PROFILE

Stephen Kraus

Chief of Insights, SimilarWeb
Stephen Kraus is Editor-in-Chief of Market-Intelligence.io, and Chief of Insights for SimilarWeb, a market intelligence firm that aims to track usage of every website and app in the world. Steve is author of three books and dozens of articles on consumer insights and digital trends. He insights are widely cited in the media, and he is a veteran of hundreds of presentations at conferences and client events. Steve received his Ph.D. in social psychology from Harvard University, where he twice won Harvard's award for teaching excellence. To learn more, visit: <a href="http://www.stevekraus.com/"> stevekraus.com </a> and <a href="https://www.similarweb.com/"> similarweb.com </a>
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  • Posted on: 08/21/2018

    Ross Stores is on an off-price roll

    From an economic perspective, the retail marketplace has essentially split into three segments: the wealthy (top ~1%, seeking true luxury experiences), the affluent (top ~20% or so, seeking premium products and the occasional luxury treat, but still with a value-orientation), and mainstream consumers (everybody else). For a consumer behavior point-of-view, “middle class” consumers increasingly behave like those who are struggling, in terms of their value-orientation, openness to store brands, willingness to forgo a nice experience or good customer service for a deal, etc. It’s within these three segments that growth opportunities are to be found, and Ross is thriving at the lower end. Dollar stores have been thriving for the same reason -- clear positioning in a growing segment. The decline of Sears and JCPenney and Kmart have certainly been fueled by shift toward e-commerce, but as Ross is showing, it’s possible to thrive even without an e-commerce option. Sears, etc. are struggling because they got caught in the middle, without a clear value proposition, still trying to connect with a thriving middle class that doesn’t really exist anymore.
  • Posted on: 08/21/2018

    Do CPGs need their own voice for Alexa?

    I’m sure CPG brands would love to have distinctive voices – and by extension, personalities – for their brands. As the article points out, brands have aspired to this for decades. I think the question is: What motivation does Amazon have to allow brands such a distinctive presence on their site? Some brands have long complained that Amazon isn’t a good brand building platform, and certainly one possible application of Alexa is to steer customers toward Amazon-owned or sponsored brands. I would imagine that eventually brands might have to pay a premium for the right to have a more distinctive branding voice within Amazon, and I imagine most brands would pay it – Amazon’s consumer reach has become so extensive, most brands can’t afford not to. (Note: This whole dynamic is not just specific Amazon – the same dynamic is true of other highly influential sites that have historically been “intermediaries,” such as online travel agents or Google’s shopping services.)
  • Posted on: 07/20/2018

    Retailers and brands collide

    Retailers and brands have always been frenemies. They need each other – brands need distribution channels, and retailers need stuff to sell. But ultimately they are fighting over the same pot of consumer dollars, so while they aren’t typically competitors, they certainly do have competing interests at the heart of their relationship. Those fundamental dynamics have been inherent in the relationship literally for decades, so that isn’t like to change. And there’s always some cross-over – e.g., Sears had success for decades as a retailer, and owned brands like Craftsman – but DTC brands struggled to get distribution in the pre-Internet era. But the Internet’s ubiquity and consumer interest in new brands had heighted the pace of change, and the complexity of new models for interacting. The pendulum swung heavily toward a few retailers with dominant online presences, and now DTC brands are counterpunching. Retail has always been a hard business with often-thin margins, so more innovation and cross-overs will come – such as retailers creating their own brands, or retailers partnering with brands in new ways (e.g., Nordstrom carrying DTC brands). One key is that brands are now able to use market intelligence solutions to provide gain full visibility into what happens on dominant retail sites – information like search activity and conversion rates on Amazon. As brands become more empowered with information, the dynamics of the relationship will change further.
  • Posted on: 07/19/2018

    Prime Day success extends beyond Amazon

    Amazon’s brief outages at the start of Prime Day were a “quality problem” – the problem being that approximately a gazillion people all went to the site at once. At the end of July, historically a slow time for retail. And they turned it into their biggest sales day ever. The most impressive part is how many new Prime customers they signed up – those customers are going to spend more throughout the year. The fact is that retail holidays continue working (Black Friday, Cyber Monday, China’s Singles Day, Prime Day, etc.). And the data generally suggest that these generate new sales, rather than just pull in sales that would have happened at other times. But even if it just leveled out sales throughout the year, that would be of benefit as well – remember that Black Friday got its name as the day when retailers turned profitable, and no business would choose to go 11 months of the year as unprofitable. So expect more retail holidays. And with Amazon’s resources, they can make it a pop culture event that every one is talking about. When it comes to Prime Day, retailers would be wise to ride the wave of consumer shopping Amazon creates.
  • Posted on: 07/18/2018

    Direct-to-consumer brands key to Nordstrom’s assortment

    Nordstrom has been weathering the department store “apocalypse” relatively well through a combination on innovation and focusing on their core upscale brand/audience. Partnerships with appropriate new DTC brands is an example of both. And there are a growing number to choose from, as one side effect of Amazon’s dominance has been the growth of innovative new DTC brands, even in CPG categories which historically have always sold through retail outlets. Customers get a wider selection, and a sense of being in-the-know by connecting with new “hip” brands. Win-win.
  • Posted on: 07/09/2018

    Amazon announces Prime Day-and-a-half

    Amazon has shown over the past two years that they increase their already industry-leading performance with Prime Day. Amazon gets about 60 million visits a day (!) in the U.S – that ranks it #5, behind four sites that ad-supported and less transactionally-focused (Google, YouTube, Facebook and Yahoo). And Amazon’s conversion rate is 8%, which is among the highest in the world. On Prime Day, their traffic surges by 65-70%, and their conversion rate rises to 11-14%. For Prime Day 2017, we saw evidence that people were staying up late the night before to jump on sales just after midnight – expanding to 36 hours may alleviate some of that pressure that consumers feel. And there is evidence that it generates new sales – not just pulling in sales that would have happened eventually. Even if it did just “re-distribute” sales from other time periods, that alone would be of value – remember that Black Friday got its name because that’s when retailers started making a profit for the year, and no company would prefer to remain unprofitable until the last five weeks of the year. So expect Amazon’s Prime Day pushes to continue getting bigger and bolder. If you are competing with Amazon, first of all, good luck. Second, I’d recommend trying to ride the wave. They will devote tremendous resources to stoking consumer demand – find ways to leverage that spending fervor for your own benefit
  • Posted on: 06/29/2018

    Will Amazon’s PillPack acquisition disrupt the retail pharmacy business?

    Expect massive disruption in the pharmacy business. An outsider’s perspective on the big pharmacy chains: their business revenue is driven by their pharmacy sales, but their broader strategy (historically at least) has centered on building retail stores to support their non-pharmacy sales. Walgreens, for example, gets 69% of its revenue from pharmacy sales; retail sales as a percentage of their revenue has dropped from 37% to 31% over the past five years. But historically (e.g., Jim Collins Good-to-Great era) the growth strategy of pharmacy chains has effectively been: find a high density of relatively affluent customers and saturate those neighborhoods with retail stores. It will be a 1-2 punch: Delivery of prescriptions would be very convenient for most consumers, and Amazon is already hard at work figuring out how best to deliver the low-price convenience items that make up pharmacy retail.
  • Posted on: 06/27/2018

    Dollar General pilots scan & go tech

    Dollar stores had a great run over the past few years – stock prices for Dollar Tree and Dollar General hit all-time highs in Q1 2018. The bifurcating economy is creating growth at the extremes of the economic spectrum, and this is one manifestation of that. But both stocks are off their highs (Dollar Tree ~-20%, Dollar General -~5%). Our data suggest traffic to their websites is showing a similar general pattern – now trending down after a good run. Dollar Stores are facing strong competition, particularly in the digital space. Low-cost/low-quality overseas suppliers are increasingly selling via Amazon. The Wish app has been extremely popular, essentially selling dollar-store-style products with the convenience of online shopping. Dollar Stores need to innovate to keep pace, and leverage their strong retail geographic coverage -- this new "scan and go" app is one strategy they are testing to respond to these competitive challenges.
  • Posted on: 06/21/2018

    Best Buy makes health and wellness tech a strategic priority

    There is a lot to like about the consumer health market. Certainly the consumer and health sectors of the economy have grown strongly – that’s why Walgreens replaced General Electric in the Dow Jones Industrial Average. And there’s still plenty of room to grow, between the aging of the Baby Boom generation, growing Millennial interest in health wearables/apps, etc. And there aren’t dominant brands in many health sub-categories, at least not that have made great connections with consumers, so that opens opportunities as well. New players are trying to expand their scope to incorporate health care (e.g., the partnership of Amazon, Berkshire and JP Morgan), but it remains to be seen how successful they can be. The question for Best Buy (and other non-health players) is whether they can broaden their brands to encompass health in a way that resonates with consumers. Certainly Best Buy has reach and name recognition. Our data show Bestbuy.com brings in nearly 100 million visits a month in the U.S. – although that’s down about 10% from the same time last year, that’s still a lot of traffic – it puts them among the 10 largest shopping sites in the U.S. And obviously they’ve got a big retail footprint as well. Expect major partnerships or an acquisition if they are serious about leveraging their scope in a foray into health care.
  • Posted on: 06/20/2018

    Neiman Marcus results show the latest sign of department store life

    Neiman Marcus has been successful in tackling one of the most pervasive challenges facing luxury brands today – how to evolve so that they are relevant to today’s consumers, yet also remaining true to the elements of their heritage that made them successful in the first place. They have embraced their upscale nature, and avoided the “muddle in the middle” positioning that has left many department stores struggling. And unlike many luxury brands, they have successfully embraced digital media. Our data shows that traffic to NeimanMarcus.com is up 10-15% vs. last year (in contrast, traffic to their Last Call discount site is much smaller and largely stable). They reported that their online sales are up 17%. Department stores obviously remain a challenging category, but Neiman Marcus illustrates how differentiation and branding remain more crucial than ever, particularly in challenging categories.
  • Posted on: 06/07/2018

    Rue La La acquires Gilt Groupe in a flash

    It’s the nature of many digital markets – a clear category leader emerges that pulls away from the pack, and gobbles up competitors as they struggle. Our SimilarWeb data show that visits to RueLala.com have remained roughly stable over the past 1.5 years, at nearly 3 million visits a month; but in a weakening category, stability is (at least temporarily) something of a victory. Over the same 1.5 years, Gilt.com’s traffic has dropped about 20%, losing its lead and falling into near-parity with Rue La La. Other flash competitors like HauteLook.com and BeyondTheRack.com have seen traffic declines as well. The broader challenge is that the flash sale concept feels “so five years ago.” Today luxury sensibilities skew more toward experiences than things, and consumers have come to expect good value all the time, not just when clock on a flash sale is counting down.
  • Posted on: 06/07/2018

    Millennials spend like crazy on their ‘fur-babies’

    Several studies have shown the strong connection that Millennials have with their pets, which certainly translates to spending. Some of it is the “pet as kid replacement” phenomenon – birth rates have dropped, with Millennials on average getting married later and having kids later (ok, perhaps “replacement” is a little strong, but certainly being child-free frees up discretionary time, money and emotional energy). And some of it is the “pet for unconditional love” effect -- loneliness and depression are on the rise, fueled in part by weaker social bonds (despite the ubiquity of social media). Brands like Chewy have ridden this wave. They had very strong growth (Petsmart bought them last year) by connecting with digital-native mobile-first Millennials who want to buy online and are open to new brands. They connected with Millennials with both elements of their core offering (the convenience of delivery, good service, good value), as well as their positioning and communication (e.g., YouTube videos posted by their pet-loving employees, which come across as very authentic). As Millennials move into middle age, opportunities are growing for a new wave of brands disrupting categories related to home, family, investments and, yes, pets.
  • Posted on: 06/05/2018

    Is data-driven marketing holding back storytelling?

    No. Data-driven marketing is not holding back storytelling. In fact, data-driven marketing is potentially a huge boost for professional storytellers (in this context, marketing & insights teams) by grounding their stories in fact, and sharpening the practical implications of the stories. These days, the most compelling stories have their genesis in data. For all its shortcomings, data -- specifically, comprehensive market intelligence data that paint a complete picture of a marketplace -- remain our most comprehensive and most objective means of arriving at the truth. In fact, I would argue that data-driven marketing is being held back by a lack of compelling storytelling. Spreadsheets and algorithms do not inspire organizations into action. Action is shaped by stories that provide vision and understanding and inspiration and emotion. Storytelling in turn is being back by the double-whammy of hiring people with weak storytelling skills, and then not training them up. I think most companies now recognize the importance of storytelling, so it is generally rewarded in corporate cultures today; when it comes to storytelling, the problem is on the supply side, not the demand side. The fact is that storytelling is hard. We like to engineer solutions; it is hard to engineer stories. Storytelling takes a unique combination of right/left brain skills (data savvy and language as well as creativity and visualization), and the ability to understand data in the context of broader social and marketplace trends. The chart above shows that the most commonly cited challenge with data is “telling the right story.” And the interactive poll to the above right (admittedly of unknown scientific validity) shows that 50% say retailers are using data to support story-telling “very ineffectively,” and an addition 40% say “somewhat ineffectively.” So data-driven marketing isn’t holding back storytelling; a lack of storytelling is holding back data-driven marketing.

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