and digital sizers can help sales floor specialists better interact with customers. The second is store planning technology, which provides layers of benefit for improving flow. Consider a shopper’s initial impression, which is often based on environment and product presentation. Both are resultant from healthy operational factors including organizational systems, opening/closing tasks, cleaning routines, managerial oversight and more. Store planning technology maximizes these logistical efforts.

However, it is no longer enough to mop the floors, adequately stock shelves with product and call it a day to satisfy customers. Shoppers want to interact with their retailers in unprecedented ways. “Stores [of 2019] will focus on delivering differentiated experiences to the customer in the front of the house and turn into fulfilment centers at the back of the house,” wrote AlixPartners’ managing directors David Bassuk and Joel Bines7 (in their most recent annual predictions on retail trends.) Said another way, thriving retailers will become more like restaurants in their fulfillment approach. Particularly for Generation Z buyers, who are digital natives favoring personalized interactions,8 flow-invested experiences will be important for brand loyalty. It seems store planning technology impacts more than first impressions, as it will also have implications for customer faithfulness.

How can retailers create differentiated experiences? This will be brand-specific, but regardless of a retailer’s go-to-market strategy, it will necessitate having employees available to interact with customers. Store planning tools make tasks easier for managers and employees, so they spend less time administrating and more time engaging—research shows that engaged employees increase retailer performance.9 Examples of technologies that increase employee margin for engagement are self-learning forecasting solutions, mobile employee self-service, location-based staffing calculators and wall-to-wall scheduling software. On a final note, customer-facing technologies are dependent on this employee margin; thus, forward-thinking operators will employ both store planning and customer-facing technologies, offering an optimal environment for shoppers.

Conclusion

In ending, today’s consumers expect just enough from retailers to get what they desire. Too much will drive them from brand loyalty, while too little will move them to seek more personalized options. Businesses in the physical retail space can use technology to find this sweet spot. Specifically, customer-facing and store planning technologies will benefit organizations by offering a flow-producing atmosphere to customers. That flow might just usher in unseen results for participating businesses.

References

  1. [Barry Schwartz | TEDGlobal 2005]. (2005, July). The paradox of choice [Video file]. TED. Retrieved from https://www.ted.com/talks/barry_schwartz_on_the_paradox_of_choice?language=en
  2. Sherred, K. (2019, January 15). Survey: 9 in 10 shoppers revisit stores that ignite the senses [Blog post]. Grocery Dive. Retrieved from https://www.grocerydive.com/news/survey-9-in-10-shoppers-revisit-stores-that-ignite-the-senses/545938/
  3. Griswold, A. (2017, September 14). There’s still one big reason why people aren’t buying their groceries online [Blog post]. Quartz. Retrieved from https://qz.com/1077743/people-dont-buy-groceries-online-because-they-prefer-to-pick-things-out-in-stores/
  4. Smiley, L. (2019, February 19). Stich Fix’s radical data-driven way to sell clothes – $1.2 billion last year – is reinventing retail [Blog post]. Fast Company. Retrieved from https://www.fastcompany.com/90298900/stitch-fix-most-innovative-companies-2019?utm_source=Sailthru&utm_medium=email&utm_campaign=Issue:%202019-02-21%20Retail%20Dive%20Newsletter%20%5Bissue:19532%5D&utm_term=Retail%20Dive
  5. Cheron, G. (2016). How to measure the psychological “flow”? A neuroscience perspective. Frontiers in Psychology, 7(1823), 1-6. doi: 10.3389/fpsyg.2016.01823
  6. Avery Dennison. (2019). FLOW MAKERS in action [Blog post]. AveryDennison.com. Retrieved from https://rfid.averydennison.com/en/home/shop-talk-2019.html?8
  7. Bassuk, D., & Bines, J. (2019). Retail viewpoint: 10 predictions for the industry in 2019. AlixPartners Insight. Retrieved from https://www.alixpartners.com/insights-impact/insights/retail-viewpoint-10-predictions-for-the-industry-2019/
  8. Stillman, D., & Stillman, J. (2017, April 11). Move over, millennials; Generation Z is here. Society for Human Resource Management. Retrieved from https://www.shrm.org/resourcesandtools/hr-topics/behavioral-competencies/global-and-cultural-effectiveness/pages/move-over-millennials-generation-z-is-here.aspx
  9. Ton, Z. (2017). The case for good jobs [White paper]. Harvard Business Review. Retrieved from https://hbr.org/cover-story/2017/11/the-case-for-good-jobs