Retail giant Alibaba recently announced its target to hit a gross merchandise volume of $1tr by 2020 – crediting it success so far to a ‘New Retail’ business model which entails the merger of physical and digital commerce, and digitisation of retail operations.
In a world where we continually hear about the death of the high street, and bricks and mortar retailers losing out to expanding e-commerce giants, it’s refreshing to hear Alibaba promoting the convergence of the two channels rather than the replacement of one with the other.
In reality, e-commerce still makes up a relatively low proportion of overall retail sales. Its share varies greatly by category but even for clothing and footwear – where e-commerce is relatively strong – it accounts for less than 15% of overall sales according to the latest Office for National Statistics report. In the food category this figure drops to just 5%.
The truth is consumers still like to shop in-store, and this doesn’t just apply to older generations who grew up in a world without online shopping. A study by IBM and the National Retail Federation reveals 98% of generation Z consumers shop in store, with over two thirds (67%) stating offline is their default shopping method. Even Amazon – which now accounts for 37% of online spend – understands the value of physical shops as it prepares to expand its Amazon Go stores following its multi-billion dollar acquisition of Whole Foods.
The shift from physical to digital shopping is not a linear, one-directional trend; it is a dynamic evolution that encompasses the digitisation of the entire shopping experience. Rather than abandoning the physical path to purchase and throwing their entire budget at the digital journey, brand marketers must take an omnichannel approach that bridges the two – taking the best of digital innovation and applying it to both the offline and online worlds.
So how can brand marketers follow Alibaba’s lead and embrace an age of New Retail?
Optimise to the right goals and metrics
Marketers frequently focus their efforts on optimising for digital outcomes such as clicks and conversions – driving the visitor to the brand website so a sale can ultimately take place. But in the real world consumers don’t necessarily buy products direct from brand websites. You wouldn’t visit the Unilever or Persil websites to purchase washing powder, or the Mondelez or Cadbury websites to buy Creme Eggs.
These brands aren’t interested in clicks and online conversions, they want to know whether their digital impressions are making enough of an impact for the product to be top-of-mind when the consumer is pacing the aisles of their local Tesco or Asda. While this viewpoint is most obvious with FMCG products bought in supermarkets, it is just as relevant for fashion or beauty brands selling their products through department stores or other third parties.
Rather than obsessing about clicks and online conversions, brand marketers need to focus on audience data that reflects individual consumer journeys to measure the performance of their advertising in the real world. Is their digital marketing strategy driving physical footfall as well as website traffic, and are those visits resulting in sales at the checkout?
Target those likely to shop in store
In the digital world there is a heavy focus on viewability, with brands understandably reluctant to waste budget on impressions that have no chance of being seen by consumers. Taking this concept offline, brands must invest in impressions served to consumers who will actually set foot in the physical stores where their products are sold.
Marketers are using various methods to drive consumers into bricks and mortar stores. The most obvious – geo-fencing – uses location data to detect mobile users passing by a specific outlet and delivers messaging designed to entice them into the store. But geo-fencing has a number of limitations. Firstly the targeting pool is fairly limited – restricted to consumers using their mobile devices in very close proximity to an individual shop. Secondly, the fact that someone is walking, driving, or otherwise existing close to a store doesn’t necessarily indicate they are inclined to shop there.
Rather than relying on top-level information that a consumer is ‘close by,’ brands must layer geo-location data with other information to understand who the consumer is, not just where they are. In determining the neighbourhood a consumer comes from – for instance – brands can understand the makeup of their household, their level of income, and shopping opportunities in their local area. This insight can be layered with details such as demographic data, browsing habits, and online indicators of purchase intent to build 360-degree profiles that connect online and offline activity without making the consumer personally identifiable.
Using these in-depth profiles brands can target consumers who have the propensity to shop in a particular store and buy its products, rather than wasting spend on disinterested consumers who just happen to be in the vicinity. They don’t need to wait until the consumer walks past the store; they can promote the right products ahead of time to drive pre-consideration and encourage interest, firing purchase intent before consumers hit the shops.
As the rhetoric around the growth of ecommerce growth and decline of bricks and mortar becomes ever more embedded it’s easy to see why brand marketers are focussing their efforts on the digital journey, but before doing so they must take a step back and consider how the modern consumer shops. By taking an omnichannel approach that embraces developments in digital advertising and audience data but does not forget that the majority of conversions still happen offline, marketers can gain a deeper understanding of the consumer and deliver messaging that inspires action both online and offline.
Paul Maraviglia is the European general manager at MaxPoint