The Drastic Retail Basket
You don’t have to be a rocket scientist to realize the combination of mobile shopping, socially-shared conversations, technology advancements and economically focused apps are radically changing consumer buying habits. Brick-and-mortar retailers' acceleration quest to profit in coincidence with these advancements must be radical and swift.
Aggregation and acceleration of all cloud-based tools, social engagements and big data must be encountered with counteracted with respect to major changes in the retail model in the next decade.
According to AT Kearney’s recent study of 3,000 consumers in the USA and the UK titled “Retail Store in Today’s Omni Channel World,” consumers today spend 61 percent of their shopping time in physical retail stores, 31 percent online, 4 percent through catalogues and 4 percent through mobile devices. Not surprisingly, physical store shopping in the study was the buying channel of choice across all age brackets, from millennial to seniors. The realized danger in accelerating e-cloud sales over the past few years is the direct impact of the decline of the profitable size of the average brick retail basket as well as the danger of decelerating consumer foot traffic needed to sustain the physical retail stores.
That study reveals that 40 percent of consumers purchase more than they originally planned to in brick retail stores while only 25 percent reported spending more than they intended online. Simply stated, this means the physical in-the-moment relationship with brands and products garnered in the basket in the physical store shopping experience outmuscles the same experience online. Hence, although cloud selling is more profitable for retailers (based on lower costs) brick retail selling affords a greater profit propensity to fill the basket with impulse-driven goods and services as consumers dance through various product aisles.
Further, eMarketer Digital Intelligence predicts US retail ecommerce will reach $262.3 billion in 2013, a whopping 16 percent increase over 2012, with the total expected to exceed $450 billion in the next three years. They also found that 102 million people in the US purchase through their smartphones with retail mcommerce growing 69 percent year over year. And as expected, US retailers are aggressively pouring over $9 billion into digital-cloud advertising, up 15 percent over last year. Omni-channel retailers not only need to hunt where consumers are, but need to find a way to over stimulate cloud baskets to perform as strongly as the more fertile baskets in physical retail stores.
It is clear with a 30 to 40% rise in consumer cloud purchasing coupled with declining brick-retail store traffic, that the increase in online commerce does not equal an overall increase in profitable consumer engagements. Consumers are purchasing less per basket online than they are in physical retail stores, all while big-box retailers must and will shrink costs, to protect profitability. Consumer shopping has been redefined in the cloud as open for business 24 hours a day. Cross selling, upselling and predicable selling is alive and well in the cloud but cannot or perhaps “should not” be able to match human intervention, human customer care and service in the brick. At least not yet.
Retailers must fuel brick and cloud merchandising offers for smarter and more viable ways to energize and maximize the basket. But for now, what should they be doing to energize traffic back into their core brick-retail stores, where baskets deliver a higher overall return while accelerating their omni-channel advantage?
1. Be Friendly, Be Profitable. Although cloud merchants easily capitalize on augmenting appearance, prices and offers, we cannot do the same in our physical retail environments. Not efficiently, not inexpensively, not quickly. Retailers must transform their in-store human capital into friendly, consumer-helpful associates. In our socially charged world, human intervention still out muscles machine intervention when and if they are both tuned to peak perfection.
2. Harness Cloud Benefits In-Store: Don’t drag cloud technology into your brick-retail environment, invite it in and loudly. When you invite the cloud buying environment into your physical stores you invite consumers to enjoy a true omni-channel retail brand experience. Utilize show-rooming and cloud based apps like RedLaser and ShopKick. Declare you are a cloud-friendly shopping environment and invite consumers to enjoy shopping and cloud connectivity as they move through your aisles, as they are motivated to best fill their shopping basket at the last three feet of the physical sale. Location based offers and services stimulate a greater, smarter and more profitable brick and cloud retail basket.
3. Be As Smart As Your Retail App: A multitude of large retailers are actively creating and deploying branded apps to enable their shoppers to buy and form fit into their omni-channel strategy. The apps are fueled to drive foot traffic, cloud traffic as well as to energize the retail basket with alerted offers, specials, up-selling and reward. Just some of the named apps in retail are afforded include Barnes & Noble “Book Finder”, The GAP “Stylemixer”, Starbucks' “Build A Drink” and Whole Foods “Healthy LifeStyle."
4. Offer Consumers A Cookie: The future of consumer mobile cookies is a very good thing, especially for consumers. Understanding consumer patterns of hunting, cherishing, traveling and buying is a retailer's holy grail for cross selling the basket. The future of retailing will include cookie centric, cookie-permissioned consumers who alert motivated brick retailers to recognize their smartphone before and after they enter the store, recognize the consumer with customized, relevant and on-time offers that cherish, motivate and reward the consumer to better “fill-up” the basket.
Let’s face it, retailers need to improve and prove to consumers they want their Omni-channel business. Uniting the cloud to the physical store is only viable if the results create more active, more profitable BROI (Basket Return On Investment). Cloud efficiencies for omni-channel retailers can cut deep into in-store basket profitability unless the retailer can smartly bring the cloud into the physical retail store. Online shoppers are simply not infused nor energized with the same emotional and stimulating brand-product-sales-service touch points in the clouds as they are (as they should be) in the physical store. The basket in today’s physical retail environment is fatter, wider and more profitable than the basket in the cloud. In essence, cloud efficiencies can and surely will cut like a knife across once sustainable, once highly profitable brick baskets in absence of radical, severe and swift brick to cloud, cloud to brick competitive union and advancements.
Peter Weedfald is President of Gen One Ventures and Author of Green Reign Leadership