Retailers are bringing a rusty knife to a cyber wars shootout
Dec. 2, 2015 | by Chris Petersen
Courtesy of IMS
The headlines Cyber Monday were pretty clear: retail store traffic and sales are down, online is up … again. Well duh! I'm sure the latest stats are not surprising to most consumers who are increasingly shopping omnichannel. What is interesting is the pundits' response that traditional bricks and mortar retailers need to "focus more online." But most, if not all, major retailers already have websites, so what's the issue? Building a website does not mean "they will come." Today's omnichannel shoppers have grown accustomed to services and experiences at a whole different level. To borrow a western movie metaphor, most retailers are bringing an old knife to fight cyber wars with Jedi's wielding light sabers.
Why this is important: There is an old saying "all is fair in love and war." You can add retail to that saying. To win, you have be more than show up at the game. Winning at retail requires new strategies, and even new metrics for competing online.
Retail store numbers are down for Black Friday … Well duh!
As you sat at work shopping on Cyber Monday, you were probably seeing retail store numbers were down over the Black Friday shopping weekend. In fact, Bloomberg reported "online shoppers outnumbered their brick-and-mortar counterparts during U.S. retailers pivotal Black Friday weekend." Most reports also indicate retailer store sales were down by 8 to 10 percent, while ecommerce sale were increasing by 10 percent or more on both Thannksgiving and Black Friday.
What amazes me is some retail executives and retail pundits found the magnitude of this shift to be a surprise! Fortune wrote over the weekend that "integrating stores and ecommerce is a key, top executives say." Um. Hello? The stats from Black Friday are confirmation of the broader trends that will continue:
Stats need to be put into context … but the major trends are clear
It is always dangerous to look at a percenatage change. Retail store sales were down by as much as 10 percent in the U.S. Is that significant? Ten percent of 100+B is only 1 billion. But, it definitely affects those stores that increased inventory so that they would be in-stock for the holidays where they could trump online by having instant delivery from the shelf.
The percentage change can be misleading if you don't also take a look at the base numbers. Online sales still only account for 15 to 25 percent of U.S. retail sales (depending upon the category). But, before retail stores dismiss this year's Black Friday results as an anomaly, they should consider the following stats:
The bottom line highlighted by this year's holiday trends is: consumer shopping behaviors have already changed, and are continuing to shift toward be more omnichannel.
Retailers can't win if they only bring a knife to a cyber war
"Never bring a knife to a gun fight" is a western movie metaphor describing a situation where a character enters a fight with what he thinks is sufficient, only to find that he is severely outclassed weapon-wise. It is a perfect metaphor for many of today's retailers. Not only are they just armed with rusty knives of the past, they are now literally fighting a cyber war against Jedi with light sabers. (Pardon the Star Wars metaphor update, but the Force is about to be unleashed everywhere this month. And parenthetical, online advance ticket sales are through the roof.)
In much of the retail press and analyses, there is a simple dichotomy being drawn between stores and online. It is almost as if there is an assumption that if retailers just got serious about online retail, they can compete with the like of Amazon, Alibaba and eBay. Not so fast! Ecommerce has morphed at warp speed. Simply setting up and selling on a website is not enough. Many traditional retailers simply do not understand the CONSUMER criteria for a holistic, satisfying shopping experience.
3 critical ways retailers must change to remain competitive:
- Customized service and shopping = customized pages
Retail System Research (RSR) reported "85% of retailers showed the same home page to both new and returning visitors." It's as if retailers are using the same approach for building websites as their stores – build it and they will come.
RSR also reported "74% of IR100 [top 100] sites have no memory of past products browsed by users during previous visits." This forces shoppers to start the entire discovery process over again when they go back to a website. Traditional retailers can NOT compete by merely putting physical shelves and products online.
- Personalization is the NORM, not the exception
Parallel universes may exist … but not for today's shoppers. The universe that today's shoppers live in is spelled AMAZON. Every shopper who visits Amazon sees a different page than every other shopper.
To use the Star Wars metaphor, you can think of Amazon as the "Death Star" if you like, but they are setting the new standards consumers now expect in their shopping universe. Amazon is at a completely different level. Amazon has invested the time and resources in building the infrastructure to know exactly what we have searched, what we've purchased, and what we are likely to buy if pages are customized to us as individuals.
Retailers can cling to their knives, history and antiquated websites, but they have to do battle in a universe where consumers expect Amazon personalization that focuses on them … and makes it oh so easy to buy.
- Stores that follow you home … and everywhere
Yes, it can actually be annoying at times, but the state of the art is the "store" now follows you home on your phone. Your online searches continue to pop up with suggestions in email, and even feature offers on your Facebook and social media.
How many times did you shop Amazon this past week and see an Amazon ad in email, or on Facebook? And, how many of those ads were exactly what you searched for online? Amazon measures everything. They know that today's consumers shop anytime and everywhere … and not every purchase decision is made in a single online session. They follow you home, to your office and on your phone. It's oh so easy to just click and purchase rather than make another trip back to the store.
Results count but the metrics must also change for traditional retail
There is one more very powerful and salient observation: retail metrics themselves are antiquated and completely out of date.
For today's consumers, shopping is anytime and everywhere. Purchases occur somewhere in that journey in store, online or in the car. The consumer is the new POS, and they decide when, where and how to buy … and how to pay.
The traditional metric of store sales vs online sales doesn't matter to consumers. Tomorrow's survival depends not just on store sale metrics, but whether retailers can grow total sales across BOTH online and in store.
Oh by the way, I ordered my Echo directly from Amazon on Black Friday because it was $30 cheaper, and quicker than going to Walmart and fighting all the traffic.
No comments:
Post a Comment