Retail Executive

SEP-OCT 2017

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SCALE AND AUTOMATION 2017 is an exciting year for activating omni-channel media. For many years, companies have believed in omni-channel, but the tools to activate have been lim- ited. Because of this, retailers have taken basic steps like establishing a ratio of e-commerce to online sales (e.g., 5:1 — for every online sale, I drive five offline sales). Some retailers make manual adjustments for winning tactics like raising investments in mobile advertising or store-weighted categories like appliances or apparel. These are positive steps; however, they rely on basic in- sights and implementation. This year, advanced retailers are going beyond these basic steps to automate their media to omni-channel ends. For example, many retailers will increase spend on consumers within 1 or 5 miles of a store. Others will leverage first-party audience insights to encourage store customers to visit their website (and vice versa). Finally, some consumers are plugging store visit and sales data into their buying algorithms to invest in and optimize to e-commerce and store sales. ORGANIZATION IS THE KEY These innovations are exciting; however, the most important step for retailers is to revisit their organi- zational structure and KPIs. Most physical retailers ventured into e-commerce by creating a separate or- ganization incentivized exclusively on internet sales growth. This created focus and enabled these teams to grow quickly in their infancy, but consumer re- search and buying behavior have changed, and these siloed organizations now hinder performance. Digi- tal organizations focused only on e-commerce sales neglect store impact, reducing customer satisfaction and store performance. Leading retailers are making the difficult changes to adapt. A study of Google's top performing retailers found 90 percent have integrated digital and offline media bud- gets. Home Depot combined its online and store mar- keting teams into unified category teams handling all activities on a cross-channel basis. These changes have enabled Home Depot to move quickly and share insights about how to provide better assistance to shoppers. Now they're using existing stores in better ways, such as ship- ping direct and designating online order pickup zones. THE TIME IS NOW 2017 is a critical period in the life of retailers. The im- portance of omni-channel is undisputed, but as DaVin- ci said, "Knowing is not enough; we must apply. Being willing is not enough; we must do." Retailers who want to thrive in this difficult time must embrace online/ offline by acting on insights through an integrated om- ni-channel organization. R the New York DMA. Retailers have many stores in these markets, each serving distinct groups of customers. Last year, Google began working with retailers to bring insights to their store level. Retailers have in-house store data like same-store sales, foot traffic, revenue per square foot, inventory stocking, local promotions, etc. Google's platform adds digital insights like own vs. competitor search interest, category and product de- mand, and online buying propensity, as well as physi- cal proximity and digital-influenced foot traffic. Google combines this data with public datasets like population and demographic insights to provide a comprehensive view of a store's health. TAKING ACTION Retailers are using these insights in four ways. First, they are tailoring category and product store offerings to lo- cal preferences. A retailer has its own sales and invento- ry data for existing SKUs but can introduce new brands, products, and even sizes to capture sales based on online search demand for SKUs not stocked at a location. Second, they are optimizing marketing tactics to address competitor threats and consumer preferences. If a store is struggling with awareness, retailers can target consumers in that area with digital campaigns. Stores facing strong competitive threats can fight back using targeted media toward sought-after consumers and/or categories. Third, smart retailers are personalizing their digital marketing based on customer location and relation- ship. Consider these scenarios: A customer 20 miles from a store should receive messaging and call-to-ac- tion toward e-commerce, while consumers one mile from a store are better served with an in-store coupon and driving directions. Customers near a competitor's store can be served a brand or price comparison mes- sage. Finally, if an existing customer is inside a store, they can be shown information to encourage cross-cat- egory purchasing. Fourth, in the difficult case where a retailer must close stores, they are using digital to soften the impact. Digital messaging is a highly effective way to direct consumers to the next-nearest store and/or retain the customer via e-commerce. Digital can also help accel- erate inventory relief, minimizing the loss of revenue from scrap or obsolete products. Digital organizations focused only on e-commerce sales neglect store impact, reducing customer satisfaction and store performance. RETAILEXECUTIVE.COM SEPTEMBER/OCTOBER 2017 23

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