The Services Revolution

August 8, 2018

 

In a time of unparalleled flux, UK and US retailers have something in common. They are increasingly looking for the next point of differentiation to stay relevant to their customers. As consumer behavior evolves, many are seeking ‘experiential’ or ‘service-based shopping’, and this new way of conducting commerce could just provide the beacon of hope the industry needs.

The rise of this consumer movement can be attributed to a number of integrated forces. The exponential growth of the on-demand economy; now estimated to have reached $57.6 billion by the end of 2017 in the US alone. Coupled with the millennial-led trend towards “experiencing” over “owning.” And more directly; there’s the pressing need for retailers to differentiate from the rise of the global generalists, who now own more than 50% of global sales.

It is perhaps no surprise therefore to see retailers exploring strategies to develop a share of both the on-demand and experiential wallets.

The recent strategies of UK Department Stores in particular have been heavily influenced by in-store services. Take high street stalwart Debenhams, who recently decided to differentiate their offering by taking stakes in on-demand beauty service Blow, fitness with Sweat! and dining with Loaf & Bloom - collectively covering impulse experiences and on-demand utilities.

We’ve seen plenty of retailers seek to differentiate themselves by offering new services and experiences – including Nike’s immersive experience in New York City with a basketball court and treadmills to track running patterns and strides, Sephora’s in-store makeover service, and even Casper’s Dreamery, where customers can take a 45-minute nap for $25. So how can retailers get started offering more services to customers?

So how can retailers get started offering more services to customers?

Workout

New Revenue Streams  

Many brands are finding success in leveraging their existing reputation and product range to add new, related service lines into their mix. From differing ends of the spectrum both Amazon and John Lewis have in the past few weeks launched their respective Home Services offerings (or “Home Solutions’ in the case of JLP).

Where Amazon will look to utilize their marketplace set-up to quickly acquire a scale of service providers for consumers to progressively rate, John Lewis will presumably be looking to present a highly-curated selection of pre-vetted providers with strong customer feedback.

In both cases - although for differing reasons - the retailers are banking on the strength of their brand to drive trial of the new Service. Time will tell if they prove to be notable revenue streams.

The Wrap-Around Service

Services are also being introduced across sectors to directly increase product sales; both first time and repeat purchase.

IKEA’s acquisition of TaskRabbit in 2017 was a tacit admission that few enjoy the prospect of battling through the construction of yet another Billy or Hemnes. Rather than shy away from a perceived customer negative however, IKEA addressed it head on and in so doing, created an opportunity to eradicate a barrier to purchase and (potentially) deliver a new incremental revenue stream.

The french retailer Nature et Decouverte reasoned, not un-wisely, that consumers buying from their range of Telescopes might be interested in booking Astronomy classes in the same buying journey. Likewise Jessops with their camera courses. Or Halfords with Bike set-up and maintenance.

To be a category-leader is to make the most of your superior knowledge of your specialism. Helping customers to better select, use and maintain the products you desire to sell them is a key defensive strategy in the battle with the online generalists.

Increased Brand Relevance

When cycle-brand Rapha witnessed their brand loyalists organising their own impromptu grand tours in far flung places; they jumped on the opportunity to take ownership of the trend by launching Rapha Travel.

Likewise, upon recognizing the extreme passion for adventure amongst its customers, lifestyle camping and outdoor retailer REI decided to take things one step further by organizing REI Adventures. These outdoor adventures and treks give brand-loyal customers the opportunity to explore different parts of the world, led by experienced REI guides.

To become part of the customer conversation outside of the narrow buying window has long been the holy grail for marketers short on relevance. As more and more retailers rally around the “One stop shop for….” strategy, Services will be an ever-more-popular tool to extend relevance.

Cycling

A Marketplace for Services

So how to get started with integrating Services into your assortment?

Take a global view of the leading players in the delivery of Services online and you’ll see a consistent trend - they typically do not ‘own’ nor directly provide the inventory of Services they sell. Whether Uber with taxis or A‌i‌r‌b‌n‌b‌ with hotel rooms - high-growth companies utilize the marketplace model; allowing third parties to offer their Services through a controlled, branded online interchange.

Irrespective of the business imperative, a marketplace model allows retailers’ to focus on their strengths - driving customers to an on-brand experience with great CX - and leaving the provision of Services to their expert partners.

Welcome to the Services Revolution.

A version of this blog appeared in Retail Week 07/07/18

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