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Digital Commerce: Infinite Commerce

By: Katherine Voyten, Lauren Edelman, Nichole DiNunzio, Alexandra Hardyment, Lauren Hirschbach, Carlos Omana and Allison Robl
Posted: June 10, 2013

Editor’s note: The 2013 graduates of the cosmetics and fragrance marketing and management master's degree program at the Fashion Institute of Technology (FIT) in New York presented their Capstone presentations at the Beauty in a Digital World event, sponsored by Beiersdorf USA with research partner Google, at FIT’s Morris W. and Fannie B. Haft Auditorium in June.
The following white paper accompanied the presentation from group leader Katherine Voyten, co-leader Lauren Edelman, and group members Nichole DiNunzio, Alexandra Hardyment, Lauren Hirschbach, Carlos Omana and Allison Robl.

Introduction

The beauty industry today is very focused on commercial transactions in the traditional brick and mortar channel with 95% of sales in the U.S. taking place in physical stores. Consumers, however, have shifted the way they shop in this new digital age. They do not want brick and mortar to be treated as a separate channel from the online world and expect to get the best of both of these environments wherever they are. Consumers also expect to find whatever they are looking for easily, but the beauty industry still makes them work too hard to get what they want. There is a huge opportunity to leverage technological capabilities to help consumers have better commercial experiences wherever they shop. Only 5% of beauty sales take place in the e- commerce channel, but other categories have much higher penetration: toys & games 13.9%, consumer electronics 13.1%, consumer appliances 10.2%, and apparel at 6.3% (“Emergence of S Commerce,” 2013, 60). This highlights a significant under-index in online sales for the beauty industry, which also means a missed opportunity to capture more consumers and grow industry sales overall.

This is happening for two reasons. First, beauty is an experiential category and consumer-product interaction is essential in the path to purchase. This paper will highlight opportunities to use digital technology to enhance the consumer experience in all channels. Secondly, brands and retailers are not leveraging existing technology to enhance or create new purchase opportunities. This paper will also explain how both the current brick and mortar and online retail channels will need to evolve to keep up with consumers’ growing demands, and how a new model of commerce creates opportunities for consumers to transact anywhere and for brands to sell everywhere.

Infinite Commerce Model

In the current state, the online and offline channels are not seamless or frictionless, although brands are beginning to use technology to close the gap. Online and offline began as two separate commercial environments. Over time, these two worlds have moved closer together. Some brands have been successful bringing high tech elements from the online world into brick and mortar. Other retailers have successfully elevated service by bringing high touch elements from in store into the online environment. However, it is still not the seamless experience consumers are seeking. 89% of consumers feel retailers should enable them to shop in whatever way is most convenient and 49% of consumers feel the best thing a retailer can do to improve the shopping experience is to be more seamless between the physical stores, online and mobile channels (Samuel, 2013).

Consumers have become very comfortable in a complex environment of omni- channel retailing, where technology enables 24/7 access to products, education and service. A new model of commerce must incorporate the three key drivers that define our interactions with consumers at every touch point: convenience, curation, and customization. The consumer expects a consistent brand experience across all channels. Therefore, it is up to brands and retailers to implement an Infinite Commerce model, introducing high touch experiences to the online environment and incorporating digital elements that add value to the in store experience. Implementing the Infinite Commerce model requires operational and organizational changes from brands and retailers to improve the consumer experience. Consumers will be able to snap a picture of any object and purchase it directly. Image, sound or video recognition technology locates the product. And the brand ships the product directly to the consumer. The end result of this implementation is that the consumer will experience Beauty on Demand.

This new model, Infinite Commerce, conveys a continuous cycle of commerce. It addresses the key desires of consumers, utilizes technology to create commercial opportunities everywhere and allows consumers to opt in for high touch experiences when needed.

In Store: High Touch Experience

Brick and mortar locations will continue to be a dominant retail channel for the beauty industry, but in order to grow, they will need to evolve. They should introduce meaningful digital technology to the in store environment and evolve the format of the in store channel with the end goal of creating a more customized, enjoyable experience that encourages increased consumer engagement and interaction with beauty.

Julie Bornstein, CMO of Sephora has said, “The key is to figure out where technology can add to the physical experience, rather than focusing on just the appeal of an iPad sitting in a store (that wears off quickly)” (Bornstein, 2013). Retailers and brands must bring high tech to the offline channel to elevate the consumer experience by guaranteeing the most appropriate selection, encouraging discovery and ultimately driving more sales.

Facial recognition and predictive analytics technology will revolutionize the in store experience. Installations at counter will recognize and synthesize your consumer profile, based on publicly accessible information. It can then recommend products that will work for a consumer’s unique beauty needs. As a result, each virtual beauty advisor consultation can be customized and will never start from square one. Layering meaningful digital technology to augment the in store environment is just the beginning of transforming the in store experience.

The next phase of the evolution of the physical beauty retailer will be the introduction of new, smaller-format boutiques. These boutiques can be located as free standing stores or can pop up within other locations like hotels and airports. Proximity will continue to be a crucial factor as 75% of all purchases are made within 15 miles of consumers’ homes (Joyce, 2012). Consumers are beginning to see the big-box store format as impersonal and overwhelming and there has been a return to “shopping small” with an emergence of localized boutiques. Consumers have always felt their relationship with retailers needs to be genuine and personal and are looking to establish stronger relationships where they shop (Yarrow, 2012). Macy’s and Walmart have already begun to capitalize on this trend and have introduced smaller, more localized initiatives, through My Macy’s and Walmart Express. My Macy’s directs consumers to the best location based on their zip code and products they are looking for to make the hunt for something specific easier (“My Macy’s Shop Ahead,” 2013). Walmart Express is the smaller store format now being offered by the biggest of the big-box retailers, to allow consumers more localized, convenient access, still at the signature everyday low prices (“New Walmart Express Store Opens in Princeton,” 2013).

The product assortment and services offered in smaller format boutiques will be customized to the clientele so the selection will vary according to location. Digitally enabling stores will make this possible. Merchandise can be selected and ordered based on local community demographics and shopping habits. The stores will all have WiFi and will be enabled with Geofencing technology (which “works by defining a virtual boundary around a real-world geographical area. In doing so, a radius of interest is established that can trigger an action in a geo-enabled phone or other portable electronic device,” (“Geofencing,” 2013). As consumers shop their personal mobile devices will be synched with the store’s database, allowing the staff to immediately understand their interests and needs, thereby providing the appropriate products. Consumers will discover and explore new product and service offerings which will inspire incremental purchases they may not have located in traditional big-box formats.

Another key to the evolution of the physical store environment is leveraging artificial intelligence technological capabilities, which can be combined with advancements in facial recognition tools in store. This will produce an elevated and curated offline shopping experience because retailers will have more relevant information than ever before. The evolution of traditional brick and mortar to a more localized and curated approach to retail, will further enhance the consumer shopping experience, leading to increased sales.

Online: High Tech Experience

The online channel is lagging behind brick and mortar in beauty sales because it does not replicate the high touch experience of the in store environment. Today, the online beauty commercial environment is very flat with static pictures of products and few tools to help consumers make purchase decisions. The high touch experience, which is essential to beauty, is nonexistent because consumers do not have the ability to experiment with products and get the same level of service that is provided in stores. The toys and games category enjoys one of the highest penetrations of online sales in the U.S. at 13.9%, so it is an interesting industry to watch for digital innovation (“Emergence of S Commerce,” 2013, 60). Video gaming, in particular, is a category that was once very static and flat within the home entertainment category. With various systems striving to offer gamers better experiences through their television sets, Xbox revolutionized the video gaming industry with the introduction of Kinect, which allows the player to be the controller, physically inserting the player into the gaming experience. This same concept will be replicated in the future of beauty e- commerce.

By the end of 2013, an estimated 29.3% of U.S. households will have a TV connected to the internet through either an internet-enabled smart TV, game-console or other device (“Demographics,” 2013). Penetration is on the rise too as it is projected that by 2016, 43.1% of U.S. households will have a TV connected to the internet. The tools to experience beauty in a high touch format already exist in consumers’ homes and are on the rise.

The online retail environment will replicate the high touch store environment through an interactive screen experience. Motion-activated technology will allow consumers to literally browse aisles of products and make selections for purchase directly from the screen. Brands and retailers will have the opportunity to use this platform to invite consumers to experience their best and most unique stores. It introduces a new type of exploration for two reasons. Consumer interaction with products will evolve into an environment that replicates the engaging layout of a store as well as the opportunity to enjoy “entering” and experiencing far-flung boutiques such as the Chanel flagship in Paris or the new Sephora flagship in Shanghai.