For years the industry watched, wondering how the rise in e-Commerce would impact traditional brick-and-mortar retailers. Would consumers still make the physical trip to the store when similar goods could be purchased at a click from the comfort of their homes? These days, consumer goods manufacturers and retailers in many industries know with relative certainty that the answer is yes. As of 2014, less than 2% of the $600 billion a year in groceries sales occurred online. Today, 75% of retail decisions were still made in store. Consumers clearly still value live, in-person retail experiences.
To the contrary, the rise of omnichannel represents much more of an opportunity than a threat for brick-and-mortar retailers. Online enables traditional (primarily offline) retailers to reach, target, engage, and learn about their consumers in ways previously thought impossible — cost-effectively and at scale. In particular, the rise of digital is underpinning three key trends in retail: online coupons, digital offer testing, and context-aware promotions.
Before The Abyss
Although e-Commerce is on the horizon for all sectors of retail, the full force of its impact won’t be felt for years. Yet, there are number of digital trends resulting from the omnichannel revolution that have a very immediate potential to transform the retail landscape. The grocery industry is an interesting case study. While grocery may lag other sectors in e-Commerce, digital is already making its impact felt in stores as shoppers increasingly look for coupons online, and either print them at home or load them to a retailer card — all before their trip. According to an L2 Insights Report, in 2014 online coupon redemptions topped 66 million, up 141% year on year. Browsing for coupons is the second most popular digital activity for grocery shoppers (55%) after reading online circulars, and 24% of in-store smartphone shoppers use their devices to look for coupons.
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But despite impressive growth statistics, digital coupons make up only 1% of all coupons, and account for just 0.05% of all promotions today. So why is this slow-burning trend an important one? Digital coupons offer CPGs a scalable platform to directly learn about their shoppers’ behaviors, preferences, wants, and needs — in a highly targeted manner. The opportunity is to use these insights to generate much more effective promotional programs than were previously possible.
The Blurring Of Worlds
For years, e-Commerce retailers have utilized A/B testing to drive higher online sales. A/B testing enables marketers to run balanced experiments to test the effectiveness of particular ads and, on the fly, to swap out less effective parts (text, colors, images, etc.) for more effective ones. This can result in a dramatic increase in web site conversion, lift in “adds to cart,” and higher revenue. Now consumer goods manufacturers and retailers are starting to leverage the same approach to test promotions online before rolling them out in their brick-and-mortar stores with end-cap displays and newspaper inserts. By generating thousands of unique offers — varying depth of discount, imagery, product, quantity, call-to-action, etc. — and serving them to small groups of shoppers through social platforms, retailer mobile apps, or digital coupon sites, companies are uncovering promotions that significantly outperform what they’ve traditionally run.
Called “offer innovation,” this relatively new method of digital testing is dramatically improving the effectiveness of in-store promotions by uncovering counterintuitive insights that would be impossible to predict without digital testing data. For example, a leading consumer goods manufacturer found that for one of their most popular products, surprisingly, 4 for $5 was more appealing than the 3 for $3 promotion, which they had been running for years. Similarly, a national retailer found the demand for a grocery item found in every supermarket, dropped 43% when price was raised by just one cent above a seemingly arbitrary threshold. And this is just the tip of a very large iceberg of insights that are being uncovered on a daily basis.
Beyond The Horizon
So what does the more distant future hold for in-store promotions? It’s a truism to say that getting the right offer in front of the right consumer at the right time is crucial for any retail promotions campaign. But today, the average promotional event loses 50 cents on the dollar. Uncovering the most effective offer is challenging enough; but finding the most effective offer for each and every consumer is nearly impossible. Or rather, it was. The rise of mobile apps, RFID beacons, and mass personalization have given birth to method for doing so — context-aware promotions.
Instead of receiving uniform promotional offers, customers who opt into a retailer’s contextually-based offer system will receive offers and coupons that are most relevant to them in that moment. Leveraging much of the same technology behind offer innovation – real-time data, cloud-based analytics and predictive modeling – retailers can serve consumers with ads they may be interested in even while they’re in or near a store. Retailers are also able to see which promotions are working and which aren’t, in real time. From increased ROI to resource savings, the benefits of context-aware promotion programs are only growing as access to data and analytic capabilities continue to improve within the industry. Though still several years off, this will unlock exciting opportunities for retailers to understand and engage with their shoppers on a whole new, much more personal level.
Call To Adventure
The rapid rise of omnichannel has unlocked new ability for retailers and manufacturers alike to learn about consumer behavior on an unprecedented scale. Though the rise of e-Commerce grocery sales will undoubtedly be slow, retailers that don’t embrace the learning opportunity it represents will be left behind. According to Forrester, 60% of U.S. retail sales will involve the web by 2017. While the bulk purchases are still being made in store, consumers are increasingly becoming omnichannel proficient; they’ve integrated a myriad of digital channels into their path to purchase. Online now offers the industry a unique opportunity to engage, learn about, and influence their shoppers — before, after, and even during the purchase. And the stakes are high – as much as $300B in trade spend is on the line. So the question is, which retailers will heed the call to adventure in time to turn omnichannel into a competitive advantage?
Jamie Rapperport is the CEO and Co-Founder of Eversight. With over 25 years of experience as a software entrepreneur, he was previously co-founder and EVP at Vendavo, the leading B2B pricing technology company. Prior to Vendavo, Rapperport served as a founder and vice president of marketing and sales at VXtreme, which was acquired by Microsoft and became the core of “Windows Media Player.” He has a B.A. from Harvard University and an MBA from Stanford.
