Big think, think big
Image Credit - Nextup Asia
Gosh you’ve got to love digital hijacking to give you a laugh for the day. This week is the Harcourt’s Annual conference here in Auckland and the twitter sphere went wild as a result. As we all know, real estate agents are at best evangelical and at worst a cult, so it wasn’t surprising to see the Antony Robbins-esque tweets appear…but then the mocking began along with the trending. The hashtag intent was to share the inspirational quotes from our Big Thinkers. The result something completely different.
Retail can be somewhat cult like and I have found myself a new cult leader and am following L2 founder and NYU Stern Professor of Marketing Scott Galloway.
Galloway is a retail trainspotter of sorts. Using key data-points and history he has been able to predict retail trends and opportunities and he is honest enough to admit that he sometimes gets it wrong. One theory I have been professing for some time, which he leads the thinking on, is that pure-play retail will soon be dead. Why? A couple of reasons including our need as humans to interact with each other in a social context but practically, that stores serve as fabulous warehouse structures that not only provide experiences but easy pick-up, returns and fulfilment points – way, way better than pureplay.
To support this, L2 research demonstrates that ominchannel models in which online drives shoppers to the store or the online buy button are winning. This is most evidenced through the growth of Warby Parker who started as a pure play operator and now is the second most successful retailer on a sales per square foot ($3,000 per sqf) metric just behind Apple yet ahead of Tiffany’s.
The following video is a brilliant speed watch through how the big four, Facebook, Apple, Amazon and Google and how retailers, who are growing their ecommerce business in conjunction with their bricks and mortar in an omnichannel sense, have the most successful models (case in point Macy’s is the fastest growing retail in the last 5 years) and why.
What do I do then to transform my retail business?
So what can you do as a retailer to be successful and thrive in this digital age? Here are some of Galloway’s Do’s and Don’ts. Whilst there is notably an American skew to the examples, the tips are very appropriate for our market
Extract from Scott Galloway
DO: Become an e-commerce expert.
In the Big Box category, the majority of L2’s top-ranked retailers now have 15-plus years of experience in e-commerce under their belt. A few latecomers have caught up to or surpassed the first movers — notably digital Genius Walmart — but those who wait will have difficulties closing the gap.
DON’T: Rely on new stores for growth.
In the past, the key to growth for retailers was to open as many stores as possible around key demographics without cannibalizing sales from existing stores. That game is over. Today, the retailers investing the most in bricks-and-mortar are those that can’t tap into alternate sources of growth. However, digital is not replacing brick-and-mortar. On the contrary, stores are increasingly important as omnichannel strategies win the day — bricks in tandem with clicks.
DO: Use digital tools to drive brick-and-mortar shopping.
Research suggests that more American consumers webroom (69%) than showroom (46%). Sales that start on a digital channel and conclude offline will account for 59 percent of U.S. retail sales by 2018 — four times the sales attributed to direct e-commerce. Given that impulse purchases are much more likely in stores than online, getting shoppers into stores will be a key metric for success.
DON’T: Favour e-commerce over omnichannel.
Some retailers are so focused on ecommerce that they neglect to build out omnichannel capabilities. The number of Specialty Retail brands offering online-purchase and in-store pickup remained stagnant in 2014, with only three brands in L2’s Index enabling shoppers to reserve online and pick up in store (Armani Exchange, Gap, and Banana Republic). Only a third of Specialty Retail brands let users check product availability in local stores. Gucci is one of the few Apparel & Luxury brands to offer real-time inventory information. E-commerce is essential, but today’s consumers expect a “buy-anywhere, fulfill-anywhere, return-anywhere” marketplace in which purchases originate in one channel, are completed in another, and tended to (by customer service) in a third.
DO: Build up Amazon immunity, aka “shark repellent.”
Amazon is the retail sector’s great white shark, sitting fearlessly atop the retail food chain. On track to become America’s second largest retailer behind Walmart by 2018, Amazon is a triple threat — offering low prices, wide selection and fast fulfilment. Meanwhile traditional retailers must charge a 15 percent premium over Amazon to cover fixed operational costs. Big box retailers are especially vulnerable as Amazon has accelerated dramatically in their core categories.
DON’T: Act like befuddled prey.
The savviest retailers are focused on narrowing the gap with Amazon, prioritizing investments in customer service while mimicking Amazon’s checkout efficiency. They are creating or improving loyalty programs, fine-tuning personalization and producing mobile apps for in-store shoppers. There’s no easy or cheap way around mastering fulfilment but doing so is essential, as speed has become a critical point of differentiation now that Amazon has trained consumers to expect two-day shipping as a default.
Macy’s is fighting back by turning many of its stores into mini-fulfilment centres and building a real-time system that correlates in-store and online inventory; for instance, if stores are overstocked on a given product, it can be shifted to online sales, and products are not listed as out of stock online if they can be found in stores. Macy’s also offers same-day delivery in some markets.
DO: Add content to commerce.
Branded content is exploding, with successful retailers understanding that merging the two is a very powerful algorithm. There is a positive correlation between content score and conversion rate, most notably for content stars Sephora, Clarins and Estée Lauder. Sephora’s Beauty Board, launched in March 2014 on the brand site, is an explicitly commerce-oriented “social shopping platform” based around user-uploaded photos of their beauty looks.
So the next time someone around the table tells you that e-commerce alone is the panacea to the retail future you can feel confident that this may not be the case. More accurately you need to think bigger than ever before and beyond e-commerce alone to unlock the magic to a seamless, frictionless customer experience with many activation touchpoints on the path to purchase.
Happy shopping, wherever and however you choose to do it.