Over the last two decades, consumers have become accustomed to convenience, variety and doorstep delivery: the modern-day shopping paradigm ushered in by Amazon. From books, to shoes, to fresh bananas; the dominant face of retail sells 480 million products online, leading many of us to ponder the purpose, value and hence the fate of brick-and-mortar stores.
Well, they are not going anywhere!
Amazon’s surprising $13.4 billion acquisition of Whole Foods this year not only substantiates the value of physical stores, but marks the beginning of a new era of retail. The data collected on shoppers will not only change their in-store activities, but, will change what motivates shoppers to even set foot in the store in the first place, thereby underscoring the incredible symbiosis of online and physical stores.
What is that symbiosis? How are digital efforts driving in-store engagement today? I’ll explore those questions in this post, specifically touching on leveraging today’s consumer behavior, why location is of paramount importance, and how online convenience can drive habit-forming experiences and create an extremely important link between online and in-store actions.
Leveraging the familiar
Unless you’re a recluse or a misanthrope, you’re likely making weekly visits to a retail store and purchasing an item or two. In fact, more than 90% of purchases are still made by people trekking to a physical store, standing in line to pay for items and then lugging them home. Phew. I felt inconvenienced and exhausted just writing that.
Kidding aside, e-commerce accounted for 8.5 percent of all retail in the first quarter of this year, registering $105 billion in sales out of a total $1.25 trillion, according to the latest numbers released by the U.S. Census Bureau. Add to that the huge number of shoppers using the "click and collect method,” in which shoppers buy online and then pick up the item in store, rather than having it shipped. The benefit for the retailer in this case is getting people to step inside the physical store, where they’re more likely to make additional purchases. According to The International Council of Shopping Centers (ICSC), nearly one third of shoppers this past holiday season used the click and collect method; more importantly, 69 percent of those shoppers then went and purchased additional items in that store, and 36 percent of them made a purchase in another store."
What this means is that retail stores have a raison d’etre. Most folks still go to a store to buy stuff, but which store is going to be increasingly in question.
As William Gibson famously said “The future is already here — it's just not very evenly distributed.” Trends are not in the favor of most retailers and they will need to strive for innovative ways to keep consumers returning. To do that, brands would benefit by realizing that consumers already have ingrained habits.
“Retailers have built on the programs that had already established customer behaviors with things like circulars,” said Karl Denzer, Senior Vice President of Emerging Technologies at InComm, a provider of prepaid products and payment processing solutions. “Retail customers are all trained to look at what used to be the physical ads which would articulate the sales and special deals they had available. It’s a very simple migration behavior for customers to now look at that same communication on a digital channel.”
“What is tried and true, and does drive customer behavior in stores, are absolutely the notifications around the digital circulars, emails and, for the merchants that have loyalty programs, notifications to their loyalty customers around special offers.”
In an analysis on the impact of online coupons and deals by Forrester, they uncovered that promotional incentives are still, in fact, extremely relevant even as the industry evolves to meet shifting habits. With 63% of shoppers saying that promotions help close the sale when they are undecided about a product—brands and retailers need to serious about how they reach their audiences and deliver promotions in this new environment.
Data that matters: location
Many marketers look at numerous data points, including demographics (gender, age, income), psychographics (hobbies, attitudes, interests), and behavioral data (websites visited); when it comes to driving in-store sales, however, location is the most significant piece of information. It’s a data point that’s increasingly accurate, thanks to our cell phones.
Mobile is fast becoming a larger and larger part of the shopping experience. Nine out of 10 shoppers used their phones while in a store. More than half used them for price comparisons, while nearly half looked up product information and just over 40% checked online reviews. Clearly, if most consumers are using their phone while shopping, there are myriad opportunities to incorporate hybrid physical/digital shopping experiences.
“You have to have a mobile strategy. In other words, targeting has, historically, been about gender, age and so forth, but arguably the most important measure is where are the people right now. Are they on the couch? Are they entering the mall? Are they driving in their car passing a supermarket?” said Bill Demas, CEO at Shopkick, a company that incentivizes in-store sales through gamification.
“Being able to understand where the consumer is while they’re on the go, being able to send an offer and an ad that shows up at the right time, to be able to ultimately predict what intent that user might have, is really critical. Comparing it to an old-world model, where you’re on your PC with a display ad that’s not targeted—those days are over in terms of any sort of effectiveness.”
As SalesCycle’s Graham Charlton mentions, “Despite the opportunity to target customers based on their locations, just 22% of marketers agree that they are exploiting hyper-local advertising to its full potential.” This presents a huge opportunity for retailers and brands alike to leverage digital ads to drive more shoppers to the stores.
Moreover, since retailers are sitting on billions of data points, they have the power and the information to now deliver a relevant ad while a person is on the go. That is “their most critical asset” in getting people in the store, Demas believes.
“Today we live in a data age, and not only do we have the data, we need to be able to do predictive analytics. There’s lots of opportunity at the brand and retail level to be able to use their treasure trove of data to ultimately make better decisions, not just in connecting a retailer to the consumer, but in helping them run their business better by understanding what consumers are doing.”
Uber leverages digital to create frictionless physical transactions (services request, payment), enriching a service that can only be consummated in person. Retailers need to apply this mindset and ask themselves: ‘what can be done online that’s convenient and enhances the in-store experience?’
CVS allows consumers to order and pay for photos online. Consumers can select to have photos delivered or picked up. Picking them up without standing in line to pay for them makes for a very convenient experience, and drives more in-store shopping by just bringing customers in the door.
The online convenience creates two positives: first, a habit-forming occurrence that enables more in-store shopping activity and second, a definitive link between online action and in-store engagement.
The latter positive is elusive and hard to measure and therefore considered by some to be the Holy Grail for both the retailer and the advertiser.
“On the merchant side, one of the challenges is going to be attribution on mobile. Using affiliates are super easy since we can drop a cookie and know if they completed that purchase,” said Jay Klauminzer, Vice President of Local Deals at Groupon. “But how can I find if that mobile person I don’t have a cookie for actually came into my store? So, the notion of how you do online to offline attribution is going to be really important so retailers can build ROI to these campaigns. They’re all struggling to get people in the door, and so the services that prove they got them in the door are going to be the most valuable.”
Groupon made its name on vouchers, which were a form of proof of purchase; once a retailer scanned that voucher, Groupon could prove, without a doubt, that it was the one that drove that sale. Now the company is already looking to the future, making the experience even more frictionless for consumers, while still driving attribution.
For example, the company recently launched a beauty booking service, which lets the customer book a salon or spa services, show up and then leave, as payments and tips are already taken care of when the appointment is booked.
Another way to do it is through a geolocation-based push that gives customers a custom coupon code that integrates directly with the point of sale upon checkout. Another is card linking, where an offer is added to someone’s credit card, meaning the customer no longer even needs to present a voucher to get the deal. For the customer, the experience requires nothing from them, while the retailer can see the success of the campaign and the advertiser gets to prove their effectiveness.
“You’re going to see technologies like that focus on convenience because we’re growing up in a mobile world. People aren’t cutting the coupons that they’re getting in their mailer and walking into their retailers anymore. They want something that’s super easy, accessible on their phone. I think the notion of convenience is going to be much bigger in the next few years,” Klauminzer said.
Convenience is often attributed to personalization, where shoppers are getting what they want, when they want it. In a recent report, Accenture notes that 57% of consumers want real-time promotions and offers—they only want to see what is pertinent and contextually relevant to them with minimal effort on their part.
Shopper convenience goes way beyond simply retail location in today’s environment. With digital influencing $0.64 of every dollar spent in-store, brands and retailers need to connect with their shoppers in new and engaging ways in order to forge connections and maintain their business.
Digital is the answer to driving in-store sales
As we can see from Groupon and Shopkick, new technologies have already been driving a connection between some digital interaction coupled with a real-life experience, giving retailers the opportunities to upsell customers once they’re in the store. However, as shopper expectations continue to rise, the use of digital advertising to drive omnichannel, hyperlocal and personalized experiences will no longer be the exception in retail, but the standard.
With Amazon’s purchase of Whole Foods, along with Walmart’s $3 billion purchase of Jet.com last year, it’s clear that digital convenience, data and physical experiences will be increasingly synthesized to create a new world of digital/physical retail experiences. It’s a world in which in-store activity will be activated, driven and enhanced by a digital component that can deliver the right product, to the right person, at the right time, and, at the best price.