Rethinking the Store
If consumer spending is alive and well, why are local news programs often inundated with stories about iconic retailers closing stores? To put it simply – consumer shopping behaviors are evolving.
Often driven by the increasing spending power of Millennials and now Generation Z, the growth of online retailers has been nothing short of astounding. According to Kantar Retail, digital and non-store sales spiked 12.4% during 4Q16 over the same period of the prior year – far outpacing brick-and-mortar alternatives. The clearest signal of this trend is the explosion of Amazon’s share of total online sales in recent years. The internet behemoth now accounts for 46% of all e-commerce.
To put e-commerce growth in perspective, Deloitte projects online will only account for 9.2% of total retail sales during 2017. Physical retailing is not going away any time soon, but it will be evolving together with e-commerce. The traditional siloing of ‘online’ and ‘offline’ is blurring as the two become increasingly intertwined.
Marketers now have an unprecedented opportunity. The improvements to sales attribution coupled with machine learning are enabling advertisers to gain a unique, holistic view of each user’s path to purchase. Sridhar Ramaswamy, Google Senior VP of Ads and Commerce, expanded on this business reality during his May 2017 Keynote presentation.
“Consumers no longer differentiate between online and offline. In fact, they interact more with your brand on digital than they do with any stores or branches. As a result, to the consumer there is increasingly no line between channels. The customer is the channel.”
This omnichannel approach to driving business results is about better understanding the consumer’s journey. Businesses need to deliver value in each individual’s daily life. Furthermore, as the capabilities of devices improve, so too will consumer expectations. Smarter devices will allow consumers to leverage them in a wider variety of experiences – generating new realms of opportunities for marketers to reach consumers.
Industry-leading retailers have been using tools to connect their online and offline presences. For years, consumers have been driven into stores with tactics like Google pins, Snapchat filters, push notifications, etc. New media such as visual search, personal assistants, or even chatbots, have also been introduced to better fit the lifestyles of consumers. Combined with more seamless point-of-sale systems, improved clienteling tools, and enhanced engagement platforms (VR, interactive signage, etc.), the industry is primed be more adaptive to the busy lives of consumers.
These innovations have had a profound impact on the overall shopping experience. The seasonality of holiday shopping itself has been disrupted. Users are extending the cycle, both by researching sooner and purchasing later, especially millennials. The high penetration of smartphones facilitates researching products prior to an in-store purchase. In fact, eMarketer reported that 82% of smartphone users consult their phones on purchases they are about to make in a store. As a result, it is not surprising that Kantar Retail projects digital media to influence 56% of all in-store purchases during 2017.
The inherent strengths of a true omnichannel retail strategy may create challenges for marketers. While there is value in being able to reach a consumer at each possible touchpoint, not all are created equal. The capabilities of the different digital formats are inconsistent. Yahoo VP Courtney McKlveen says there is no ‘one-size-fits-all’ for measurement or cross device understanding. Attribution can also be impacted as these tactics usually require CRM or customer spending data, which is often the most guarded data due to privacy concerns. From a media planning standpoint, the institutional siloing of media channel buying further inhibits the flow of insights and data needed to effectively execute the plan.
Despite these challenges, marketers have started asking new questions. It is no longer a function of how to drive a user in store. Both large and small advertisers first need to ask what is the best path to purchase for each specific user, and take steps to meet their expectations.