Brand value increases across categories

Thought Leadership Total Disruption at Retail
TOTAL
DISRUPTION
AT RETAIL
Digital impacts everything 24/7/365
Anne Zybowski
Vice President – Retail Insights
Anne.Zybowski@kantarretail.com
MANY RETAILERS and suppliers measure the
impact of e-commerce on retail by the percent of total
sales it represents, often dismissing it as “growing, but
small.” The challenge to this burying-head-in-the-sand
approach is that online behavior is sticky and today
100 percent of shopping experiences are impacted by
digital. Companies must approach digital with a 100
percent impact lens, as a digital ROI based solely on
e-commerce just measures the tip of the iceberg.
Digital Impact
Kantar Retail’s 10/50/100 framework crystallizes
the true impact of digital on the retail landscape. For
organizations struggling to come to terms with digital,
the disconnect starts with the common misconception
that digital’s impact on a business is represented
by the e-commerce share of total sales. As the
10/50/100 framework illustrates, the impact of digital is
more significant:
10 percent
Sales E-commerce sales are reaching critical
mass. Growing quickly and surpassing 8 percent
of total retail sales in the US and the UK in 2012,
e-commerce will soon represent 10 percent of overall
sales. When one of every $10 spent is online, it
matters—even if your products may be part of the
90 percent purchased offline. Online behavior is
sticky and shoppers are developing new habits.
50 percent
Influence A number of Kantar studies across a wide
range of categories suggest that online influences
over 50 percent of total retail sales today. As
shoppers leverage social media and digital tools
to help research, plan, and shop, online impacts
one of every two purchases fulfilled in the physical
store. With 50 percent of sales influenced by online,
but only 10 percent purchased, which is the real
showroom? Bricks and mortar stores, or Amazon?
100 percent
Impact Online experiences and new shopping behavior
has 100 percent impact on all shopping experiences
today. Even if a shopper goes into a store to purchase,
the penalty for out-of-stocks is significantly higher
when the item could have been purchased online
or on-the-go without setting foot in a store. Digital
has 100 percent impact on how everything is bought
and sold today. And understanding this impact on
shoppers is a critical insight required to go to market.
The Amazon catalyst
While the impact of digital is broader than Amazon,
Amazon is the dominant online player as measured by
traffic (eyeballs) and sales, and is also the most valuable
retail brand in the 2013 BrandZ Most Valuable
Global Brands ranking. With over 200 million customers
worldwide, not to mention the millions of shoppers that
use Amazon for research to help make the purchase
decision, Amazon shopping continues to shape shopper
experiences and set new standards for retail.
Bricks and mortar retailers describe their competitive
advantage based on physical proximity as “immediate,”
but the Amazon value proposition gives this word new
meaning. Immediate—does it mean at this moment, or in
the next hour? For many Amazon shoppers, “immediate”
Digital Impact
10% of retail sales
Source: Kantar Retail analysis
means ordering an item with one click today and having
it delivered in one-to-two days to their doorstep.
Ratings and reviews have been the hallmark of the
Amazon shelf since it launched as a book retailer in
1994. Today, those ratings and reviews are critical
influences to purchases with reviews by strangers often
more influential than input from a brand, retailer, sales
associate, or friends and family. They exert so much
influence, many shoppers will not purchase a product
without ratings. And bricks and mortar retailers are
looking for ways to bring reviews into the store to assist
in closing the sale.
The Amazon share of mind
Shopping frequency and the Amazon experience is
another Trojan horse, as frequency breeds behavioral
loyalty. According to Kantar Retail’s Shopperscape®,
18 percent of US primary household shoppers—and
31 percent among Gen Y/Millennial shoppers—shop
Amazon weekly. This frequency results in changes in
both shopping and purchasing behavior.
Shopping and purchasing rates vary across 30 categories
tracked, with women’s apparel topping the list for
both shopping and purchasing rates. Remember when
conventional wisdom was that apparel would never be
purchased online because people need to see, touch,
and try on clothing? Both shopping and purchasing
rates increase dramatically among those who shop
Amazon monthly.
Amazon Prime members are especially loyal. These
members pay $79 per year in the US for two-day free
shipping plus unlimited access to Amazon Instant
Video and monthly Kindle book rentals. According to
Kantar Retail’s’ Shopperscape®, as of December 2012,
14 percent of US primary households were Amazon
Prime members. These members trust Amazon and
dramatically expand their share of wallet and categories
purchased once becoming members.
As Amazon strengthens the Amazon Prime ecosystem
with more value-add services, the retailer continues to
grow more than larger share of wallet—it grows larger
share of life; presenting challenges—and lessons in
digital retailing—for retailers worldwide.
Challenges of retail branding
in an omni-channel world
Shoppers’ expectations of the retailer brands have
grown significantly, yet retailer capabilities have not kept
pace. Shoppers are omni-channel—leveraging channels,
devices, and touch points to connect with retailers.
Retailers are multi-channel. Building retailer brands is
challenging in the best of circumstances. This growing
gap makes it more difficult.
Great marketing and advertising can often make a
brand, but retailer brands are unique. Retailer brands
are experiential and inextricably tied to the manifestation
of the brand within the four walls of the store. Retailers
are notoriously risk-averse because they understand the
impact that a negative experience can have on the
overall brand.
Historically, retail brands have been built around three
main pillars: the manifestation of the brand in store;
representation (marketing) outside the store; and
conversation with shoppers (often via loyalty cards, and/
or customer service). In today’s digital world there are
two shifts happening that make it more challenging for
retailers to deliver on their brand promise:
1. There is another store, an e-commerce store. For 99
percent of multi-channel retailers, there is a fundamental
disconnect between the physical store brand and
experience vs. the one online. Retailers continuing to
ignore this disconnect should be reminded that your
brand is only as good as its weakest link.
2. Each one of the three brand pillars has a traditional and
digital component. How should retailers manage the mix?
Take representation of the brand outside the store as an
example. Processes and organizations have been built
around traditional media (TV, print, circulars, etc.).
How should retailers incorporate digital media into
the mix? Easier said than done. From a conversation
perspective, how does a retailer incorporate social media
into the relationship with shoppers and engage in a
two-way conversation?
From the store to the retailer brand, digital has 100
percent transformed the way shoppers engage with
retailers and elevate their expectations of retail brands. In
2013, it will be critical for retailers to invest significantly
in building multi-channel capabilities to reduce the gap
between how customers shop and how retailers sell; to
fulfill customer expectations of the retailer brand and
grow brand value.
98 BrandZ Top 100 Most Valuable Global Brands 2013 99
Influence
on purchase
10%
50%
Impact on shopping
experience
The impact of digital
extends well beyond
e-commerce
100%
Kantar Retail is the world’s leading shopper
and retail insights and consulting business.
The agency works with over 400 clients and has
20 offices in 15 markets around the globe.
www.kantarretail.com