Future Retailers Will Be Digital Platforms
Physical Retailers are Losing Relevancy in a Digital Shopping World
Quick, think of the last product you bought online, did you go directly to a retailer, or did you search on Google, Facebook or Pinterest? Its likely that you either used search or went directly to Amazon. Last holiday season, over 50% of ecommerce growth went to Amazon(and a whopping 24% of overall retail sales growth). It has effectively become a verb for eCommerce, the Kleenex of the category. It’s also likely that Amazon is becoming the default for your online shopping, much like your grocery store of choice is determined by its proximity to your home. This isn’t just bad news for physical retailers, it’s potentially a death sentence for many if they are unable to transition to relevancy in consumers minds.
It’s also a huge opportunity for brands to sell directly to consumers, although like retailers, a huge struggle for many brands is underway with regards to relevancy. As we transition from shelf shopping to products on demand, many brands will struggle to find traction in consumers minds. Do we really need 900 skus of toothpaste? Not a chance. Many Niche brands will find success however as they use storytelling and direct targeting to consumers and build great businesses that current CPG behemoths wouldn’t bother with. The good old days of $100MM new product launches will be few and far between without access to overpopulated retail shelf space.
Already the impact is being felt. Walmart reported that its Q4 eCommerce sales grew at an anemic 8%, a rate that is far below the overall growth of eCommerce indicating that consumers are turning to other channels to fulfill their needs. This is dangerous territory for many retailers as mindshare will be driven by shopping simplicity and innovation versus real-estate and location. Without relevancy, many retailers will simply cease to exist. Already, 8 of the top 25 eRetailers in terms of sales aren’t physical retailers at all (Apple and Nike have significant physical retail presence but not core to their business operations).
As consumers untether from physical retail, relationships will be paramount. Weak relationships based solely on price or volume of merchandise will not maintain customer loyalty as those attributes will be table stakes. Price and selection are completely transparent in digital unless being gamed in which case trust will suffer. The very definition of a retailer will change as products automatically come to consumers when needed and the most valuable shopping asset becomes information and stories provided from sources ranging from the manufacturer to retailers to the most important source, consumers!
I recently began shopping for some trekking poles to use on my hiking trips. I first went to a physical retailer, REI to see and try out various poles and more importantly, to get some insight from REI’s highly knowledgable staff. After checking out REI’s inventory, I later Googled trekking poles at home to learn more. I was greeted with 3 ads, two of which were from REI and one from a rating company Best Reviews which seems to be an affiliate push to Amazon stores.
REI does a masterful job with contextual commerce and also garners the first organic spot. Shoppers can find excellent content on virtually any type of outdoor gear. A whole industry of storytelling platforms is emerging to meet this need. Verse and Fabl are doing masterful jobs of creating stories from simple platforms with integrated shopping nodes. Using existing brand and curated content, amazing stories can be created like this helpful SXSW recharge built using the Fabl platform. These stories are portable and can be used all along the shopper’s journey from search to product pages.
Google Shopping then becomes a great editor for products. A simple click brings me to a multi-channel shopping page with many filter options. The biggest benefit is that I’m not shopping a single retailer’s inventory, I’m shopping all trekking poles offered online. Using Google Shopping filters, I can easily narrow my search by whatever my purchase hierarchy may be.
Finally, I can choose just the product I want which will again bring me to multiple options for price and delivery. The Black Diamond poles with cork grip are a whopping $169.95 from Google Express (fulfilled through REI) and REI and amazingly $153.76 from Amazon. REI members get a $17 member dividend on the product which Amazon has priced closely. Both have free shipping so what becomes the order winner? One Click. For me simplicity wins hands down. I imagine that Google Shopping will convert me to a member soon and more tightly integrate search and acquisition.
Bottom line, Google is well positioned to become a fully blown retailer as is Facebook, Twitter, Pinterest, Instagram etc. Consumer behavior is shifting rapidly and it seems unlikely given existing results that current retail consideration sets will translate to digital shopping without serious investments in user experience and content from physical retailers.