Is digital defining the shopping experience?
According to a new Deloitte study, digital platforms such as Facebook and Google “are operating at such scale now that they are shaping customers’ definitions of what a great customer experience is.”
The study, “The New Digital Divide: The future of digital influence in retail,” pointed to the limitations of a single retailer creating a “meaningfully personalized experience” with its customers. They estimated that the customer likely interacts with a retailer six to eight times per year and mostly in a transactional manner.
“Contrast this with the kind of relationship, trust, and understanding of preferences and purchase intent that a digital platform like Facebook or Pinterest can create when they interact with that same customer for several hours a day,” Deloitte wrote in the report. “As a result, almost universally, customers’ preferred method of locating, buying, and receiving products in-store has been redefined by their online experiences.”
Outside social media, the study found two-thirds of consumers now prefer a self-directed shopping journey, up from 30 percent in 2014. Deloitte wrote, “The browser curates the exact assortment they are seeking, far more quickly and easily than a visit to the mall.”
Deloitte’s main advice for stores: Further integrate with those digital platforms. The report states, “Retailers should embrace the native capabilities of their digital touchpoints and integrate with platforms where their customers are already interacting at scale rather than trying to build such platforms themselves.”
Traditional budgeting and ROI measures have also not kept pace with shifts in customer behavior, Deloitte argued. For example, the study found that few retailers leverage an integrated budgeting/planning process that plans holistically across channels. This often results in double and triple counting key metrics such as customer interactions and failing to recognize programs that are decreasing in productivity.
Deloitte wrote, “The pull of these traditional structures is so great that these retailers, should they remain overly outwardly focused on their competitors’ practices, are destined to remain 12–24 months behind in recognizing and meeting their customers’ changing needs.”
Discussion Questions
DISCUSSION QUESTIONS: Are stores losing influence over the purchase journey due to the scale of digital interactions? Why have retailers struggled to respond? Do traditional budgeting and ROI measures have to be revamped to help retailers become more responsive to customers’ needs?
Poll
BrainTrust
Lee Peterson
EVP Thought Leadership, Marketing, WD Partners
Bob Phibbs
President/CEO, The Retail Doctor
This study makes a fairly big assumption that online is winning because it’s a simpler path to purchasing. That’s true but the customer that has decided to buy is probably only 10 percent of the game. 60 percent is in them becoming aware that they have a need or having their interest piqued, 30 percent is considering their options. People go to stores many times for the awareness stage. I think well-merchandised stores and well-trained employees still can provide a much better experience than an algorithm. And let’s be honest — all retail is transactional.
Is all retail transactional? Finding the “Buy” button in a consumer’s brain is requiring more transactions — or should we say interactions — where needs are met, toward the buy-now decision. Retail it seems to me is interactional.
You can’t neglect the fact that digital and in-store experiences can be complementary and become that much more powerful together. For example, if in-store employees have access to a consumer’s purchase history on location they may be able to make better suggestions to the customer. Or, if a consumer can order an out-of-stock item via an eCommerce solution easily paired with their in-store transaction. Channels are only relevant regarding our internal processes. All consumers see is a single brand and single experience, whether they’re on your website or in your store.
I just read something in Forbes that asked, “since everything about shopping has changed, why do we still measure ROI from stores the same way we did 30 years ago?” — great question. First of all, there will be fewer stores and the stores that remain will become more experience-oriented vs. sales-oriented (see: no “Store” after “Apple”) so, yes, the ROI expectations are way off.
All this is of course fueled by Amazon figuring out digital native thinking way ahead of the retailers that came before them. Amazon looks to gain information as an ROI from stores. Smart. Traditional retailers need to pay more attention to the 900 pound gorilla in the board room.
Stores still play a key role in the final purchase influence. Sure, on the web people might build out a mental list of stuff they really want due to how it is presented online. Then, in the store, they come back to their real world and find that it does not look on them like it did on that model, but in their mind they need something. This is where the store SAVES the sale. Associated help better map products to the shoppers needs or desires. The web cannot do that, nor can AR/VR/or online try-on rooms.
Vital to retailers is to establish a common platform that can support the shopper from their interest to their purchase. In the end the idea and concept products may go out the door but their needs are fulfilled in a human-to-human space.
The web is not reality yet — even though some digital pundits may disagree. In our industry creativity is stronger than Facebook or Google.
The question shouldn’t be whether brick-and-mortar stores are losing influence over the purchase journey but rather how the store complements the entire journey beginning at the zero-moment-of-truth all the way through the entire shopping journey — regardless of the channel/platform. The store and the digital interactions should complement one another, not compete with one another. One reason retailers struggle is that all their different agencies want to maintain their client revenues which in turn leads to fragmented and biased advice. This leads to continued siloed thinking and execution. This is directly related to traditional budgeting, monitoring, measuring and ROI math. Leading brands or retailers will not fund what they cannot measure! All channels need to complement and operate seamlessly to support the shopper’s journey and bring value to the shopper first and foremost. You’ll only know if this is true by monitoring, measuring and optimizing in a cross-channel iterative process.
That Three Musketeers “all for one and one for all” motto of monitor, measure and optimize is a key breakdown in retail advancement. Too often the approach of “acceptable ignorance” is applied on the basis that the juice is not worthy of the squeeze. If continuous improvement is not in the playbook, retailers self-marginalize quickly.
The Deloitte study makes very good points. The purchase journey is significantly influenced by digital interactions, and these are interactions that retailers largely don’t and can’t control. Realistically, no retailer can provide an online experience that provides the depth, breadth and richness that digital platforms like Facebook, Google and others can. Furthermore, these non-retailer digital interactions provide an unvarnished objectivity that resonates with some consumers far more than anything a self-interested retailer may offer. Retailers have been incorporating digital platforms into their own efforts for a long time, but this is not the same as controlling them or even significantly influencing them. I’m not sure that it’s a case of retailers struggling to respond as it is a question of how exactly to respond.
I completely agree with Bob. The goal of retailers is not ultimately to gain influence over the purchase journey. Rather, the goal is to sell products and services to customers along their decided journey.
The fundamental problem of retailers today is that whenever they are included as a touch-point along the customer journey they often fail to make the sale. Too often Amazon makes the sale at no profit. And honestly, how can you expect to compete with somebody who is both more efficient than you and seeks no profits?
The good news is that despite the current confusion in the retail industry society would always need well-run physical stores. As Jeff Bezos once said, “the vast majority of retailing will stay in the physical world because people have acute needs, they want things now.”
There are only two possible scenarios. In the first, the current players would adopt a new business model that includes a profitable service component. In the second, Amazon and its clever and more imaginative leader would adopt a similar physical retail model later after most current players are gone.
Which one will it be? It is not too late to save physical commerce. But the time is right now.
Good point about the urgency, Ori. One of the competitive values of digital is that it can be rolled out and start to fuel itself through the benefits it delivers so rapidly. The combination of cost savings and revenue generation make digital the unstoppable force against the immovable object. Paradox solved.
After reading the three posts before me, I want to say “what they said.” And that’s because I too realize that the consumer is doing many parts of the journey via digital because the human-to-human part of retail (especially in chain stores) has been drastically diminished over time. Do we all want to resort to our phones for most of our shopping journey? Perhaps not, but we’re out of great options for on-point human assistance.
That said, I’m a firm believer in the power of a physical store opportunity. I so wish retailers would wake up and smell the coffee when it comes to the “experience economy” and how easy it is to apply the art of behavioral science to their stores.
I think the power of the physical store is interesting at present. I believe that what the consumer wants is the physical touch and look, and that is why they would go to a physical store. Now what is very exciting is how retailers can use AR to combat this. At LFW, Lyst used AR on half-naked models to fashion their new products. It will be interesting to see how they can implement AR to combat the human customer service interaction.
As “digital” has enabled the supply chain and virtually aspects of business operations, the digital sector’s attention has now been turned to marketing. That big amorphous function of business that has so far been shrouded in creativity is being felled with the continuous strikes of the digital axe. Every element in the “Paid-Owned-Earned” marketing model is being addressed by digital which, as an invested industry itself, brings the detachment and objectivity that are essential to creating more productive ways of operating. The CFO, CIO and CTO have long appreciated digital economies, enabling its embrace by the CMO.
In the digital age, Facebook, Google, Amazon, Pinterest and even Twitter own distribution (eyeballs), and know shoppers better than any retailer ever has. Similar to how many major media companies have integrated into Facebook, I can see the same happening for retailers. However, the rub here is that with media content, readers say “I read it on Facebook,” as opposed to saying “I read it in the New York Times or Huffington Post.” The customer will undoubtedly say, “I bought those jeans, top, etc., from Facebook” (though sourced from a given retailer). This change will put defined retailer brands in the back seat and also put more fiscal pressure on retailers as this will further commoditize their offerings, driving prices down.
There is no doubt that traditional KPIs and ROI measures are out of sync with today’s digital business reality. It’s natural for measures to lag change, as with the continued fixation of productivity measures across the brand that ignore all but store performance: comp-store sales, sales per square foot, sales per labor hour and so on. In such a “reality,” operators and analysts see the world as stores vs. the rest in a zero-sum game, in a fast changing shopping environment. Just as retailers designed, built and delivered an assortment of products and services to meet their customers’ needs, they also need to co-create the shopping environment in which their 21st century business lives — and today that extends well beyond their four walls and span of control.
While the Deloitte study does an excellent job of exposing the only reality that ought to matter to retailers — how consumers view, live, and behave in this world — the authors sell short retailers’ ability and willingness to adapt and adjust to this new reality. The winning retailers of tomorrow are starting to invest today in this mindset change. The store will remain the most significant element in the mix yet, keeping in mind that in a thoroughly customer-focused approach, digital becomes THE operating environment from which the next wave of retail winners emerge.
The photo illustrating this article is as rare as hen’s teeth in the vast majority of retailing. I sometimes say there are trillions of dollars sloshing about in the world of commerce, looking for some way to increase sales. The Chicago department store magnate John Wanamaker said, “Half the money I spend on advertising is wasted; the trouble is I don’t know which half.” This is still true, and explains the billions of tech dollars following online, just as they did radio and TV. Does it work? Does it matter?
Clearly online touches people, but the social content is massively diffuse compared to a few programmed radio or television channels. And the people selling “it” are just as avid as the massive industry selling radio and TV. It’s not surprising that supporters of that media industry want to believe that it works. But the photo illustrating the article reminds me of the photo in the Wall Street Journal showing a shopper intently looking at a Walmart TV overhead. Of course the photo was staged, and the lies represented in the stories told couldn’t hold up a phony effort that has now vanished. Long after massive funding had moved from suppliers to the retailer, in support of this foolishness. The emperor has no clothes!
Herb makes some important points.
The point isn’t that people are glued to phones while shopping (they aren’t). The point is that customers are accustomed to having access to instant information from digital devices. If your in-store technologies or associates can’t provide instant information, customers could go elsewhere. Retailers should shop their stores through the eyes of the always-on information crowd and see where the gaps are.
Digital is giving retailers more control over the shopping experience, not less. Only those retailers who treat it as a necessary evil will be hurt by it. It’s true that Facebook, etc. have raised consumers’ digital expectations, but that’s a symptom of the overall digital shift and not the cause. The cause is convenience and personalization. Retailers can do much more in that area by blending the best of digital with the best of in-store. Technologies like mobile self-scanning are a perfect example of this — how could Facebook ever influence the shopper experience more than a retailer’s own app in their own physical location?
I’m wondering if the Deloitte study differentiates by type of retailer, or better yet, by product category. Seems like most attention is on soft goods and electronics when worrying about how retailers can capitalize on digital shopping habits, rather than getting left behind.
Maybe that’s a good way to make sense out of the changes in the path to purchase. In other words, retailers should think about focussing attention and digital participation budget on the products that shoppers increasingly buy or at least research online, The corollary: improve the in-store experience for the other products.
Not all retailers have struggled to respond to this trend. Stores that are jumping on the digital shopping experience opportunity are gaining influence at earlier stages of the shopper journey. There are some great tools that retailers can take advantage of to leverage digital influence in the shoppers’ eyes.
One capability that innovative retailers are implementing is customer experience analytics. This enables marketers and customer experience professionals to quickly understand, analyze and take action on data-backed insights to improve sales, shopper engagement and conversion rates.
Each application will have its own metrics and these metrics will drive the budgeting process more effectively. By 2018, Gartner believes 70 percent of eCommerce will move from B2C and B2B models to models that focus on the individual customer experience.
Shopping is digital in-store, online or where ever we shop. The disconnect? Thinking that each is a separate experience. The line has been blurred for quite some time. Companies like IBM are building new cognitive based computing systems like Watson, to make human, emotion-driven recommendations [ie. the movie trailer in the news this past week] to assist film editors select the best clips for a trailer. Cognitive computing systems are the future of shopping, rather than the current linear, decision tree formats.
Humans purchase aesthetic based products based on human emotion and sensory perceptions based on unique and subjective preferences or biases. New digital technologies designed and programed to process sensory inputs in a human-like manner to make individual product recommendations are the future of the customer experience, at least for the next decade.
Systems able to process millions of product SKUs to make an individual product recommendations to customers, in-store or online or wherever we shop. Customer preference intelligence applications for retailers? Customer preference-based product assortments, customer preference based vertical product development … you know what sold; now you know why, specifically.
Digital IS “shaping the landscape” but they’re doing by offering money losing services to consumers. The saddest reality retailers have to face today is they’re competing against online efforts where investors are willing to lose massive amounts of money.
For example, Amazon Prime drives volume but is a clear money loser for Amazon. Net out, Amazon does NOT have a profitable retail model for traditional retail goods — they’re profit comes from devices, digital content, books/music, and retail services (like the cloud which is over 50% of their profit). Yet, consumers are being led by Amazon Prime to expect retailers to pay them to buy goods.
It’s very difficult to choose how to compete in a situation like this. But to start, retailers need to think more clearly. Online isn’t winning. It remains a tiny part of retail — stuck at under 10% of retail revenue on averages.
I LOVE online retail. But we need to treat it for what it is: A corner of the market. An important corner. But only a corner.
I disagree with the advice about further integrating with platforms like Facebook and Pinterest. I would argue that the scale mentioned for these networks likely is not really greater than the direct traffic retailers are seeing at their own sites. And you only have to look at the poor performance of buy buttons at the social networks to know that consumers are dropping in on the networks during the shopping journeys, but are still buying at the retail sites.
And the statement is incorrect about the only choice being building such platforms themselves. There are any number of embeddable technology choices that bring the social network type engagement to an e-commerce site. One is the next generation wish lists, where simply expressing interest in a future purchase by placing an item in a wish list brings that list “alive.” That means the retailer can now alert to list holder to changes in their items as an alternative to creeping them out with retargeting ads on the social networks.
One reason why Twilio has done so well and will do so well. These developments are now in the implementation phase. It’s not fancy, it just is. Note: I don’t work for Twilio, but I do have a position in my charitable trust. 😉
Branded retailers like Gap and JCrew are utilizing digital interactions to initiate the purchase at the consumer’s fingertips — wherever they might be. They have inserted themselves into the context of the consumers life, needs and desires. They have a relationship with consumers
The challenge for other retailers is that there is no clear owner of the purchase journey. CPG brands increasingly focus on consumer promotions which essentially take the purchase journey away from the retailers. Strong retail brands like Target have done a good job in becoming more than a distribution point, but the purchase journey is still owned by the CPG brands. Grocers and pharmaceutical chains launched promising loyalty programs that could have owned the purchase journey, but have devolved to digital shopping lists and coupon/discount programs — some of the benefits have nothing to do with the retail brand.
A new paradigm on budgeting and ROI is not necessary, but the proper value has to be given to the consumer-brand relationship as a critical element of the purchase journey.
Of course digital is defining the shopping experience because with the Internet, shopping is a truly global experience. Shoppers can find anything they want in the digital world. The challenge now is for retailers to offer customers the right mix of products, delivered at the right price and with a high level of quality to make the shopping experience a good one.