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Enter the world of Integrated Reality

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Retailers must come to terms with the world of Integrated Reality

As technology becomes ever more complex, the lazy assumption among many market observers is that the young generation “get it” and older people simply don’t. To be successful according to this rule of thumb companies must completely reconfigure themselves, dispensing with physical assets and placing their faith in websites and online logistics.

Nowhere is this shift more evident than in the retail sector. Not so long ago shares of companies reporting results would be marked up strongly for a robust store opening programme; now they only get the nod of approval if their online sales growth numbers are strong. Nobody, it seems, cares about footfall any more. The lazy assumption has taken hold.

But this assumption needs to be challenged because it is leading retailers off in the wrong direction. Yes, their online businesses have huge opportunities to grow but their high street presence is arguably more important than ever. Why? Because we are entering the world of Integrated Reality.

This is a world in which boundaries between the behaviour of different age groups are blurred – and perceptions of how they behave are often, quite simply, wrong.

We need to think of the population as i-Natives and Adaptive Immigrants. The i-Natives are the younger generation born in the last 15 years who have grow up with technology as part of their everyday lives. To them, firing up a computer is as uneventful as turning on a light and texting is as natural as phoning.

However, it is entirely wrong to think of their lives as being conducted wholly online.

The key to understanding the behaviour of the i-Natives is to comprehend that they do not perceive any difference between the online and physical world – one is merely a continuum of the other. Shopping, for example, is seen as a social activity –an excuse for a day out with friends and a chance to try on favourite fashions they may have seen in magazines or on websites.

Adaptive Immigrants are the other key demographic. They are generally a middle-aged, middle income group who generate and spend most of the country’s disposable income.

Being born in an era when buying a telephone could take two months, they are fascinated by the speed and efficiency of modern technology. They place great faith in the internet’s ability to make their lives easier and the promise of great bargains to be had by surfing the web.

To Adaptive Immigrants the internet and its associated technological spin-offs are sophisticated tools that need to be diligently mastered to unlock their full potential –i-Natives give that same technology as much thought as they do electricity: i.e. not a lot.

These different perspectives lead to very different behaviour than the lazy assumption would predict, as our last annual Christmas retail survey demonstrated. Despite being generally far less tech-savvy, it was the older age group who were keenest on online shopping and reported higher use, higher spend, greater motivation and fewer problems than younger people.

Overall, shoppers were evenly split on whether they preferred online or high street shopping, with 18 to 24-year-olds showing a preference for in-store browsing and purchasing while the older generation was more likely to use the internet, particularly for goods such as books and DVDs.

For Adaptive Immigrants there has been a “halo effect” around internet shopping – it is popular because it is easier to source goods, they are generally cheaper and they are delivered to the door, negating the need to battle through crowds.

However, online sales generally were significantly down on expectations, despite the bad weather in December which might have been expected to deliver a boost. Could this be down to the waning of the “halo effect”? Are Adaptive Immigrants beginning to act like i-Natives and becoming less in awe of technology?

These are key questions for retailers. Integrated Reality means they must stop thinking of two distinct worlds, one online the other on the high street, but must start to view them as one joined-up marketplace with several different roads leading to it, rather like an old town square.

They must be more alert to the threats and opportunities in all distribution and communication channels and work out a way to exploit them all in a more closely coordinated fashion.

All too often large corporates operate in silos. Typically they would have a high street division, an e-commerce division and, increasingly a mobile commerce (m-commerce) group. While this might look neat and tidy on a balance sheet, the reality is these divisions all need to work in tandem.

The winners in the world of Integrated Reality will be those that create a buzz about their offering via social networking, use location-based services on smart phones to ping highly personalised special offers to their database of customers and lure them to bright new stores which will be kitted out as all-encompassing retail destinations selling a much wider range of merchandise.

Even when they have done all of this, such is the changing nature of modern consumer behaviour, they still will not be able to guarantee success. The frustrating reality of Integrated Reality for marketing teams of the future is that reaching potential new customers is becoming easier, but persuading them to stay is infinitely more difficult.

   
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