How To Get Innovation Right In Retail

How To Get Innovation Right In Retail

All that investment in innovation pays off — so says the National Retail Federation, which found that three out of five “consumers feel retail technologies have improved their shopping experiences.” Not only that, but those consumers have noticed a particular improvement when shopping online, with eight in 10 saying they’ve had better interactions thanks to retailers’ technology investments.

When it comes to innovation, it seems obvious retailers should aspire to that goal, but there is always uncertainty about its deployments and ultimate benefits. Such nuances are found not only in this fresh NRF research, but PYMNTS original data as well.

Innovation Gaps

For instance, why are there significant, revenue-draining gaps between what merchants think about payments innovation and what they actually do? Hypocrisy can’t be blamed for that – not when fresh data from PYMNTS, along with a recent interview with Nicky Koopman, SVP of content and value-added services at AEVI, tells a much deeper story.

Koopman and Karen Webster recently engaged in a discussion about how those gaps apply to a very specific but lucrative part of the retail landscape: the health and beauty product space.

Using the February Retail Innovation Readiness Index from PYMNTS as their guide, they tried to figure out the reason for those innovation gaps, and what can be — or should be — done to bridge those distances, an effort that promises to increase customer acquisition, loyalty and revenue. AEVI, which sees itself as providing next-generation merchant acquiring services, brought an expertise to the conversation that helped illustrate what retailers are dealing with when it comes to finding the best innovation for their particular needs.

Consider this finding from the PYMNTS report: 61.7 percent of health and beauty merchants cited customer loyalty as their reason to innovate, but only 35 percent of merchants said they’re prepared for it. That is a major gap, and speaks to the potential — and very real — lack of progress when it comes to innovating in a typically revenue-rewarding retail task. After all, as Koopman pointed out, “loyalty customers will spend up to 11 percent more” than other shoppers.

What explains the gap between the ideal and the reality, then?

The answer is complex, but speaks to the larger issues involved with getting merchants to invest the money and time into innovation.

Innovation Difficulties

First, as Koopman told Webster, “innovation is quite a difficult topic,” and there exists a “lack of awareness and education” about what innovation is and can do, along with “an overwhelming offering” that can all but paralyze a merchant. (Just think of the tyranny of ample choice, as a grocery shopper can be stopped cold when presented with a long aisle of choices in cereal, bread or chips.)

Not only that, but choice is tied to cost, and it’s not the easiest work in the world to figure out which innovation — a new point-of-sale technology, for instance — might be the most cost-effective.

“Business owners are not experts on payments,” Webster said, putting a finer point on those challenges, “but only in whatever areas they operate.”

As for the NRF findings, the retail trade group found that “those who’ve grown up embracing tech in all aspects of their lives are particularly satisfied: Millennials are more likely than any other generation to feel these innovations have enhanced their overall shopping experiences.” The group’s research found that innovation can help encourage purchases if deployed wisely during the shopping process.

“Consumers report feeling the most frustrated in the early stages of the path to purchase, when they’re researching products or reading reviews. Importantly, this is when they’re the most interested in trying new retailer innovations to help them,” the NRF said. “Nearly half expressed interest in tech solutions that assist with the early phase of the shopping journey.”

It’s not enough to just innovate in retail — the timing and other factors must be right as well.