The State of Retail Marketing- UBM Tech - 2013

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This survey of 160 retailers in the US Market details how retailers are fundamentally rethinking their go-to-market plans and finding ways to modernize the front- and back-end operations that support these efforts.The survey also finds how today's digitally empowered consumers are transforming the retail industry and creating important new opportunities for innovative companies. It highlights how for many retailers, making the right decisions about how to serve digitally empowered shoppers can mean the difference between surviving and thriving in today's market.

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The State of Retail Marketing- UBM Tech - 2013

  1. 1. The State of Retail Marketing An exclusive survey finds today’s digitally empowered consumers are transforming the retail industry and creating important new opportunities for innovative companies Executive Summary By Alan Joch Digitally empowered consumers are upending some tried-and-true business assumptions the retail industry has relied on for years. As a result, making the right decisions about how to serve digitally empowered shoppers can mean the difference between surviving and thriving in today’s market. Exclusive new research conducted by UBM Tech and sponsored by Intel documents how retailers are fundamentally rethinking their go-to-market plans and finding ways to modernize the front- and backend operations that support these efforts. Sponsored by I t’s no secret that digitally empowered consumers are upending some tried and true business assumptions that the retail industry has relied on for years. After all, these savvy shoppers are more informed, more engaged in all phases of the purchasing process, and more enabled, thanks to the latest Web and mobile resources. So, long before they lay down any cash, they grab their trusty laptops and smartphones to gather product information and read online reviews from friends, family and complete strangers. As a result, they hunt for the best prices, even when shopping for luxury goods, and they have heightened expectations about the level of customer service they’re entitled to get from retailers. Surprising, though, is what it takes from a strategic and infrastructure standpoint to understand and satisfy these clients. A new survey entitled, “The State of Retail Marketing,” which was conducted by UBM Tech and sponsored by Intel, found that many retailers are fundamentally rethinking their go-to-market plans and the front- and back-end operations that support these efforts. For many retailers, making the right decisions about how to serve digitally empowered shoppers can mean the difference between surviving and thriving in today’s market.
  2. 2. The State of Retail Marketing “In a world where I can shop the Web for the lowest price, the question for a brick-and-mortar store is, ‘How are you going to compete?’ The answer is: ‘You’d better have customers who are really, really loyal to you,’” says Laura Davis-Taylor, senior vice president and managing director of ShopWork, a BBDO Proximity domain practice devoted to cross-channel shopping behavior. “To build loyalty, you add value to their lives and make them feel [as if] they’re not just buying a commodity, but that they’re experiencing something that is important in their world.” Figure 1. Which of the following are touch points you use to engage your shoppers/customers? A Multitouch World Print media The practice of customers “showrooming,” instant reviews on social media sites, and ubiquitous access to product information all mean that retailers must deliver ever higher levels of customer service and perform flawlessly across all the touch points at which they interact with customers. Known by insiders as “omni-channel” marketing, this area is well known to the participants in “The State of Retail Marketing” survey, in which companies large and small say they routinely connect with customers across multiple venues. The reality of omni-channel marketing and sales means some tough challenges for retailers, especially for organizations with back-end operations that maintain separate customer data and fulfillment systems for each channel. But some leading companies also see a way to gain a competitive advantage. For example, Ahold USA is the $24 billion parent company of a group of regional supermarkets that manage nearly 800 stores throughout the Eastern seaboard. Brands include Giant Food Stores, Martin’s Food Markets, and Stop &Shop. Ahold also owns the Peapod online grocery and delivery service, and rather than viewing the physical stores and online operation as separate entities with unique customers, Ahold looks for natural synergies. “Our strategy is to help the customer through the key phases of planning, acquiring and enjoying our products,” says John Dettenwanger Jr., CIO at Ahold USA. “To do that we need to take that omniview and not force customers through a single channel.” This means that in some markets, shoppers can now create a shopping list online by entering product names or by using their smartphones to scan the bar codes of items already in their pantries. These customers may then choose to have the order delivered to their door or have the items packed and waiting for pickup at their local supermarket. This year, Online 76% Email 73% In-store 50% 46% Phone 43% Mobile 42% Brochures 34% Snail mail 22% Print Catalogs 16% Print media coupons 15% Electronic wallet (e.g. NFC-enabled smart phone) 6% Note: Multiple responses allowed Data: UBM Tech survey of 159 professionals responsible for marketing strategy and plans in retail, consumer goods or the hospitality industry, December 2012 “Omni-channel” is the new normal in retailing, with companies of all sizes regularly utilizing multiple touch points to engage with customers. Ahold will take this a step further when it rolls out 50 new drive-through locations — some in its store parking lots, others in space it leases from other companies. Online orders Survey Methodology: UBM Tech polled 159 executives in a cross-section of retail companies, ranging from e-commerce sites, to physical stores, consumer product and consumer packaged goods organizations, and the hospitality industry. Survey participants primarily hold positions as senior executives, store managers, marketing directors, division managers and chief marketing officers. 2
  3. 3. The State of Retail Marketing will be filled from a central warehouse and then moved to these convenient satellite facilities. “You’ll pull in, someone will put your order in your trunk, and you’ll drive off without ever getting out of your car,” Dettenwanger explains. Dettenwanger expects that many customers will choose each of these options at various times depending on what’s most convenient on a particular day. “We don’t see them as Peapod customers or Stop & Shop customers — they’re all the same customers.” in today’s competitive environment. A high percentage of the respondents say they can distinguish new from returning customers, know their buying preferences and see purchase histories across channels. The data revealed a notable difference between small companies (with 100 or fewer employees) and larger ones. A solid 12 percent more small companies gave themselves high marks for being able to identify new or returning customers, compared to large companies. Consumers Expect Rewards Figure 3. What are your biggest challenges? Providing high levels of flexible and dependable service is just one challenge retailers face today. Many technologically savvy customers also expect retailers to recognize and reward them as they move across sales channels. Executives in “The State of Retail Marketing” survey understand that 4% 4% providing a successful customer experience is a requirement Figure 2. As the retailer of digitally empowered consumers who are highly engaged, how well do you do the following? Increasing margin 57% Upselling 44% Maintaining optimal inventory volume 37% Providing an integrated shopping experience 32% Know whether they are new or returning customers 4% 74% 22% Cross selling Know preferred products, services offers, and the preferred method to receive them 2% 69% 29% 36% 57% Enable online or mobile check of in-store product availability 18% 38% 40% 56% Provide personalized offers 9% 42% 1 - We do a poor job 3 - We do a good job 49% 2 Data: UBM Tech survey of 159 professionals responsible for marketing strategy and plans in retail, consumer goods or the hospitality industry, December 2012 Retailers are putting greater emphasis than ever on knowing the likes and dislikes of clients. 3 Note: Multiple responses allowed Data: UBM Tech survey of 159 professionals responsible for marketing strategy and plans in retail, consumer goods or the hospitality industry, December 2012 Maintaining profit margins is an ongoing concern, but now retailers are also looking for new ways to expand sales and reduce costs. 44% Provide ways to purchase, track delivery & return via any channel 4% Opening new outlets 13% Maintain a personalized cross-channel history of all purchases 7% 32% This is significant because retailers who get this right often enjoy a competitive advantage if they react with promotions that turn first-time customers into regulars and make loyal shoppers feel special. Conversely, stores that underperform in this area risk losing a customer for good. “What happens, whether it’s conscious or not, is that I, as a consumer, may get angry when I know I’m a top-tier shopper for a particular brand, but [the brand doesn’t] know me,” Davis-Taylor says. “That’s a market opportunity for the competitors that get there first.” Likewise, giving shoppers the tools to check inventory online or via mobile devices can have a big payoff. This is still an emerging area, according to the survey, with about
  4. 4. The State of Retail Marketing 44 percent of respondents across large and small companies saying they perform well in this area. Davis-Taylor notes that one national discount shoe chain recently announced it was putting this strategy into action. It unveiled a service where an in-store shopper who can’t find the right size of a desired style can scan the bar code on the box and see whether another store or the e-commerce site has the size in stock. “That tells me that I’m never going to waste valuable time in a store and not find the shoes I want,” she explains. “And that will make me go to that store more [often].” Survey participants see important bottom-line benefits as the reward for better serving digitally empowered clients and breaking down the barriers that separate various sales channels. Topping the list of business benefits is the desire to successfully increase profit margins, which the respondents placed at the top of their list of challenges. Related to this are difficulties associated with boosting sales through upselling and cross-selling. Smaller companies in particular were sensitive to upselling challenges, with half of them seeing this as a major problem versus 35 percent of large companies. Figure 4. How important are each of the following to your business? Immediacy of information – to know what's happening & when 75% 23% A unified view of product and inventory data – to see all inventory wherever it is 4% 34% 28% 1 - Not very important 3 - Very important 64% 2 Data: UBM Tech survey of 159 professionals responsible for marketing strategy and plans in retail, consumer goods or the hospitality industry, December 2012 Retailers are putting greater emphasis on gathering accurate, real-time information about individual customers, inventories and products. But the big question for many established retailers is: What building blocks are required to achieve results like these? “The State of Retail Marketing” survey found a clear link between business success and having up-to-date and 4 Budget issues 66% 33% Difficulty demonstrating return-on-investment 30% Lack of executive sponsorship 12% Do not see the value in this type of strategy 7% Other (please specify) 5% Note: Multiple responses allowed Data: UBM Tech survey of 159 professionals responsible for marketing strategy and plans in retail, consumer goods or the hospitality industry, December 2012 Budget constraints outweigh technology challenges when it comes to courting today’s digitally empowered consumers. 62% A singular view of each customer – to see and track shopping in store, online, or mobile 8% Figure 5. What are the roadblocks that keep you from overcoming these challenges? Technical integration challenges The Payoff 2% comprehensive information about customers and inventories across various touch points. But survey respondents felt stymied by other challenges, including tight budgets and technology hurdles. In particular, respondents cited difficulties selling modernization strategies to key decision makers. Davis-Taylor sees this playing out in the retailers she meets with. “You’ll see a marketing guy with the right attitude, but he’s not empowered by the people at the top,” she observers. “So [the marketers] either don’t get the funding they need, or they don’t get the cross-departmental support that’s required. I have seen many of these projects fail because the necessary teams aren’t working together.” An Action Plan Fortunately, thanks to new technologies and maturing best practices, it may be easier for some retailers to implement the necessary support systems for successful cross-channel marketing. This can also help “change champions” demonstrate a potential ROI that’s attractive enough to sway even the toughest C-level skeptics. The trick is to focus on both in-store and back-end operations which, when integrated
  5. 5. The State of Retail Marketing effectively, can open up new business opportunities. The first step is to create a true single operational view across all sales channels. Ahold is linking together its Peapod and grocery chain databases into a unified repository. To do this, Dettenwanger and his staff are turning to middleware that combines point-of-service (POS) and back-office systems. Also helping are emerging technologies, such as a new class of IT appliances that house transactional data. “In the past, I would have had to build a centralized customer database and create a unifying number to have everything linked. That’s a big job,” he says. “But now I can have every piece of transactional data in a memory-resident appliance, so if a customer scans a bonus card, we can correlate that with other activities and create a master customer record on the fly.” That could be the basis for another new resource designed for technologically savvy shoppers. Ahold will be rolling out a new Peapod app with a tool called Guess My Order. “We married our POS transactional history with the customer data, so [that] statistically — depending on the day of the month — we can pretty much predict what you’re going to buy,” Dettenwanger says. “We can refine the predictions by letting users edit the lists and use that information to refine the algorithm.” they keep close watch on costly out-of-stock and overstock items, with a significant percentage saying that the costs of these problems can range as high as a quarter of a million dollars in their operations. Plug Cost Leaks $5,000,000 or more The second step is to get control of inventory, which the survey found to be a priority, especially if it gives customers and sales associates more accurate information and helps organizations optimize promotions. Figure 6. Do you have technology systems in place that allow you to do the following? Connect better with customers in store by providing inventory intelligence 73% Optimize promotions in the store to reflect real-time inventory and product pricing 56% Note: Multiple responses allowed Data: UBM Tech survey of 159 professionals responsible for marketing strategy and plans in retail, consumer goods or the hospitality industry, December 2012 Retailers today increasingly see back-office operations as a key to success. Better inventory controls can go a long way toward strengthening the bottom line. Survey participants say 5 Figure 7. How much has inventory distortion (i.e. out-of-stock merchandise, overstocks) impacted you? $0; I always have the exact right about of inventory 18% $1 - $49,999 51% $50,000 - $249,999 18% $250,000 - $499,999 9% $500,000 - $999,999 1% $1,000,000 - $4,999,999 1% 2% Data: UBM Tech survey of 159 professionals responsible for marketing strategy and plans in retail, consumer goods or the hospitality industry, December 2012 Gaps in inventory management can be costly, especially when they result in out-of-stock and overstocked items. Here, the survey identified clear differences based on company size: Large companies were more likely to report higher costs, with 32 percent saying the losses ran between $50,000 and $249,999. By comparison, only 12 percent of small companies experienced losses in this range. Some organizations are using a new strategy to cut down on these expenses. A large department store chain recently announced it had joined the ranks of retailers that are shipping some orders from individual stores, according to William Kuipers, a partner at Spaide, Kuipers & Co., a management consulting firm specializing in multichannel retail operations and fulfillment. “Although it may have a distribution center for these orders, the company may opt to ship from a store based on a set of business rules it has in place,” he says. The benefit for store managers is that they suddenly have a larger
  6. 6. The State of Retail Marketing audience than usual. “So I sell my overstock of size small, pink T-shirts without taking markdowns by exposing them on the Web,” Kuipers adds. Enabling these sales are new order-brokering systems that can track inventories in master distribution centers, as well as in each store. “The company or each store may set up rules about when to make inventory visible to help the system decide which stock to pull from,” he says. “It might be based on who has the most inventory, who’s closest to the customer, or other factors.” Get Closer to Customers The third step to retail modernization is to use the combination of unified sales channels and better inventory controls to create targeted marketing programs for key shoppers. Stores are starting to do this by tracking and harvesting the rich supply of in-store shopping-behavior data. The survey found that while a majority of the respondents can track how consumers engage a product, capturing more granular data, such as how long a consumer’s eye lingers on a message, is still something only a small number Figure 8. Which of the following are you able to measure? How consumers engage a product 57% How you create a more effective, engaging 1:1 marketing experience 41% Where a consumer's eye travels when they walk up to the shelf of organizations are able to measure currently. Digital signage teamed with gaze-tracking analytics can document how long a shopper focuses on a promotion or product. The best solutions also give retailers insights into the gender and age group of the viewers. Data like this is essential for developing and presenting the right messages at the right time. “Gaze-tracking helps us learn what types of messages people find valuable while they’re in the store,” Davis-Taylor points out. “If I’m selling laundry detergent, it’s probably a coupon that will get the most attention. If I’m selling a video game for kids, the information I want to see more may be reviews by other parents. You’ve got to understand what the barriers are in peoples’ minds as they are weighing whether to buy a product — and what’s most likely to tip them into making a purchase.” Ahold is among the large retail chains that is making a new commitment to customer data analysis. It recently created an internal group devoted to data analytics and leveraging the large volumes of transactional data Ahold collects. Efforts like this will supplement current strategies for forging closer relationships with customers. For example, the organization recently sent out 1.6 million home mailers to its various grocery store customers, and the vast majority — 1.2 million — were unique, based on the recipient’s buying preferences. Not only did the consumers receive offers for products they’re likely to buy, but the stores promoted items that, from a business standpoint, were priorities to sell. The key is matching customer needs with products. “If you get promotions for things you have no intention of buying, it’s a waste of money and it undermines the credibility of the retailer,” Dettenwanger says. “It looks like you’re just trying to be opportunistic rather than helpful to consumers.” 23% How long a consumer's eye lingers on a message 22% How you move the consumer from a device (i.e. tablet on shopping cart) to the shelf 21% How you move the consumer from digital sign screen to the shelf 11% Note: Multiple responses allowed Data: UBM Tech survey of 159 professionals responsible for marketing strategy and plans in retail, consumer goods or the hospitality industry, December 2012 Gathering information about consumers while they’re actively shopping will help retailers deliver the right messages at the right time to influence buying behavior. 6 Invest in the Future The survey participants have clear ideas about how they’ll continue to evolve their operations in the future. PCI compliance, the underlying controls for securing credit card transactions, is high on the list. A close second is the desire to implement an end-to-end solution that integrates sales channels and creates a unified experience for demanding consumers. In the end, solutions like these may help in-store locations reclaim business from online sellers and capitalize on unique benefits that only physical retailers can offer. “People still crave human interaction and experiences that are multisensory and engage us emotionally,” DavisTaylor says. “It’s hard for an e-commerce transaction to create much emotion beyond, ‘This transaction was quick and it was easy.’ But a visceral emotion can happen in a physical store when, for example, you smell or taste or find something that’s fabulous and unexpected. There’s life
  7. 7. The State of Retail Marketing Figure 9. Please indicate your level of interest in the following on a scale of 1 to 3 where 1 is not interested, and 3 is very interested. PCI compliance solution to protect transaction data 24% 36% 40% Shelf display solution to create brand awareness of the product 34% 31% 35% Cloud & mobile advertising targeted messages 19% 44% 37% End-to-end-retail solution that delivers consistency across channels 25% 36% 39% that happens in physical stores, and that’s the opportunity for retailers.” The takeaways are clear—today’s digitally empowered consumers are driving forward-thinking retailers to redefine their marketing strategies as they simultaneously look for ways to closely integrate each of their multiple sales channels and modernize their front- and back-end technology environments. Retailers who understand and address these trends create opportunities for big payoffs, in the forms of customer loyalty and retention, tighter cost controls, and more efficient operations. One other trend is obvious: Given the level of commitment to omni-channel marketing shown in this survey, the time to act is now. For more on technology-driven marketing strategies, visit Digital Canvas Retail, the global community for retail marketing. Secure POS touch screen solution 35% 32% 33% Mobile insta-couponing through mobile devices 45% 25% 30% Virtual shopping solution to expand in-store & online inventory 30% 40% 30% Intelligent consumer trend & inventory matching solution 25% 41% 34% About Intel Intel® (NASDAQ: INTC) is a world leader in computing innovation. The company designs and builds the essential technologies that serve as the foundation for the world’s computing devices. Additional information about Intel® is available at www.intel.com/pressroom and blogs.intel.com. AVA vending station giving fresh data for brand promotion & product placement 35% 44% 21% Intelligent dispensing solution 30% 40% 30% Electronic 'customer assistant' for in-store consumers 37% 37% 26% Shelf compliance to minimize inventory distortion 43% 36% 21% 1 - Not interested 2 - Somewhat interested 3 - Interested/Very Interested Data: UBM Tech survey of 159 professionals responsible for marketing strategy and plans in retail, consumer goods or the hospitality industry, December 2012 Retailers have clear ideas about how they want evolve their operations in the future, including a desire for comprehensive, end-to-end retail solutions. © 2013 UBM LLC. All rights reserved. 7

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