Online shopping theme with young businesswoman
The retail industry has been turned on its head these last few months, and it remains unclear what direction it’s headed indefinitely as a result of the pandemic. What we do know is that some brick-and-mortar chains aren’t doing so great, while others are thriving from eCommerce sales being up amidst various States’ shelter-in-place orders. We’ve also learned this may be the push traditional retailers need to prioritize their digital offerings to properly compete with Amazon and the alike.
I had a chance to connect with Ed Kennedy, Senior Director of Commerce at Episerver, a billion-dollar digital experience company that advises companies like Yamaha Water-Craft and Pandora on their omnichannel retail strategies. Episerver offers these brands custom technology solutions enabling them to deliver customer-centric digital experiences.
Something that interested me and my colleague Phil Rist at Prosper is proprietary data Episerver has from using its product recommendations-tracking technology to keep record of changes to online retail traffic and indications of consumer behavior changes worth noting for its 100+ retail customers. On a recent call with Ed, we were able to explore these findings' larger implications and discussed how technology plays a role in informing retail business decisions during these unprecedented times.
Let's dive into how retail leaders and their marketing teams can proactively address these swift changes to their business...
Gary Drenik: In May, Prosper surveyed over 8,000 people and found that while more consumers were planning to shop online in light of the coronavirus pandemic, they were also expecting to pull back on spending at the start of the crisis, with a quarter of consumers reporting they put off or deferred purchases on apparel in the past 30 days and another 29% reporting that they plan to decrease overall spending in the next three months.
In Episerver’s own analysis of its web traffic data, your team saw a resurgence in revenue from online shopping in April, both month-over-month and year-over-year.
Are you surprised by the uptick given the current economic climate? How have consumers’ online shopping behaviors changed in the short-term, and what does this mean for the long-term?
Ed Kennedy: I’m not surprised by the data given the unique conditions. So many more people have been isolated at home and, either through stress or necessity, are shopping online.
The additional traffic is driving the increase in revenue. It’s not that the same cohort of consumers is coming to retailers’ websites and shopping more – it’s that more people are coming to these websites and shopping the same or maybe even a little less.
Units per order are actually down, but it’s still netting an overall increase in revenue because more people are shopping on these websites since they don’t have any alternative.
The numbers could of course evolve radically as stores start to reopen across different states, and it may be some time before we see how permanent of an impact there will be to online and in-store shopping behaviors – and as an extension – revenue.
Drenik: The majority of consumers Prosper surveyed in May said they are somewhat or very likely to use Buy Online, Pick-up In-Store services through their grocery store in the future. Will the pandemic expedite the adoption of “phygital” services by consumers?
Kennedy: Yes, I expect the major response from retailers to the pandemic will be on the omnichannel fulfillment and shipping side, and we will likely see an acceleration on this front.
Tractor Supply, for example, just rolled out their free same-day delivery program in response to the current situation. The company is putting the customer experience at the center of their decision-making, and it’s paying off.
Buy Online, Pick-up In-Store (BOPIS) options are attractive to retailers since they drive in-store foot traffic, but consumers may be eschewing those options right now in favor of curbside pickup. Curbside pickup wasn’t seen as much of a priority before, but now curbside pickup is going to be more important than BOPIS and even more important than buy online, deliver from store (BODFS) options.
A year ago, today, we would not be putting curbside pickup at the top of the list for omnichannel fulfillment priorities. But now it’s at the very top of that list.
At the same time, this is where the customer experience is breaking down. It’s a challenging operational capability to stand up but delivering these omnichannel capabilities at scale and speed is critical.
Drenik: How can retailers and retail brands adapt to succeed in this new retail environment now and in the future?
Kennedy: Retailers who innovate now and serve customers well while times are hard will be remembered by those customers, and they’ll come back stronger for it.
Now is not the time to retreat; now is the time to innovate in specific areas that were either already on your checklist or that have become a necessity. While other initiatives in IT and digital marketing may have been put on hold, companies need to execute on these projects and reallocate resources to work quickly.
Episerver has a program right now where our customers can launch an e-commerce website in as little as 30 days on our platform for this very reason. We want companies to know that they can and should move fast to adapt to a new retail landscape.
Having a seamless omnichannel experience should already be at the top of retail companies’ lists. We’ve seen some retailers who have dipped their toes into e-commerce in the past now really jumping in and embracing it. But if a retailer is already transacting online, it's a matter of making sure that – if they do have physical stores – they can green-light and speed up omnichannel fulfillment capabilities like curbside delivery.
We have retailers using the Episerver platform that are innovating and pulling off impressive feats. For example, Mayrand, a grocery retailer in Canada, launched its e-commerce website during the pandemic. It went from having no digital footprint and having never sold online to building a fully functional B2B and B2C e-commerce experience – complete with mobile ordering and curbside pickup – in six months. These are the brands that are surviving and that will thrive in the new retail environment.
Drenik: We found that consumers were 33 times more likely to choose Amazon based on its online product selection over Walmart. How will brick-and-mortar be impacted by lasting changes in shopping behaviors, and what’s the next move for retailers with large physical footprints?
Kennedy: Amazon is the de-facto choice for Americans with a specific product in mind leaving retailers the opportunity to win with proximity during these times.
Forty-eight percent of American shoppers go straight to Amazon when they know what they want to buy. During widespread shelter-in-place orders, this number likely increased as consumers were hyper-focused on their immediate needs – household supplies, work-from-home necessities, loungewear. Amazon sellers didn’t necessarily keep their end of the bargain though with price gouging, incredibly slow shipping times, low inventory – for a company that made its name on speed and selection – and return faux pas.
While digital-first became the norm during this time, retailers with both small and large physical footprints put their proximity to good use. Amazon was cut out of a lot of the buy online, drive-up functionality that so many Americans took advantage of. Omnichannel has accelerated over the last couple months, and the next move for retailers is to continue investing in using their local storefronts to their advantage – inventory that can be in the hands of consumers as they wait in the car for it.
Do I want to buy the book needed for a virtual book club this weekend if it’s going to take two weeks from Amazon but two days from Target, or do I just want to place the order and let Target hold it for me? The answer is going to be the latter time and again.
The next move for retailers with large physical footprints is to better understand what customers want from their in-store and digital experiences. Retailers can easily get it wrong if they pull back on social distancing precautions too quickly as people’s sense of risk is heightened, and not providing a safe shopping experience is one way to permanently lose trust and business. Retailers can also easily get it wrong by delivering the wrong content at the wrong time. Retailers must invest in personalization to know the real-time needs of their customers as everything changes minute by minute.
Drenik: With discounting on the rise according to Episerver's data, it appears retailers and retail brands are focused on driving transactions and getting products into consumers' hands by any means possible. What short-term and long-term strategies should they prioritize?
Kennedy: What’s interesting about the data is that the number of products retailers were putting on sale jumped in January and February, before shelter-in-place orders came into full effect. In March the average retailer had 37% of their catalog on sale with an average discount of 14% off. It’s possible that post-holiday sales drove January and February promotions. Then, in March, retailers kept a larger-than-normal number of products on sale but normalized discounting. In April the percentage of items on sale dipped to 30% – the benchmark for this statistic – and the percentage off also returned to normal at 14%.
Regardless, deep discounting is not sustainable, and retailers need to continue to define what differentiates them. For retailers relying on their physical footprint to date, what differentiates them is typically location. They may have existed in a consumer’s favorite shopping mall or the closest shopping center to their customers’ home or office.
Online, everyone is your competitor – from every reach of the globe. One way to differentiate a retail shop online is through content – using it to persuade and personalize for each customer. Consumers need more than just three lines of product specs when they are in browsing mode. Short term, some serious content mapping needs to happen for retailers to inventory what they already have and what they need now to influence how a shopper views their product and help them visualize how it can fit into their lives.
Long-term, differentiation never goes out of style and that goes for the differentiated experience retailers provide each customer. Unique, personalized experiences can tailor the content and products each customer sees based on an understanding of their unique interests and the retailer’s content assets.
Drenik: With the need for digital commerce accelerating, how can retailers and retail brands harness advanced machine learning to better predict consumer behavior during these uncertain times and drive better digital experiences?
Kennedy: Digital experience starts and ends with the content a person sees about a brand and their products. When there is inadequate content or content not personalized to what an individual wants or needs, the experience starts to deteriorate. Advanced machine learning can predict the next best piece of content for a person to consume as it relates to their unique preferences, transaction history, and campaign engagement – across multiple channels.
One of the many challenge’s retailers have during these uncertain times is knowing how to speak to their customers since it seems impossible to know what they actually want or need. When shelter-in-place orders started to go into effect and necessary products started flying off the shelves – digitally and in-store – retailers needed to tip-toe in their messaging because people were most immediately worried about meeting their basic human needs of shelter, food and health.
While it may seem impossible to know what every customer needs so your messaging doesn’t appear tone-deaf, it’s more than doable with machine learning algorithms that can discover a customer’s real-time needs and help marketers and merchandisers know what kind of content they should produce and which products they should promote.
The good news is the technology capabilities and merchandising know-how are still delivering. In April, Episerver’s product recommendation engine drove $17 million dollars in revenue. This is double the revenue from April 2019, and it shows us that merchandisers are leveraging machine learning technology to personalize each consumer's shopping experience during these uncertain times.
Drenik: Thank you Ed for your insight into how technology plays a role in informing retail business decisions during these unprecedented times.
Complimentary Coronavirus/Covid-19 findings are available at AWS Data Exchange. To learn more, click here: Strategic Insights: Coronavirus Covid-19 Consumer
To read my previous Forbes articles on changing consumer behavior, predictive analytics, machine learning, data privacy and more, please click here.
