- Showrooming is here to stay but retailers are finally fighting back
- Real time mobile technology is likely to drive consumer engagement
- Contextual shopping experience will accelerate
- Lines between digital and physical channels will blur
1. Showrooming is here to stay but retailers are finally fighting back:
Retail stores have been recalibrating their strategies to address the significant opportunity cost of showrooming- where customers price and experience products in-store and then buy look for the best price online.
An Arcus survey conducted last month indicates that 55% of Canadian shoppers have showroomed, especially for consumer electronics. Retail stores such as Wal-Mart, Target, Futureshop and Best Buy are likely to feel the impact of this trend next year as it accelerates and becomes a default practice for consumers. This trend is especially pronounced during promotions and peak shopping periods such as the end of the year.
We have seen a rebellion among independent book stores. Some are refusing to carry books published by Amazon. For example, Timothy Ferriss, author of The 4-Hour Chef has refused to do so. Many independent book stores are concerned about the vertical integration of Amazon which is focused on controlling a larger expanse of the eco-system of book sales. Other examples include Target and Wal-Mart which have both stopped carrying Amazon’s Kindle.
The primary reason Amazon is seen as a threat is because their primary focus is on low prices. This singular focus undermines the value proposition of retail stores that offer a wider array of benefits. One strategy being adopted is a year-round price-matching policy. However, the immediacy and convenience of buying online cannot be matched by just price matching. Target and Future Shop have such a policy with price matching with Amazon, Wal-Mart, Best Buy, and Toys ‘R’ Us.
This strategic shift towards price matching is a race downhill towards oblivion. Bricks and mortar have a higher cost structure and this strategy is eventually going to be unviable as margins decline to a point where they are unsustainable in some product categories. A key differentiator would be a superior shopping experience. One marketer that has done this well is Apple. Its distinctive in-store experience draws customers with a experiential tactile approach where all the products are visible in an array of clusters allowing the consumer to experience each one rapidly and arrive at a considered set quickly.
A key measure is the closing ratio in retail stores. How many inquire about a product and then end up buying it. Some strategies that are likely to grow next year include unique co-branded designer product offerings such as Missoni at Target. Exclusive content on music labels is also likely to grow.
2. Real time mobile technology is likely to drive consumer engagement
As consumers adjust their shopping behaviour and integrate mobile more deeply into their shopping, next year is likely to be the year of mobile shopping. New emerging technologies will blur lines between in-store and ex-store shopping. Mobile will impact shopping behaviour and advertising in many ways.
First, near field communications will drive promotions in malls as consumers are pinged with their wireless identities and offered incentives when they pass a store.
Second, we are likely to see a rapid expansion of in-store real time offers to counter the showrooming effect. It is surprising the online advertising companies such as Google haven’t integrated near field communication (NFC) advertising into their offering as yet by leveraging their vast knowledge base of consumers. NFC is likely to grow rapidly because it is likely to offer the highest ROI at the “last mile” of shopping when the consumer is in the store or near it.
Third, digital couponing will ride the wave of NFC and online stores as retailers look to increase the stickiness of their offering and draw consumers in for repeat purchases.
Fourth, personalized pricing apps that use predictive big data analytics to offer consumers an array of options in real time as they cruise through product categories is likely to gain traction.
An interesting development in 2015 will be Amazon’s roll out of physician stores. Their strategy is likely to be watched closely as it indicates the reverse of the strategy of retailers with physical stores who are augmenting their digital presence.
3. Contextual shopping experience will accelerate
We are seeing signs of a move from information to emotive insight. Where consumers want to learn more about the application of the features of products than the products themselves. Retailers will need to expand their augmented reality capabilities to help consumers experience products specifically aligned with a hierarchy of features that appeal to specific target sub segments. For example, themes such as gaming will dominate experiential marketing of mobile instead of just screen resolution, memory and other product features. Rich data on consumer interactions with product categories and user behaviour will inform these strategies.
The big challenge retailers face is adding method to the medium: how to mine the deluge of consumer data that is being generated and translate insights into meaningful benefits for consumers. This will be a key to the integration of digital, ex-store and in-store consumer shopping behaviour – to create a seamless transition from one medium to another. This will require a quantum leap in the capacity of retailers to understand the digital ecosystem around consumers’ data and how the rapidly evolving nature of shopping behaviour is going to impact where and how consumers buy products. A big influencer will be a deeper understanding of how consumers relate to their money and their definition of value in context of the products they buy.
4. Lines between digital and physical channels will blur
74 percent of shoppers say they expect they would like to see their shopping experience extend across physical and digital channels, but just 25 percent say they are satisfied with the transition from physical to digital currently. Our research of retailers confirms these findings. Over two thirds of retailers currently lack cross-channel consistency.
Interestingly, shoppers say they are more likely to spend more in-store if they could research products available online before visiting the store for a purchase. And over half would use a mobile app to research products. There has been an accelerration of mobile app availability in some retail category. Canadian Tire has augmented its mobile app with the integration of its Canadian Tire Money. Shoppers are more open to sharing personal information such as personal information and payment credentials if they can be offered added convenience and features that would enhance their shopping experience. However, 57 percent would not want to be identified when they enter a physical store. Women are more likely to be engaged in a digital channel than men. They are also more likely to accept personalized promotions and information about new products.
How Arcus can help
Arcus has designed a well tested process that delivers on four key success factors to ensure successful implementation of a retail strategy.
- Strategy implementation
- Change Leadership
- Process Management
- Data Management
Arcus works with senior teams to develop the objectives and constraints of the strategy deployment process (in the context of the issues such as new launch, integration of forces, level of disruption, future changes, redeployment). We create an alignment and deployment strategy based on the expected activity by customers and the location of target customers or accounts. In addition, workload indices are created and supported by local geographical knowledge to design territories.
Arcus has provided sales and marketing effectiveness solutions to retail organizations, and utilizes its strengths in analytics, research and technology to deliver actionable and measurable results. Deployment solutions from Arcus lets you benefit from our vast experience in building retail strategy capabilities and implementing the same for our clients across all major markets and categories.
Growth Strategy and Innovation: An interview with Mr. Dirk Miller, Vice President, Siemens. Mr. Miller believes investments in research and development is the most effective growth strategy for companies today.
Our solutions for customer loyalty focus on three key areas:
Most profitable customer architecture. We have created a repository of best practices identify the most profitable customers of a brand and to address erosion of loyalty. We thereafter develop a base of initiatives and tools that will exploit specific opportunities. High-impact direct, online, and face-to-face programs to influence customer behaviour are the architecture of an effective loyalty effort. To maximize speed and impact, we help our clients run pilots – taking a test-and-learn approach. We then help roll out successful approaches across the organization, offering support when these approaches require new skills and capabilities.
Targeted value proposition and delivery redesign. Longer term, improving loyalty involves changes to a company’s value proposition and delivery. The trick is to eliminate key sources of dissatisfaction, increase customer “stickiness,” and/or exceed competitive offers. Arcus helps identify changes that are likely to have profit impact far in excess of the investment required. We work with clients to transform their measurements of customer satisfaction into the means to track the 100-plus attributes linked directly to migration behaviour. We then help redesign key service processes at the front line to significantly improve the elements of the experience that customers most value.
Effective and efficient rewards programs. For some companies, a rewards program is an effective tool for gaining share of customer wallet. For other companies, a competitive rewards program is expensive but necessary to be fully competitive in their industry. In either case, we help craft a high-impact program or improve the design of an existing program, adding critical relationship management elements and developing a powerful partnership strategy with other industry participants, if appropriate.
We invite you to learn more about us by browsing this site, or by contacting Merril Mascarenhas at (416) 710-2727 or by email.