As I wrote in my Consumer Goods 2014 Preview, what became readily apparent in 2013 is that Consumer Goods business decision-makers recognized the value of fact-based decision-making and that decisions rely heavily on information and analytics. Consumer Goods manufacturers and Retailers operate fundamentally different businesses, but share common goals and challenges. Both are motivated to influence shopper behavior, drive greater sales volume, and face a price sensitive and loyalty-challenged consumer landscape. Data and analytic collaboration can establish a critical connection between both parties in pursuit of their common objectives. In this way their mutual efforts can be optimized, not collide, and ultimately yield a “win/win” for both. The cost of acquiring, storing and managing data is falling steadily and therefore, Retailers will have the opportunity to push budget dollars into analytics across new parts of the business. Retailers will invest heavily in consumer data and related analytics to improve productivity and the result will be a value chain that is flexible and matches more closely to actual consumer demand.
In 2014, Retailers will also invest in data-driven marketing and demand-driven retail execution frameworks (including supply, demand, merchandise, and store operations planning) as competitive differentiators to forward-leaning retail organizations. Here are several other Retail areas to watch in 2014.
Cross-Channel 1-to-1 Shopper Engagement. Shoppers increasingly are interacting with Retailers across channels – from store to web and across social and mobile platforms. Shoppers are buying online, picking up in store; buying online and demanding free shipping to home; shopping the store, then ordering customized sizes, shapes and colors for delivery to home. And the list of permutations will continue to evolve. Retailers looking to differentiate themselves with shoppers will invest in “recognizing” or knowing shoppers across platforms and routes to market and providing individualized, customized messaging and content through each. A top priority for Retailers will be to connect the dots – break down internal organizational silos (e.g., across brands, across retail store ops / merchandising / marketing / omni-channel teams) limiting cross-channel shopper engagement – and creating a comprehensive customer profile and thus, relevant marketing and engagement messages.
What’s old is new…and personalization (at the heart of traditional 1-to-1 marketing and CRM) lies at the center of omni-channel marketing strategies in 2014. As Retailers have been “saying” for two years, they will continue to “pursue and do” in 2014 – reach shoppers with what they want, when they want it, and via the channel they prefer to shop. Retailers will also work to curate the right product information at the right time in the shopping process.
Content-Rich Experiences. If you shop online, you will note the many new and different ways that products are curated to you as a shopper. No longer are “flat” product pictures the norm. We now have 3-D images, 360-views of products, close-up views of fabric, video that demonstrates the product, and live, real-time updated customer reviews of the product. Content sells the product as much as look, fit, and feel. Savvy Retailers are using multimedia content to make the shopping experience more engaging. Retailers recognize that shoppers want to be entertained and informed as they browse the web (or the store) and make purchase decisions.
Content-rich experiences extend beyond the web to the store. In 2014, Retailers will continue to find new ways to differentiate the in-store shopping experience from the one shoppers find online. They will offer in-store only events and services and invest in guest experience aimed at bringing customers to stores and keeping them there (and of course encouraging incremental purchases).
“Social Curation” Buzz. Social media has been a strong influencer of shopper purchase behavior – and through new analytic capabilities, Retailers will have the ability to make product purchase decisions using shopper preference insights. Social Curation will become a small-scale buzzword for retail in 2014 as Retailers leverage shopper social data and insights to curate product assortments online and in-store. Analytics will also be helpful in gauging new product introduction performance as in near-real-time, the Retailer will have access to product performance data and can make future inventory decisions based on actual shopper demand.
Smaller Format Store Growth. In 2014, we will see a continued rotation into smaller format retail environments vs. big-box growth. The smaller format stores such as dollar stores and specialty discounters will have a formidable impact on supercenters, malls, and mass merchandisers (also see industry statistics on mall growth / decline). These smaller format stores will take share from the larger box stores, have the flexibility to fit into new, high-density living and multi-purpose (convenient) locales, and provide an environment for more customized assortment based on shopper analytics for specific stores. Today’s consumer is both brand-aware and cost-conscious, making her the ideal outlet store shopper. According to one retail report, more than half of all Saks stores are now outlets, and 13 of the 15 planned stores for the next two years will be outlet stores. Nordstrom is planning 30 more Nordstrom Rack stores in 2014.
Big Data “Buzz” Subsides…Analytics Investments Increase. Retail, like many other industries (including Consumer Goods) is looking to leverage Big Data in new and different ways to maximize profits. In Retail, Big Data means access to real-time analytics that will fuel dynamic pricing in store. Digital pricing in store will take flight both in-store (see example of digital pricing in Kohl’s stores) and online. Big Data capabilities will enable dynamic pricing in a real-time, customized manner vs. based on historical sales trends or latent POS data trends. Based on consumer purchase behavior, Retailers will also use Big Data to customize in-store product sets.
Expect technology investments to pick up in Q1 and Q2 2014 as political, economic, and consumer sentiment indicators point in a positive direction going into end of 2013. While Gartner forecasts that Big Data will drive $34 billion of IT spending in 2014, Retailers are at times, slow to adopt data-enabled insights and analytics best practices. Look for Consumer Goods partners to step in to partner with forward-leaning Retailers thus driving a better experience for the end consumer while driving higher margins for the Retailer (and of course, increased volume sales for the CG manufacturer).
When I presented at NRF two years ago, I asked the audience of 5,000+ retail execs, “how many of you have in-house analytic teams responsible for Shopper, Space, and Category Insights and Analytics?” Less than 10% of attendees raised their hands. Expect those numbers to shift in 2014 as data and resulting insights are viewed as valuable enabling assets for use in fueling new growth while maximizing existing investments.
Mobility Is No Longer The E-xception. E-commerce has been growing for years (e.g., Cyber Monday), but now consumers are shifting away from purchasing items on their laptop or desktop and are now buying via their phone or tablet. Consumers are increasingly using mobile phones and tablets for product research and online purchase. In 2013, mobile shopping accounted for 17 percent of Cyber Monday shopping, a 55 percent increase over last year, according to IBM. This shift to mobile will accelerate in 2014.
Though mobile still accounts for such a small share of US retail sales, this shift is further along in more digitally advanced markets like the UK, where mobile will account for an estimated 24% of retail ecommerce sales in 2014, and rise to 35% in 2017 according to emarketer.The combination of portability, connectivity and relative affordability gives the smartphone a privileged place in driving always-on commerce.
Throughout 2013, interest in mobile wallet for retail remained constant with limited implementation and deployment despite the hype and talk at every major retail conference. The percentage of consumers who use smartphones and tablets is growing rapidly and willingness to use mobile wallets will rise as confidence grows in the Retailer’s ability to secure consumer information. Financial institutions, payment networks, mobile network operators, merchants, and mobile technology providers all have a vested interest in the deployment of a profitable mobile wallet solution and are battling for their own piece of the action, stalling growth in 2013 according to Javelin Strategy and Research. The largest players in the space include Google, PayPal, Visa, Isis, and the Merchant Customer Exchange (MCX). Although making mobile wallets mainstream is still a few years off, their acceptance at major Retailers and by consumers will continue to grow in 2014.
Name: Justin Honaman
Title: Partner, Consumer Goods / Retail National Practice Leader
Company: Teradata Corporation
Twitter: @jhonaman / @TeradataCPG