Retail is rapidly evolving to serve increasingly connected shoppers:
• 62% of consumers worldwide now go online for part of their shopping journey (Ernst & Young, 2011).
• 79% of UK 25-34 year olds who use the Internet before purchase are influenced by social media (Ernst & Young/YouGov, 2011).
• 40% of US cell phone owners use a social networking site on their phone (Pew Internet & American Life Project, 2012), creating the potential to quickly share both positive and negative shopping experiences.
US-based global advisory services and market research firm IDC Retail Insights has dubbed these connected consumers ‘5i’ Shoppers – instrumented, interconnected, informed, in place and immediate.
To deliver the experience these 5i shoppers demand, retailers need to understand how to engage with them across all the channels they use.
With consumers who are always connected, retailers must be on their best behavior. “It’s as if the customer is constantly peering in your shop window,” said Leslie Hand, research director at IDC Retail Insights. “Your brand, your reputation and your products are on display all the time, for all to see, everywhere.”
Failure to understand this new environment can be costly, as feedback on every shopping experience – good or bad – can circle the globe within minutes of it happening.
“There is real power in social media,” said Beverly Macy, author of The Power of Real-Time Social Media Marketing. “You can either harness that power and use it to your advantage as a brand, or it can potentially bite you, hurting your brand in the process.”
Retailers who understand how to engage with consumers across multiple channels – providing an ‘omnichannel’ experience – stand to benefit.
US fashion retailer Nordstrom, for example, combines social media with shopping apps, on-the-spot item location and register-free transactions. It hasn’t all been smooth sailing – the company recently abandoned an experiment in tracking smartphone signals in-store after protests from shoppers. But Nordstrom is making its omnichannel strategy work.
of consumers worldwide go online for part of their shopping journey. Ernst & Young
“Nordstrom realized years ago that it needed to start connecting the dots with technology because consumers were moving in that direction and it needed to be ahead of the curve,” Hand said. “It has made acquisitions around social media and daily deal sites, and increased the size and profitability of each basket.”
Philip Clarke, CEO of UK supermarket Tesco, told delegates at the World Retail Congress Asia Pacific 2013 in Singapore that the company’s future growth demands that Tesco “change the way we engage with our customers and embrace digital retailing.” That has been the case in South Korea, where the rollout of virtual stores in subways and bus shelters resulted in a 76% increase in registered users of the company’s mobile app and a 130% rise in revenues for Tesco subsidiary Homeplus. “In the future, app development is going to be just as important as property development,” Clarke said.
GETTING THE PICTURE
Understanding the big picture of omnichannel-customer behavior is a key challenge for retailers.
“A customer’s journey might start online with a social interaction with a friend, or inside the store where they might pick up their mobile to compare the product with what other stores have,” Hand said. “Every shopping event – whether or not it’s a buying event – is just as important as the others, because they all feed into the purchase decision.”
“There is real power in social media. You can either harness that power and use it to your advantage as a brand, or it can potentially bite you, hurting your brand in the process.”BEVERLY MACY
Author of The power of Real-Time Social Media Marketing
Retailers need to be able to assimilate, analyze and respond to information from all the channels their customers use. Cases like Nordstrom emphasize the need for sensitivity to customers’ concerns about privacy and how that information is gathered. But if a retailer is successfully engaging with the consumer through digital and social media and in the store, a lot of that knowledge is already available.
“Collecting and understanding the information that people are freely giving about themselves on social platforms, as well as data from their interactions with apps, online and through mobile devices, is crucial,” Macy said. “Some companies are now using systems that collect this type of data and are turning it into intelligence that helps retailers.”
COLLABORATING WITH CUSTOMERS
Information on digital and social media flows both ways, and retailers are realizing that 5i consumers expect a collaborative relationship with their brands. “Our Facebook page has helped us evolve our marketing from merely broadcasting to customers to a two-way dialogue with them,” said Lou Jones, head of online and digital marketing at British multi-national retailer Marks & Spencer.
Global fashion brand Benetton, meanwhile, is using 3D modeling, information intelligence and social and collaborative apps to capture consumer involvement alongside input from factories, suppliers and designers – all groups that include 5i consumers. Extending collaboration in this way has enabled the company to develop new collections more quickly, saving time and money in responding to new trends and customer demands.
“Organizations must align their entire value chains to develop collaborative partnerships with consumers,” Ernst & Young said in its 2012 report, “This Time It’s Personal: From Consumer to Co-Creator.” According to the report: “Customer collaboration is particularly essential in innovation.”
Rising to the challenges of digital and social media will be an ongoing learning process as new channels continue to emerge. But forward-thinking retailers like Tesco, Nordstrom and Benetton are gaining the understanding they need to reach the 5i consumer.
“It’s all about being more responsive and communicative,” Hand said. “How you extend your presence and create more personalized, virtual marketing that engages the consumer – that’s what will keep you on top of the shopper’s mind.”