A look at key issues/developments in the dynamic discipline of marketing
Tuesday, August 30, 2016
Gen Z Remains Price Conscious And Seeks Experiential Retail Featured
Retailers aiming to capture a younger audience must understand four major characteristics of the Gen Z shopper: they are very price-conscious, they prefer experiences over material items, they’re not brand loyaland they prefer paying with cash to credit and debit cards.
With Gen Z currently making up 25% of the total U.S. population and representing $44 billion in buying power, brands need to move quickly in order to align their business models to this demographic.
As many as 89% of Gen Z shoppers consider themselves price conscious, according to a study from Interactions Marketing, titled: Next Generation of Retail. They also prefer to spend their money on experiences instead of material items (62%), with two of the top three spending areas being experiential:
Food (80%);
Clothing (67%); and
Experiences with friends (47%).
Additionally, 75% of these consumers prefer to shop at retailers that provide an engaging in-store experience. Members of this generation are likely to seek out products that provide both a memorable experience and instant gratification.
When making a purchase, 64% of Gen Z prefers to use cash as their method of payment vs. credit and debit cards.
Interactions Marketing generated the data from a survey of more than 2,000 Gen Z’ers in the U.S. between the ages of 14 and 19. The study analyzed the shopping habits and preferences of these shoppers so that retailers can engage and interact with them more effectively.
81% Would Switch Brands For Quality
The study dives into the reasons Gen Z shoppers make their purchases. A majority of these consumers don’t display a strong sense of brand loyalty, with 81% willing to switch from their favorite brand if they find a similar product at a higher quality. Similarly, 79% don’t care if a product is from a national or private brand as long as it’s of good quality.
Although brand loyalty may not be a chief concern when comparing multiple items, the brand still matters to consumers mulling over a purchase. The top five factors Gen Z shoppers identify when making a purchase include:
1. Price
2. Quality
3. Brand name
4. Social responsibility of brand/retailer; and
5. Environmentally friendly product
Retail Executives Have No Clue About Digital
I remember attending a conference a couple of years ago, where, as the conference was concluding, the people around me were saying to each other, “I don’t know what the organizers are going to do next year. I mean, omni-channel is done – we’ve figured out what we need to do, and now we just need to figure out how to do it.”
At the time, I kind of agreed. It felt a lot like the tail end of the Internet Bubble, when, desperate to keep the frothiness going, people were moving on from basic internet and holding up mobile as the next big thing. Mobile WAS the next big thing – but it didn’t arrive in 2001. It took until 2007 to get here in any meaningful way.
In the same way, I hear fellow analysts and industry pundits say things like “omni-channel is dead” or try to invent some new term to mean something even bigger and better than omni-channel – in the same way that web people were holding mobile up as the next big thing in 2001.
And at the same time, I look around at the retail shopping experience and think, “Where are the flying cars?” This is scifi speak, by the way, for “We’ve been promised a vast and shining future, and it’s not here yet. Why not? What the heck is taking so long?”
How can both of these perspectives exist at the same time? One view is that omni-channel is over, it’s all figured out, the only thing left to do is get the cogs and gears running, and everything will be great. The other view is that what retailers present as a shopping experience in 2016 still looks an awful lot like the one you could get in 2007. Which, to be really honest, especially when talking about the store, looks an awful lot like the one you could get in 1985 (you know, when Doc Brown invented the time machine).
Well, my partner Brian and I have cracked open the data from our latest benchmark report (due later this month), and what we found answers the question. The disconnect is at the executive level, and it comes from having no clue what digital really means to the retail business.
We’ll go into detail in the report about this disconnect and how it manifests, especially in the largest retailers. But that statement – retail executives have no clue what digital really means to the retail business – actually is pretty obvious, once you think about it. When 90% of retail business comes from stores, when digital has only impacted the business over the last 10 years or so, when even the CMO is more likely to have come from traditional advertising than from digital (and marketing is the department within retail most impacted by digital today), it shouldn’t be too surprising that the executive team has no clue.
Generally, companies deal with these gaps, these blind spots, by bringing in people to educate them. By spending focused effort on understanding what digital means to retail in general, and what it means specifically for their own company. And we’ve had at least 10 years of a lot of people spending a lot of brainpower trying to understand and predict what digital means for retail. So it’s not like there isn’t a lot of material to start from.
So why is this understanding so hard? I think there are a couple of reasons. One, these people were raised in stores, or traditional merchandising or marketing. These are the things that are familiar to them. When faced with uncertainty, it’s easy to fall back on what you know. Two, generationally, these are people who are not digitally savvy. That’s an easy accusation to level, and one that is probably not true in the specifics – my grandmother was teaching herself web page development nearly up to the day she passed away.
But even then, using the tools is not the same as understanding how these digital tools change how customers see the world. It’s way too easy to lose touch with customers, the problems of their lives, and how your brand fits into those lives.
The bottom line is this: no substantive change is coming to a retail enterprise unless and until the executive team understands the nature of the digital transformation that is impacting their business. This isn’t about fixing the store, or even “creating a more seamless customer experience”, a phrase I often hear thrown about.
This is about understanding how consumers are changing their own shopping experiences. This is about understanding how technology – consumer-provided, retailer-provided – will continue to change shopping experiences. And, apparently, until retail executives develop a deeper sense of empathy along those lines, traditional retail will continue to fail to meet consumer expectations.
And those flying cars? They’re still nowhere to be seen.
Amazon charges sellers 'brand gating' fee to curb counterfeits
In an effort to curb a growing problem of counterfeit name-brand merchandise available on its Marketplace, Amazon is requiring third-party sellers to pay a one-time, nonrefundable fee of up to $1,500 per brand, CNBC reports.
Such “brand gating,” in addition to other requirements like showing such evidence as invoices or other paperwork from brands or manufacturers such as Nike and Adidas, will likely be prohibitive for many smaller Marketplace sellers.
"We want customers to be able to shop with confidence on Amazon," an Amazon spokesperson wrote in an e-mail to CNBC. "For certain products and categories, Amazon requires additional performance checks, other qualification requirements, and fees."
Dive Insight:
The new limits and requirements are a blow to sellers that profit from so-called “retail arbitrage,” where they scoop up a ton of merchandise at one retailer and resell it on marketplaces like eBay or Amazon. Retail arbitrage is a mixed bag for consumers: While it can be a way to find otherwise sold-out merchandise or items at a discount, savvy shoppers will often find that an item on eBay or Amazon listed at full price or higher can be found at the original retailer for less.
The problem has been especially acute for Target, which last year faced a lot of disappointed (and even angry) customers who didn’t get a chance to shop for its limited-edition Lilly Pulitzer line when it sold out in stores and the retailer's site crashed. Customers had to go to eBay for many items in the line, at drastically marked up prices.
Sales of counterfeits are even more troublesome for sellers and their marketplace hosts. They leave brands and consumers furious — and, of course, it's against the law.
While Amazon has largely escaped the counterfeit buzz, the problem appears to be growing as its Marketplace expands. Citing concerns over counterfeiting and unauthorized selling, Birkenstock USA, for example, this summerinformed Amazon that as of Jan. 1, 2017, it will no longer offer its footwear on the e-commerce site or its third-party Marketplace, citing concerns over counterfeiting and unauthorized selling.
While Amazon is the dominant e-commerce player in the U.S., with a stellar reputation for customer service and a massive (and growing) membership base, it can ill afford to to cede any ground in those areas over dubious practices by its marketplace sellers. “Amazon’s North Star is the consumer, not the seller. If there’s a collision of the two things, they'll choose the consumer,” Scot Wingo, founder and executive chairman of e-commerce firm ChannelAdvisor, which works with a range of Amazon Marketplace third-party vendors, told Retail Dive earlier this year. “Everyone talks about the customer, but I’ve never seen anyone walk the walk like Amazon does.”
Still, Marketplace purchases account for some 40% of Amazon’s sales (and growing), so keeping those sellers happy is increasingly important, too. More stringent and expensive Marketplace policies, plus what some sellers say are arbitrary and unfair consequences of consumer complaints (some totally unfounded), are a growing source of frustration. Some sellers say they’ve been kicked off the marketplace without being able to speak with anyone at Amazon.
But bottom line, Amazon needs to be able to guarantee that its merchandise and sellers can be trusted... and many sellers realize that, too.
"Amazon feels that they're somewhat under attack and their credibility is under attack," Jeff Cohen, director of business development at Seller Labs, a site to help Amazon sellers, told the audience at last week’s Sellers' Conference for Online Entrepreneurs in Seattle, according to CNBC. "The customer is the most important thing. Sorry, it's not us.”
Amazon plans another big distribution center in Chicago area
For the third time in about three months, Amazon has announced plans to add a huge distribution center in the Chicago suburbs, this time in Monee.
Amazon said it plans a fulfillment center of more than 850,000 square feet in the south suburb, where hundreds of employees will sort, pack and ship small orders such as books and electronics.
The company's statement did not specify exactly how many workers will be in the Monee facility, other than to say it will be "hundreds and hundreds."
It is the latest in a series of deals by Amazon as it builds a network of distribution centers in the Chicago area to meet the growing demand for online shopping.
Amazon in late May said it planned a second large distribution facility in Joliet. The Seattle-based company, which opened its first Joliet building last October, said it will have 3,500 workers in Joliet once both warehouses are operating.
In June, Amazon said it planned to hire hundreds of workers at a new Romeoville warehouse.
“We place our fulfillment centers close to customers to provide the fastest possible delivery times, and the growth in Illinois is directly tied to our increasing customer demand,” Akash Chauhan, vice president of Amazon's North America operations, said in yesterday's announcement of the Monee warehouse.
The warehouse will be built for Amazon at 6521 W. Monee Manhattan Road just west of Interstate 57, Amazon spokeswoman DeAnn Baxter said in an email. She declined to provide an estimated completion date, but said “we expect it to move quickly.”
According to real estate date provider CoStar Group, Amazon will be a tenant in an 856,605-square-foot building that Atlanta-based Seefried Properties and San Antonio-based USAA Real Estate plan to develop on the site. Amazon plans to move into the building in October 2017 on a 15-year lease, according to CoStar.
David Riefe, Seefried's senior vice president of the Midwest Region, did not immediately respond to a request for comment.
"It's clear that Illinois is a growing center for businesses like Amazon that need a strong transportation hub and logistics," Intersect Illinois CEO Jim Schultz said in a statement. "We are excited to earn another investment by Amazon and will continue to work closely with them to expand their presence here."
Intersect Illinois works with the Illinois Department of Commerce and Economic Opportunity on economic development in the state.
It is unclear whether the state is providing financial incentives as part of the Monee deal. Intersect Illinois spokeswoman Kelly Nicholl did not immediately respond to requests for comment beyond its statement.
In addition to large distribution centers outside the city, Amazon also has leased smaller spaces on Goose Island and the South Side to make fast deliveries to homes in the city. Expectations that Amazon and competitors will continue gobbling up urban warehouse space are fueling asurge in industrial development within Chicago's city limits.
Step by step, physical grocery stores are becoming back ends for online shopping
Walmart, Kroger, ShopRite and other traditional chains are jumping aboard, as physical store-less grocery providers like Amazon are moving in.
When I was a kid way back in the last century, I remember that one of my parents’ ideas of a fun Friday night was to go grocery shopping.
Not my cup of tea, and, fortunately, I usually managed to avoid going. But that sense of enjoyable grocery shopping, which was not uncommon among my parents’ generation, is going the way of vinyl records — maybe not completely extinct, but a quaint habit. And grocery stores, like banks and electronics stores, are becoming a blend of online and physical entities.
“People aren’t shopping that way anymore,” e-commerce provider SmartCommerce CEO Jennifer Silverberg told me, referring to the era when customers considered, selected, and bought groceries in a physical store over 30 to 45 minutes or so. Her company connects the makers of consumer packaged goods (CPG) with online customers in settings outside of online stores, such as making a purchase after watching a video.
“We’re seeing a sea change,” she said.
An ocean in that sea change is Walmart, which punctuated its seriousness about becoming digital earlier this month with the $3.3 billion purchase of innovative online shopping startup Jet.com. And the giant retailer recently expanded its initial rollout of its online grocery business to 30 new markets, bringing the total to 60.
Silverberg sees stores that don’t differentiate their physical shopping experiences as increasingly becoming distribution centers for online shopping front ends, either as curbside pickup or shipping centers.
Walmart’s move in online groceries/physical pickup is part of the boom in BOPUS, or “buy online and pick up in stores.”
That trend has already become a major part of non-grocery shopping. Last January, for instance, a International Council of Shopping Centers’ Holiday Consumer Purchasing Trends’ study found that nearly a third (32 percent) of holiday shoppers in the 2015 holiday season used “click and collect,” another term for the same tendency.
According to research firm Field Agent, the most popular click-and-collect retailer was none other than Walmart, with 79 percent of respondents saying they used that service. Although Field Agent queried only about 200 shoppers, and although the most popular BOPUS shopping category was electronics, this kind of online front end/physical back end is clearly becoming a common way of shopping.
‘An inflection point’
Silverberg observed that even six months ago, it was unusual to see customers buying online and picking up curbside, but CVS — whose health products like shampoo or toothpaste are often included in a grocery run — is now doing it at selected stores, as are such major physical grocery chains as Kroger and ShopRite.
Of course, curbside pickup is just one delivery option, next to shipping or delivery by van. Instacart, for instance, specializes in delivering online orders from grocery stores. It’s not clear yet which delivery mode will dominate, but it is clear that online grocery shopping is starting to boom.
Last fall, for instance, management consulting firm ATKearney issued a report that observed:
“Online grocery is finally reaching an inflection point. After years of promise but limited growth, American shoppers are finally warming to buying food and beverages online. According to our latest study of the online grocery market, more than one-third of primary grocery shoppers have purchased groceries online in the past 12 months, a sizeable increase from [2014].”
Investment firm Morgan Stanley reported in January that online grocery sales were about twi percent of the total in the US but had reached about six percent of total sales in the UK and other European markets. For this year, it says 26 percent of US consumers will buy groceries online, a 300-percent jump from last year’s eight percent.
A Nielsen report in 2015 similarly found that about a quarter of consumers in 60 surveyed countries now buy grocery products online, and over half are willing to do so.
Silverberg told me the trend toward online grocery shopping began four or so years ago, when Amazon started pushing smaller items and then later offered automatic reordering through its Dash button.
Fresh produce
While packaged goods have spearheaded the online grocery shopping trend — led by health supplements, pet care goods and laundry/dish products, according to research firm 1010data — the remaining holdout of fresh produce is yielding.
AmazonFresh, for instance, delivers grocery and local produce within 24 hours, while Google Express offers same-day delivery of perishables. Morgan Stanley projects that fresh produce will provide the largest increase of any product for online shopping.
Of course, Amazon’s and Google’s growing position in this marketplace, plus pure-play providers like bulk shopping service Boxed.com, raise the question of whether grocery stores themselves are on their last legs.
And if you’re like me and wonder if you could ever buy bananas without seeing them up close beforehand, Silverberg points out that consumers used to say the same thing about, say, shoes.
As it turns out, for the first time ever I’m thinking of buying some new shoes online. Groceries might be next.
Last week, a Zara customer filed a lawsuit against the company accusing it of misleading customers by posting some prices in euros and others in U.S. dollars, and of making up its own exchange rates to charge more for those items with price tags in dollars. The plaintiff’s lawyers now say they have even more proof of this pricing switcheroo.
The attorneys at Geragos & Geragos posted a video on YouTube (careful: you’ll want to turn the sound down unless obnoxious music is your thing) of a visit to a Zara store in downtown Los Angeles that they say shows the company is ripping off customers with its pricing tacts.
“Since Zara apparently thinks American consumers are stupid, we decided to take the #ZaraChallenge and see how much we would be ripped off in 10 minutes of shopping,” the caption reads.
In the video, they show price tags for individual items, both in euros and in U.S. dollars, and then a calculated “ripoff” amount. In one example, the price on the tag for a pair of black shoes is €39.99, which as of today Google’s currency converter says works out to about $45. So the $79.99 listed price on another tag for the same pair of shoes means Zara is charging $35 more than the euro price on the first tag, for a “ripoff” difference of 78%.
On another comparison, the camera shows a price tag of €29.95 on a navy cardigan, with another of the same sweater priced at $49.90, for a total discrepancy of about $16, or 48%, as the item should actually be about $33. All told, the lawyers claim that that shopping trip would’ve resulted in a total ripoff of more than $175, or 55%.
Might Zara simply be charging more for items sold in the U.S.? Perhaps, but the lawsuit claims that by including prices in both euros and dollars on the same items, consumers are confused into thinking they’ll pay slightly more in U.S. dollars, when in reality they shell out much more than the euro price would indicate.
“[T]he conversion rate is entirely misapplied — to the extent it is even applied at all — such that U.S. consumers are paying far more than the true prices of the products,” the complaint says. Furthermore, Zara’s practice of using euro pricing confuses customers “and lures them to the register,” where they are charged inflated prices that aren’t based on real exchange rates, according to the lawsuit.
Last week Zara called the lawsuit’s claims “baseless,” and said it prides itself in its “fundamental commitment to transparency and honest, ethical conduct with” its “valued customers.”
“We look forward to presenting our full defense in due course through the legal process,” the company said.
When Consumerist contacted Zara US for comment on the video’s claims, we were directed to the company’s previous statement regarding the lawsuit’s claims.
How The American Supermarket Can Best Serve Hispanic And Asian Customers
by Harry Blazer/Food industry consultant and former grocer
The Shelby Report asked me to provide some advice to supermarkets regarding how to best serve Asian and Hispanic customers.
First of all, there is a distinction to be made between ethnicity and race. Currently, the United States Census Bureau defines six race categories:
• White or Caucasian
• Black or African American
• American Indian or Alaska Native
• Asian
• Native Hawaiian or Other Pacific Islander
• Some Other Race
Harry Blazer
So we see right away that while Asian is considered a race, Hispanic is not. Therefore, a person of Hispanic descent is typically defined using both race and ethnicity as an identifier—i.e., Black-Hispanic, White-Hispanic, Asian-Hispanic, Amerindian-Hispanic or “other race” Hispanic. The United States Census uses the ethnonym Hispanic or Latino to refer to “a person of Cuban, Mexican, Puerto Rican, South or Central American, or other Hispanic culture or origin regardless of race.”
Asian can include anyone from Iran to the Philippines. But these categorizations of ethnicity and race, which have found their way into popular language, were designed primarily to track compliance with civil rights laws or for analysis by statisticians at the Census Bureau; they are not necessarily the best ways to categorize and think of your customers.
Naming right
Secondly, I think conventional supermarket operators would benefit by thinking of what has been traditionally referred to as “Ethnic Foods” as “World Foods” (or “Foods of the World” or “Foods from Around the World”)—focusing on the culinary traditions that are associated with specific cultures within nations or regions. So, for example, rather than referring to Latino or Hispanic foods, it would be preferable—and I believe appreciated more—if reference were made to The Foods of Latin America. So even though “Hispanic” broadly refers to the people, nations and cultures that have a historical link to Spain and commonly applies to countries once colonized by Spain in the Americas, today, Latin American cuisines are very different than Spanish and Portuguese cuisines. All “Hispanics” are not created equal when it comes to food traditions—even when it comes to rice and beans. A traditional home-cooked dinner in West Asian Saudi Arabia is quite different than one in East Asian Malaysia.
Latin America consists of 20 sovereign states and several territories and dependencies, which cover an area that stretches from the northern border of Mexico to the southern tip of South America, including the Caribbean. The most commonly accepted boundaries place Asia to the east of the Suez Canal, the Ural River and the Ural Mountains, and south of the Caucasus Mountains and the Caspian and Black Seas. It is bounded on the east by the Pacific Ocean, on the south by the Indian Ocean and on the north by the Arctic Ocean.
Understanding cuisine distinctions
Just imagine the diversity in cuisine between Mexico and Peru, Cuba and Brazil, Jamaica and Argentina. But the differences between Asian cuisines are more dramatic yet. There are six major Asian cuisine categories. For example, the Central Asian cuisine of Afghanistan or Uzbekistan; the East Asian cuisine of China, with its own four major culinary traditions (Cantonese, Sichuan, Shandong, Jiangsu) and its 20-plus major regional cuisines; the South Asian cuisines of India and Pakistan with their own plethora of regional cuisines in addition; and the cuisine of the Middle East (West Asian) to include Lebanese, Israeli, Persian and Turkish, to name a few. Just think about the various styles of barbecue in this country. Or take a minute and look at Wikipedia’s listing of the different kinds of empanadas. Or search for images of Sancocho—a traditional Latin American stew—and see how many different preparations there are.
So, dealing with the diversity and complexity of World Foods in an authentic and convincing manner is beyond the capability of any U.S. conventional supermarket operator. The industry just doesn’t have the food culture, the expertise, the intentionality—or the shelf space.
So what is the plan?
A) Realize that as a rule you will never be able to outdo the well-run local “ethnic” store. They speak the language and in turn have a different relationship with their vendors and their customers. They also know the products firsthand and often buy cheaper and sell cheaper because the store is often a family affair—they don’t follow the same rulebook as conventional supermarkets.
B) Yeah, you can carry some products from Goya, JFC or Patel Brothers. But that won’t get ethnic consumers excited, and maybe not even Anglo-Foodies who want a real and complete cultural shopping experience—at a better price. At least you can carry the 15 or 20 essential grocery items that each major food culture in your marketing area needs. But make sure you have the right brands, at the right price, even if you have to sell them at cost.
C) What unites all food cultures? A love and respect for fresh at a great value—where value is the nexus of price, quality and experience. So get as good as you can at providing the best value in fresh—with particular focus on produce.
D) Great fresh offerings cut across all demographics and ethnicity. And the Latin Americans and Asians, as with all folks with strong food cultures, tend to do much more cooking at home, where eating together as a family is still an important tradition. The “ethnic” customers are potentially your best customers for fresh.
E) Everyone loves a delicious, tree-ripened, sweet, juicy, succulent peach. Or just-picked sweet corn at a great price. So if you are the best value provider at those basics, you will be way ahead of the game (and here Costco comes to mind). But then in addition, you need a good variety of high-quality fruit and vegetables at great prices that make up the food culture’s diet that you are trying to appeal to.
F) At Harry’s Farmers Market in Georgia (which I founded in 1988 and then sold to Whole Foods in 2001), we had 1,200 SKUs of produce. If it grew, we wanted it, and we attracted shoppers from other states because of our quality and selection in fresh. And more than 20 languages were spoken by staff. Dekalb Farmers Market in Decatur Georgia, owned by my brother Robert Blazer, is one of the most successful independents in the country and is a direct importer of all the major Latin American fruits and vegetables. And, in fact, it is a major wholesaler to other stores for these items. Also, Dekalb carries every oriental vegetable that grows in North America and sports the largest seafood department in North America. The store sells no commercial groceries yet is a major attraction for shoppers from food cultures from around the world because of the diversity and value of their fresh offering.
G) Ask the Latin American and Asian folks who work for you where they shop, then go there and look—with them. And while you’re at it, you will learn why they don’t shop with you and perhaps what it would take so they would.
Which of the major conventional operators have been successful at serving certain non-American food cultures?
• H-E-B has learned how to sell to the Mexican customer, in particular, and Latin American customers by extension. But it made a big commitment and investment to acquire that expertise. Years ago H-E-B started a separate Mexican-based division in partnership with a Mexican retailer and then brought those learnings back to Texas, which they integrated into their existing estate and then went on to develop a separate format called Mi Tienda.
• Publix has targeted the second generation and aspirational “Hispanic” shopper and the non-Hispanic foodie in its Sabor stores, where signs and staff are bilingual and Latin American products coexist with traditional conventional offerings. The shopping experience is a major step up from the bodega in the barrio.
• Loblaw wanted to become better at serving the fastest growing ethnic group in Canada— Asians (in particular South and East Asians). When it came to East Asians (Orientals), Loblaw figured out that the quickest and simplest way to get up to speed was to acquire the expertise rather than try to grow it internally. Thus, they bought the best oriental store operator in Canada—T&T Supermarkets.
Whether you decide to partner, acquire or grow the capability internally, having the intention and the expertise to get the ethnic shopper in your market area to take you seriously is now a must. Yes, you will get your share of those shoppers by being the best conventional operator in the area. But if you can raise your game on the fresh side of the store—especially in the quality, price and diversity of your produce offering—you could end up becoming the primary shop for the Latin American, Asian or whichever food culture is in your “’hood”—for produce and then perhaps, beyond.
What this month’s Jet.com sale means for the future of retail
One in ten retail sales in the United States –- a projected $373 billion in 2016 -– happens online. Forrester predicts total U.S. online retail will grow to $500 billion by 2020. That number will only continue to increase globally as more businesses take core operations to the web.
Retailers grasp the web-focused future of the industry, but the sale of Jet.com to Walmart earlier this month has sped up the shift and validated the online marketplace approach to e-commerce.
Moving Storefronts Online and Logistics Next Door is a Winning Model
With the sale of Jet.com, traditional retail significantly moves into the business of online storefronts with global reach and locally-sourced logistics. The move by Walmart follows years of trying to compete with Amazon’s e-commerce success fueled by a fundamental shift in consumer behavior toward on-demand quality.
More importantly, Walmart buying Jet.com and Macy’s decision to close 100 stores in order to boost online operations this month does confirm that the next generation of retail will be dominated by online sales and direct-to-consumer logistics companies.
Global retail sectors once defined by brick-and-mortar, face-to-face customer interactions – selling items from electronics to books to automobiles – now need to consider incorporating the online marketplace model originally created by Amazon to differentiate during the dot com boom.
Next generation retailers will move away from storing goods in numerous local retail stores and into regional distribution centers.
Consumers will browse those goods online and have them delivered directly to them, increasingly on demand, with easy return policies. This means less inventory, more selection and lower prices being delivered to an increasingly urbanizing America where retail space costs are rising and storefronts start to not make business sense.
This model helped Amazon capture close to 60% of the U.S. online sales market growth in 2015. Retailers who successfully subscribe to a version of it will be able to capture some of that online sales market share. Retailers who don’t entertain adopting the model risk fading away completely.
(Photo by Jaap Arriens/NurPhoto via Getty Images)
The Point of Sale is Now Anywhere with an Internet Connection
Amazon, Jet.com and other leading online-first retailers create and continue to improve purchase-to-delivery models to reduce backend friction. The resulting supply chain efficiency delivers consumer access to goods at consistently lower costs.
In order to succeed in this new environment, new, legacy and smaller companies alike will need to move beyond traditional sales to provide convenient, reliable and on-demand online service to customers looking for their next pair of shoes, suit, headphones – even their next car.
Consumers with access to the web can search, find and purchase products from anywhere. They can use the internet and their own connected mobile devices to read product information, survey options and complete purchases. And third party review sites like Yelp and testimonials on company websites and consumer message boards enable shoppers to hold retailers accountable better than ever before.
In the near future, retailers will need to incorporate consumer freedom into their sales models to meet the customer whenever, wherever to complete an online sale.
Retailers Must Invest in Both Technology and Convenience
Driving down the costs associated with buying and selling allows these retailers to spend more on technologies that will connect suppliers with buyers and shorten the distance between point of sale and delivery.
A technology-powered focus on finding new products and securing logistics will allow online-focused companies to win over today’s device-wielding customers. Retailers should use the web to target consumers who care less about who delivers the goods, and more about their price, quality and convenience.
Facebook did not create social networking. Mark Zuckerberg and his team created technology to do it much better. That’s what legacy leader Amazon and relative newcomerJet.com have done for retail. They have built web-based models that cut costs for buyers and sellers. Models that other retailers can riff off of.
Online marketplaces that allow consumers who value quality and convenience above all to search for goods and services they need from the comfort of anywhere. Walmart took note of Jet.com’s prowess and scooped up a leading e-commerce platform that will help define how the company, and retailers in general, do business moving forward. Online, on-demand and on a consumer’s device screen.
