Guidance for 2013: Acting on Key Shopper Trends (Online paper)

A BRICK MEETS CLICK ORIGINAL PAPER - click here to download the pdf

by Bill Bishop, Chief Architect, Brick Meets Click

Introduction

Many year-ahead round-ups focus on retail and technology trends, but we think following is shoppers is the key to successful retail strategies. So, BMC’s Guidance for 2013 focuses on six key shopper trends. Here, we describe the most significant changes taking place among shoppers todya, discuss the insights these changes reveal and deliver guidance on how retailers can take action to respond, now and in the longer term.

SIX KEY SHOPPER TRENDS

  1. Promotion overload
  2. Emphasis on value capture
  3. Enthusiasm for peer influence
  4. Use of the store
  5. Dependence on digital feedback
  6. Confidence in online ordering

 

1. Promotion Overload

TRENDS AND INSIGHTS. Most shoppers are interested in getting a deal, but the growing number of email promotions, texts, online ads, twitter, etc – even with tighter targeting – makes it difficult for shoppers to sort through all the offers and find the ones they want. How challenging is it for shoppers? Walmart reportedly posted 50 million ads on Facebook during the 72 hours of Black Friday weekend in 2012.

Shoppers are already taking steps to reduce the “promotional noise” in their lives by opening only select email and “unliking” certain Facebook pages. We expect this winnowing to continue.

Though targeting is the new magic medicine, it’s a lot easier to say than to do and may actually have some unintended consequences. The goal is for shoppers to find targeted promotions more relevant. But creating a promotion that delivers short-term ROI may not be worth it if it ultimately alienates shoppers with too many communications.

In fact, “ROI-per-promotion” might be too short-sighted a way of defining success. Adding another dimension to the measurement of promotional effectiveness could be useful – a retention factor that considers the lifetime value of the shopper to your business and the long-term cost of breaking off the relationship.

GUIDANCE

SHORT TERM. Explore the effectiveness of expanding your promotions to communications channels that are less saturated with deals. For many retailers today, that new channel is texting, and early adopters have enjoyed meaningful success.

LONG TERM.  It’s becoming clear that high-value shoppers are looking for help in prioritizing and managing promotions. Here are two potential ways to help:

  • Opt-in geo-triggered promotions based on past purchases show shoppers relevant offers and relevant times.
  • Subscriptions from retailers who take responsibility for bundling assortments of promotions into solutions.

Also, consider orienting your strategy around the lifetime value of the shopper rather than per-promotion ROI

 

2. Emphasis on Value Capture

TRENDS AND INSIGHTS. The web has already shifted market power from retailers to shoppers, but most shoppers are just beginning to fully realize this shift. Now that shoppers can easily compare prices online, it’s more difficult for brick and mortar retailers to maintain significant price differences. Online search also greatly reduces the cost of locating “hard to find” items for shoppers. These changes are eliminating profit opportunities for brick and mortar retailers and shifting that value to customers.

Today, you can see value capture in the way that shoppers are becoming skilled at layering promotions to combine retailer deals with manufacturer coupons or rebates to secure larger overall savings.

In the future, it seems quite possible that shoppers may

  • Create “data lockers” to ensure that their personal information remains under their control.
  • Join together to offer suppliers the opportunity to meet their collective demand through reverse auctions.
  • Seek compensation for sharing personal data, an asset of growing value to retailers.

GUIDANCE

SHORT TERM.  Make it easier for shoppers to “layer” promotions and deals by providing access on your website to all supplier-provided savings opportunities.

LONG TERM. Identify your most value-sensitive shoppers and offer to assist them with personal data management services that will help them maximize the value they can capture from their personal information across everything they buy.

 

3. Enthusiasm for Peer Influence

TRENDS AND INSIGHTS. Who shoppers consider to be a trusted source of information is shifting. Instead of sales associates, stores, and manufacturers, they’re turning to each other in peer networks to find out about product features and performance. Ironically, this is happening just as the web opens up greater access to experts than ever before. This shift may boil down to an eroding trust in traditional advertising and impersonal businesses, which is making real people’s experience and perceptions more valuable by contrast.

You see the enthusiasm for consulting peers everywhere, in user reviews, Facebook comments, Pinterest boards.   

Where does this shift have the most direct impact on shopping? We see it in the growing power of two social platforms that typically don’t get a lot of attention:

  • Local platforms for customer feedback. Yelp (and Yelp-like sites) are regularly consulted about everything from car dealer customer service to a neighborhood restaurant’s menu.
  • Bloggers with loyal followings. These folks are the columnists of their day, and they’ve demonstrated that their endorsements can move shoppers to buy.

GUIDANCE

SHORT TERM.  Find out what platform your shoppers are most active on and start there, rather than tackling all of social media at once.

Take advantage of work by other retailers;  e.g. the North American Coca-Cola Retailing Research Council has developed a broad-based perspective on the retail implications of social networking. Access it at www.ccrrc.org.

LONG TERM.  Identify and encourage advocates for your business by identifying supporters who are influential with your customers and their peers.

 

4. Use of the Store

TRENDS AND INSIGHTS. The role of brick-and-mortar stores is changing in shoppers’ eyes. Now that they can perform so many shopping functions online, they don’t have to go to the store to check product characteristics, for example, or compare prices. Brick-and-mortar stores will continue to outsell online retail for quite some time, but online is already changing how shoppers think about stores.

As a result, the how and why of measuring store visits should change. The total number of shopping trips is no longer a sufficient tool, because it’s influenced by too many other factors, like the changing competitive activity and the overall economy. Instead, look at the number of visits made by a defined panel of shoppers that reflects the overall profile of a retailer’s customer base. With this panel, it’s possible to:

  • Identify any significant declines in visits for specific shoppers.
  • Determine the reason for this decline.

Will store footprints shrink? Will they become more like showrooms? It’s too early to tell, but a couple of things are clear:

  • Customers want a more seamless integration of the online and offline shopping experiences, and they’d like better technology inside of stores.
  • Shoppers often have better access to information than store associates, and it’s frustrating them both.

GUIDANCE

SHORT TERM.  Identify and eliminate, (where possible) anything that discourages shoppers from coming into the store. This often relates to store conditions and customer service issues like long waits.

LONG TERM.  There’s an opportunity to offer in-store opportunities for new experiences that shoppers would enjoy. Among the possibilities:

  • Unadvertised deals or flash sales.
  • Concierge services that handle routine tasks, saving shoppers time.
  • Event merchandising that introduces excitement and the opportunity to discover something new.

It’s also imperative that you work to integrate the online and offline shopping experiences.

 

5. Dependence on Digital Feedback

TRENDS AND INSIGHTS. The proliferation of low cost sensors has already made “the   internet of things” a reality in many production environments. Now it’s beginning to impact the way people live and shop.

This greater interdependence between people and systems is most visible today in health and wellness. People are using apps to track steps, monitor health conditions and measure overall exercise to calculate calories burned.

“Self-tracking” may not be a mass phenomenon yet, but the way it  is changing behaviors and creating new commercial relationships   is striking. Self-trackers report that they now walk more as part of their commuting and shopping. They are also looking for ways to  get more value from their information – by earning “rewards” for activity or connecting with pharmacies or dieticians for   interpretation and counseling.

This greater interdependency between people and systems will have broad applications in the future.

GUIDANCE

SHORT TERM.  Check the sales of self-tracking-related products in your business to see if there’s been a measurable uptick in demand. If so, begin to ask if the professionals in your business see an opportunity to provide new “connections” with shoppers.

LONG TERM.  Self-tracking will spread beyond bio measurements and create opportunities to offer new services for, and to strengthen relationships with, a broader set of your customers. Already MyLowe’s will “track” your room dimensions and paint colors, and the drugstore “tracks” your prescription refills.

 

6. Confidence in Online Ordering

TRENDS AND INSIGHTS. Shoppers are gaining confidence in their ability to order online in many retail sectors, but some still have reservations and need confidence-building experiences on the web.

Consider a hard case – an area where online adoption has been slower. Research into grocery shopping shows that more than 1/3 of shoppers have bought at least one grocery product online, but less than 5% do all their grocery shopping online today – either because they haven’t had confidence-building experiences with the process or they don’t have access to the system.

The research also shows that the more aggressively online ordering options are promoted offline, the more shoppers will use them.  When brick and mortar retailers begin to promote online ordering, the impact can be large. Supermarkets that promote online ordering with both pickup and delivery options can see online sales reach 10% to 12% of total store sales.

GUIDANCE

SHORT TERM.  All retailers should look for ways to broaden awareness of online ordering options. Pure online retailers can use offline promotions such as pop-up stores. Brick and mortar retailers can promote in-store and in their printed materials. Incentives, contests, and sweepstakes can be used to help build awareness.

LONG TERM.  Look to reduce customer concerns about using online orders by adding features like no questions asked/no cost returns. Also, work on identifying market areas that are more likely to be receptive to online orders.  The fall 2012 MIT Sloan Management Review has an interesting take on this topic in the article  “What Matters in Internet Retailing.”

 

Conclusion

There are many interesting things happening in the market, but when we look at the data and study the tea leaves everything we see tells us that these trends are the most significant changes taking place among shoppers today.

We plan to follow them throughout 2013 at Brick Meets Click to watch how they play out, and we hope you’ll join us.

Consider this an invitation to add your thoughts, observations, expertise, and arguments to the frank, open, and noncommercial conversation that we host about the future of shopping.

You’ll find us at brickmeetsclick.com or follow us on twitter @brickmeetsclick