The Future of Retail Is in a Data Stream Near You

For all of the digital disruption, store closures and bankruptcies, the retail industry still has not had its transformative “moment.” While some might see a slow death through a thousand cuts, there’s really no need for such doom and gloom.

Retail
Magnificent Mile, Chicago, Nov. 13 | Credit: Chet Dalzell

For all of the digital disruption, store closures and bankruptcies, the retail industry still has not had its transformative “moment.” While some might see a slow death through a thousand cuts, there’s really no need for such doom and gloom. Unless you’re a retailer that can’t handle change.

For every piece of negative news out there, there’s a slew of innovation happening now. Even at the macro level, retailing is thriving!

First off, consumers are still shopping. Despite $1.2 trillion in student debt and $800 billion in credit card debt, the American consumer has resilience and fortitude. The National Retail Federation forecasts 3 percent-plus growth in retail spending this year.

But don’t dare measure retail health any more in year-over-year “comps” (comparable sales by store).

The metrics of success are undergoing a (sea) change — much because the customer journey is changing … rapidly. Smartphones, tablets, kiosks, websites, search… and stores — it’s all in the mix. And it’s not just Millennials who are all over the customer journey map.

To capitalize on today’s highly personalized paths to purchase, data is the currency that’s making a difference. In its most recent U.S. Retail Industry StatPack 2017 (download access), eMarketer reported:

“If I can start to take browsing history, social media history and tie that to your transaction history, I can start to do very specific segmentation … If you can master the data, you can really target customers with what they want and optimize your marketing,” said Michael Relich, COO, Crate & Barrel.

“There has been device proliferation in natural consumer shopping behavior,” said David Doctorow, head of global growth, eBay. “To serve customers well, we have to identify them no matter the device they’re interacting with us on.”

So much for CPMs and sales per square foot.

Look at these profound shifts in retail ad spending. Retail dominates U.S. digital ad spend among vertical categories, primarily because of e-commerce competition. Retail accounts for 21.9 percent of total U.S. digital ad spend, and will grow 15.8 percent this year to more than $18 billion. (Automotive and Financial Services — second- and third-ranked industries, respectively — each net around 12 percent of total U.S. digital ad spend, for comparison). Kantar reports that TV retail ad spend sits at $7 billion — digital’s nearest above-the-line neighbor.

Within digital advertising categories, tried-and-true display ads have nearly closed the gap with search — the former helped by mobile display and digital video display ads targeted to Millennials, eMarketer reports. Video is now 14.2 percent of total digital ad spend among retailers, and more than half of this spend is purchased directly with premium video sites. Meanwhile, programmatic ad spend is driven by retailer spending on social media: Facebook, Instagram and elsewhere, though brands reportedly are cautiously guarding where their ads appear — turning to “private, one-to-one setups to buy high-quality inventory.”

Search ads, as one might guess, prevail in retail’s mobile ad spend, as consumers conduct price comparisons and look for product reviews and recommendations while in-store.

And what of Amazon, the so-called retail killer? On the contrary, Amazon (and other marketplace platforms, such as Walmart) “storefronts” may prove a survival mechanism for many stores — though don’t expect that highly sought path-to-purchase data to find its way back to the retail brand. Data usually is not shared outside the “walled garden.” According to retail consultant Ryan Craver, speaking recently at Marketing Idea eXchange, half of Amazon’s U.S. product sales are now sold through third-party vendors (storefronts).

Yes, there’s more to today’s and tomorrow’s retail story than data-driven targeting and marketing … yes, physical stores need to be destinations, malls need to be destinations, retail may need to entertain, etc. But mass marketing is scaling to 1:1 personalization, anonymized or other, through data. Recognize that customer well, she will reward you. Sounds a lot like the 19th Century shopkeeper, virtually yours.

Author: Chet Dalzell

Marketing Sustainably: A blog posting questions, opportunities, concerns and observations on sustainability in marketing. Chet Dalzell has 25 years of public relations management and expertise in service to leading brands in consumer, donor, patient and business-to-business markets, and in the field of integrated marketing. He serves on the ANA International ECHO Awards Board of Governors, as an adviser to the Direct Marketing Club of New York, and is senior director, communications and industry relations, with the Digital Advertising Alliance. Chet loves UConn Basketball (men's and women's) and Nebraska Football (that's just men, at this point), too! 

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