OMNISHOPPER 2017 SHOPPER RESEARCH. Omnishopper The rise of the networked shopper

Transcription

1 OMNISHOPPER 2017 SHOPPER RESEARCH Omnishopper 2017 The rise of the networked shopper

2 The Five Drivers of Consumer Transformation Retailing is changing because the consumer has changed. The dynamics of the shopper journey can reveal the forces that define the present and the future. Mathieu Loury, Vice President, Retail, Mastercard When Mastercard published its first Omnishopper report in September 2015, Jet.com was an intriguing online retail startup, and potentially a competitor to Amazon. One year and USD 1 billion in sales later, Walmart bought it for three times its revenue. In September 2015, Sports Authority and Aéropostale in the U.S., as well as BHS and Austin Reed in the U.K., were dealing with retail challenges of online competition, slowing sales, and unprofitable in-store locations. Almost exactly one year later, they all went bankrupt. Some of the retail headlines of 2016 were unthinkable in Some of the biggest names in retailing have had major store closures or other kinds of reorganizations. On the other hand, a strong set of companies, like Home Depot, Amazon, and L Brands, are keeping sales and profits on a growth track. Note that The L Brands flagship, Victoria s Secrets has maintained a profit margin of more than 10 percent so far this year. But here s another headline: it s scrapping its catalog. The Victoria s Secret catalog, one of the foundations of the brand and a pop culture phenomenon, is outdated. What was once heresy is now strategy. Stores are closing. E-commerce is thriving. Marketplaces are becoming dominant. Welcome to retailing in the era of disruption. It s not gloom and doom. It s reality. And it is change. Smart companies are finding, and will find, opportunities within this transformation if they look deeply at the their most valuable asset: consumers. Business models, inventory, and marketing are being driven by changes in consumer behavior, pure and simple. It s not that the consumer is changing, says former Saks Fifth Avenue CEO Steve Sadove. The consumer has already changed. They use technology more, research more, and use the research to compare prices, product and experiences. When you drive comparisons you create winners and losers. A look at Mastercard s Omnishopper 2017 results validates Sadove s statement. For example, comparison alone drives a good deal of shopper behavior. It is typical of the kind of information that is essential to navigate the current retail transformation. The data shows that price comparison is tied with consumer reviews for tools that the omnishoppers say make them smarter. For consumers who favor online shopping over instore, price comparison is at the top of their list (43 percent). It s well ahead of convenience, selection, and personalized experience, which were expected by most analysts and retailers to drive e-commerce growth and define the e-commerce experience. But at as Sadove says, The transformed consumer wants to compare. The retailer that is not prepared for this behavior, both from a content and operational perspectives, stands a chance to lose. Look at Figure 1. That sense of shopper control and activity also supports Sadove s point. The trend toward comparison is just one element of the shopper journey that is driving change on a more general retail business level. Looking at this transformed customer behavior can bring some order to the dramatic dynamics facing retailers. To compete in the current retail business and be well positioned for the future the Omnishopper 2017 report identifies five key consumer behaviors that are driving retail transformation. They center on the most important part of the shopper journey: research, which will be detailed in this paper, along with segment behavior, loyalty, the channel value exchange, and the experience economy. 2

3 FIGURE 01 Shoppers now have more control and use it to enhance their buying decisions I visit more merchants websites I am now comparing different products more Percent To what extent do you enjoy using technology when shopping? Compare products Saves money 78% say a great deal or somewhat

4 Driver One: Research The Omnishopper findings are most compelling when considered in the context of the survey s methodology. It did not start by qualifying respondents based on device behavior or specific retail affinities. It qualified by general shopping. The questions (delivered and answered via online surveys) were asked on the basis of current, objective shopping behavior. In that context, research stands out. When asked from a general standpoint, the omnishopper is very active and positive about their research experience. Most importantly for retailers, this journey is not easily predicted or templated. Comparison, as stated, is a transformational element. It is part of the research phase of the shopper journey. Research represents everything that happens before the purchase. It is essentially at the heart of the shopper journey. Our findings show that the research consumers perform prior to purchase, and their concomitant energetic and active behavior, form a part of the retail transformation 01 The Omnishopper wants more information than they did two years ago (64 percent) and technology has facilitated seamless movement between channels, depending on where the shopper is in their customer journey and within a specific retail sector. For example, shoppers looking for consumer electronics are the most likely to research their purchase, particularly using technology. They are 36 percent more likely to use the Internet on a computer or laptop (38 percent use it most of the time). Twentytwo percent use the web browser on their phone out of store most of the time. Grocery shoppers are the least likely to research; they are 29 percent less likely to use the Internet on a computer or laptop (20 percent use it most of the time). However, grocery shoppers are more likely to use more traditional media, with 25 percent more likely than other sectors to use store catalogs and mailings and 17 percent more likely to use magazines or newspapers. Figure 2 provides a detailed matrix of how different retail FIGURE 02 Sector shopping preferences 4

5 sectors behave as they consider, shop and enjoy in the research process. We found more insight into that thirst for information by asking consumers why they want more information when shopping. Here we found more of the overall satisfaction that is consistent across the omnishopper experience. Shoppers cited more and better information (45 percent) curiosity about the products (41 percent) more reliable user reviews (31 percent) and better tools (31 percent). The data also showed a surprising variety of information sources. That variety will make shopper journey models hard to create and follow. The omnishopper is voracious. Their information needs will make it necessary for retailers to be omnipresent. Figure 3 shows the sources of information considered and their respective influence on shopping decisions: FIGURE 03 How influential is each source of information when shopping? Friends/family Ads Packaging/labeling Circulars/flyers Social media Consumer reviews Sales associates Websites News/Media Professional reviews Add devices to this already complicated matrix. Surprisingly, home computers are still widely used for research. Eighty-three percent of respondents said they use their home computer to research purchases. Mobile device use is growing. Forty-four percent use their mobile devices in-store; 65 percent use them for at-home research. The shopper journey, the data shows, can involve multiple influences across multiple media and devices. Shopping for a new TV can involve a conversation over a family dinner, an newsletter about the latest technology, a consumer review site, a mobile comparison app, and a social media search. A week later the decision might be influenced by a newspaper circular or print ad. The retailer, ideally, needs to be present or accessible at every point. It is a major factor in how consumers behave and it is illustrative of the kind of transformation that is now underway at retail. 5

6 Driver Two: Segment Behavior With the near-constant emphasis on marketing to millennials, it s easy to overlook the other age groups that fill out the consumer base. There are nuances here, and they show the constant change of consumers. Is segmenting important? Ask fashion retailer Express, Inc. CEO David Kornberg who spoke during a call in late August 2016, explaining a samestore sales decline of eight percent. In an effort to acquire younger customers to our brand, we expanded our merchandising reach and shifted our marketing projection, he said, according to a FactSet transcript. While our fashion attracted more customers at the lower end of our target demographic age group, this was more than offset by a decline at the upper end. But new additions to this year s Omnishopper research focused on differences among age and category segments. It found some distinct differences in technology usage and value propositions, first between millennials (ages 18-29) and ages (50-plus). 02 At the most fundamental level, when asked How often do you use technology when shopping? the always answer was given by millennials 33 percent of the time. For boomers it dropped to 17 percent. Younger consumers are embracing tech in shopping and are consistently higher in their usage of online tools. Shopping for younger customers is not just about price and value. They place more emphasis on spending time with friends and family when shopping, as well as having new experiences. Finding the right price and value are still ranked high, but they are less important than they are for older shoppers. Retailers need to balance millennial-appropriate strategies and include engagement with the age 50- plus consumer. Membership and loyalty rewards as well as innovation are more important for younger shoppers. Older shoppers are using tech less generally, although they do use laptops, e-readers, and tablets a bit more. Year over year, age 50-plus consumers are closing the gap on tech usage with FIGURE 04 How influential is each source of information when shopping? year olds are almost twice as likely as 50+ shoppers to use tech when shopping. Consumer reviews followed by price comparison apps are first and second highest tools used when shopping. 6

7 the younger generation, particularly apparent in communications and finance (Figure 4). Price and quality are the biggest reason for older people to research. By considering how to use tech to engage older shoppers, retailers can help them bridge the gap in tech usage. Retail strategy must center on the different ways and motivations in how customers shop and purchase. Those differences drive the tension between what retailers want the consumer to do and what they actually do. That s the customer journey. And this tension comes at a time when more than half (55 percent) of senior marketers said they were not confident in their company s understanding of the customer journey, according to Millward Brown. And for many marketers, reaching consumers is the most important factor that s influencing media budget allocation, that same study found. As University of Arizona professor of retailing Anita Bhappu says, Know what customers you want right now. And know the customers you want in the future. 7

8 Driver Three: Loyalty After a consumer has researched their way through their journey, 70 percent agree with the statement that they like to buy from merchants you know and have bought from before. Although almost 50 percent agree with the statement that they are shopping about the same, almost one-third agree they are shopping somewhat more with the same retailers. That might not constitute loyalty in terms of operational commitment, but it is a significant number. Consumers have developed affinities and habits for their current retail set (Figure 5). Operational commitments are mostly gained through loyalty programs. Retailers have bet a substantial amount of resources that loyalty programs will act as the glue between consumers and their brands. However, the Omnishopper data shows that there is room for improvement here. Loyalty programs 03 were selected by 28 percent of the respondents, ahead of customer service factors, but well behind value and track record (Figure 5). Taken in perspective, loyalty programs do not come up high when consumers are asked to think about shopping in general, says Paco Underhill, Call of the Mall author and president of Envirosell. They are more of a reinforcement of frequency and recency of purchase. And they can be very effective. Consumer behavior is trending toward that reinforcement element. Note that value (not lowest price), track record, and convenience are the qualities that consumers value most. With 92 percent of all consumers involved in at least one loyalty program understanding how it fits into the overall consumer experience is critical. FIGURE 05 Shoppers stick with their current retail set; winning new customers is increasingly difficult 70% 30% 70% agree with the statement that they like to buy from merchants you know and have bought from before. Although almost 50% agree with the statement that they are shopping about the same, almost 33 percent agree they are shopping somewhat more with the same retailers. 8

9 FIGURE 06 Selecting the top qualities that cause you to go back to the same merchant 9

10 Driver Four: Channel Value Exchange 04 One of the words we have avoided in this report is channel. The omnishopper is shopping regardless of where the information comes from. But, again, the reality of disruption demands that retailers understand why some stores are underperforming, why some formats are non-starters, and why some elements of the customer experience are producing a 90 percent satisfaction rate. It is important for retailers in the midst of this disruption to define the reasons why shoppers go online and why they go instore. Hallmarks of the in-store experience include fast and personalized service, with advisors at the ready. The online experience offers convenience and cost savings (Figure 7). Again, take note of the both column. As retailers appropriate resources to online and in-store development, they can change the reasons to go online or in-store. For example, advances in live chat may increase the personalized experience percentage for online. Order online/pick up in store services may amplify the convenience metric for in-store. And as the omnishopper continues to get comfortable with technology, the methods and types of blending will also be open to change. FIGURE 07 Online vs. in-store does a better job - global synopsis Please indicate whether you feel that shopping online ore shopping in-store does a better job at each of the following. Receive recommendations 10

11 Driver Five: The Experience Economy 05 There is arguably no greater cause of change to the traditional retail business model than the consumer shift toward experiences over things. There are two distinct characteristics of this change: The first is the emphasis on the customer experience the value placed on shopping over the items being shopped for. Sixty-eight percent of global respondents agreed with the statement Shopping for me is about the overall experiences, not just the items I buy. It does skew younger, as other research projects have shown. The ages segment indexes at 74 percent and drops to 57 percent for those aged 50-plus. According to a separate Mastercard research project, 78 percent of millennials the most desired demographic in the world say they would rather spend money on a desirable experience or event than buy something tangible. The second characteristic of this change has to do with the actual purchases. When asked on a general level, the data shows that more than 50 percent of all respondents favor experiences over things (Figure 8). That data shows Germany and the U.S. topped 60 percent, with France, China and Hong Kong bringing the overall number down. Here s why the trend toward experiences will drive retailing change, says Joseph Pine, author of The Experience Economy. First it becomes evident that the only reason to go to a physical store is for the experience. That means experience has to complement convenience, which is an important distinction. Then the channel that s built on convenience, which is digital, has to be build a better experience. Pine believes that improving the digital experience will be the biggest challenge of the next phase of retailing innovation. Technology, another province of the Omnishopper, will be the bridge between the consumer and the need for a better online experience. FIGURE 08 I prefer experiences over things/items 11

12 Conclusion Retail executives would sooner put lightning in a bottle than define the typical customer journey. The best strategy is to stay as close as possible to that journey by understanding customer behavior. It will change and it will continue to drive change. The drivers of research, segment behavior, loyalty, the channel value exchange and the experience economy will be a solid anchor as retailers navigate the storm. Omnishopper Advisory Board Dr. Anita Bhappu Univ. of Arizona, Prof. of Retailing Dr. Piyush Sinha Prof. Marketing, Indian Institute of Management, Ahmedabad Joseph Pine Author, The Experience Economy Paco Underhill CEO, Envirosell Prithwiraj Nath Prof. Of Retailing, Leeds-Beckett University, UK Steve Sadove Former CEO, Saks Fifth Avenue For more information about the Omnishopper 2017 report and solutions that connect to the networked shopper please contact Brian.Dobson@mastercard.com 12