As physical brick-and-mortar shopping melds with the digital world, customer experience is the defining battleground since shoppers can now engage with retailers at any time and from any place using different devices. This is about far more than just online shopping. New capabilities have come into the market that are transforming the shopping experience itself, especially in the store, where a majority of retail sales continue to take place. Retailers can avail themselves of leading edge cloud-based solutions, purpose-built to fuse together the digital and physical shopping experience, bringing new services and values to shoppers.
According to the Wall Street Journal, Amazon’s recent acquisition of Whole Foods "highlights the convergence of digital and physical shopping and represents a significant shift in the competitive landscape. For Amazon, which already has access to a wealth of customer data, the acquisition gives the e-commerce player an understanding of what consumers want from their in-store experiences as well as a brick-and-mortar foothold."
Digitally engaged shoppers are already impacting a significant portion of sales. In 2016, 51% of in-store grocery sales were influenced by digital technologies somewhere along the path to purchase, up from 33% in 2015, according to Deloitte Consulting’s study, The Grocery Digital Divide. During a recent earnings call, Kroger reported that it saw a 30% growth in new digital customers in Q1 2017 and a 30% growth in digital visits.
Successful digital engagement is built on a foundation of relevancy and personalization and requires a tight, seamless and real-time integration with the retailer’s app, website, email, e-commerce, text messaging and even social media channels to provide the user experience customers expect. According to the Deloitte study, 80% of surveyed shoppers have used a digital device to research grocery products, and 77% have used digital channels such as cooking blogs, recipe websites and social media to learn about products during the awareness stage.
While traditional brick-and-mortar retailers are moving online, they are falling further behind. As Amazon and Google push to be everywhere, supermarket retailers struggle to even have a cohesive mobile presence, an imperative today with 34% of respondents saying they use a smartphone to help them choose a brand during a shopping trip, according to the Deloitte study. As reported on eMarketer.com, in 2016, more people accessed the internet through mobile devices than traditional desktop and notebook computers, and 86% of the time online via mobile devices was spent within apps, not mobile browsers.
Yet traditional retailers are slow to understand the importance of mobile and especially the mobile user experience. Case in point: Safeway shoppers must use three different apps (basic grocery app, pharmacy app and online shopping app) to interact with the retailer, which is not exactly a friendly, cohesive user experience.
Adding fuel to the fire, CPG brand manufacturers are aggressively redirecting massive marketing budgets to shopper marketing initiatives and digital marketing, forcing retailers to focus on growing digital customer engagement. CPG digital marketing budgets have grown an estimated 280% from five years ago while shopper marketing budgets have more than doubled, according to recent research from Cadent Consulting Group.
While maintaining access to industry marketing funds is the stick, increased shopper spending is the carrot. Effective marketing personalization delivers increases in customer spending of 5% or more. Forrester found that companies who fully invest in modern personalization will outsell their competitors by 20%. These gains are understandable when 88% of consumers say they’re more likely to shop with retailers that deliver personalized and connected cross-channel experiences.
But many retail executives find themselves in foreign territory as retail success demands a shift from the product-driven past to a customer-focused future. While comfortable with supply chain logistics, in-store merchandising and labor efficiency, appreciating the nuances of mobile app user experience, omnipresence via voice-enabled commerce and automating replenishment of household goods through IoT technology leaves many retailers flummoxed.
Given all this competitive activity, industry executives need to get up to speed fast. The $650 billion supermarket industry is rupturing in real-time as grocery buying moves online and technology driven innovation explodes across the supply chain. Another recent Wall Street Journal article calls out that there were 25,380 grocery stores with at least $2 million in annual sales in 2016, and the number of stores is expected to drop to an estimated 19,000 by 2021; that’s a decline of nearly 25% in the next four years.
In this stark future, retailers’ ability to meld the physical and digital worlds and drive compelling digital engagement with shoppers is a must-have capability.
Editor’s Note: This is the first of a four-part series.
Gary Hawkins is the founder and CEO of the Center for Advancing Retail & Technology (CART). He can be reached at firstname.lastname@example.org.