John McGee: Brands and retailers need to up their digital game
Amazon's recent decision to splash out $13.7bn on the acquisition of Whole Foods in the USA has set many tongues wagging in the global retail industry. While it may have marked an unusual departure for the online giant, it also offered some clues about the future direction in which the retail industry might be heading.
If there's one thing that Amazon is good at, it's data and customer experience, something many bricks-and-mortar retailers struggle with.
Throw in Whole Foods' own private label range and it opens up all kinds of interesting and exciting opportunities for the online behemoth which has been slowly creating its own vertical markets with the likes of fashion apparel brands Lark & Ro, Mae and Ella Moon.
The addition of the Whole Foods 365 range of higher-margin private label products to the Amazon firmament turbocharges this push into the vertical space.
For the foreseeable future, the retail model that appears to be emerging will be a hybrid of online data-driven retailers, offering excellent customer experience, with a high street presence for those shoppers who still want the physical shopping experience.
But with advances in technology, that physical in-store experience will be a lot different to what it is now and this will pose all kinds of challenges to marketers and brands alike.
New research carried out by the Dublin-based Ignite Research, part of the Core Media Group, highlights some of the issues retailers and customers are grappling with.
The research - Future of Retail: Responding to New Shopper Behaviours & Demands - shows that Irish shoppers, much like their international counterparts, are looking for new ways of shopping and better retail experiences.
"What the research has shown is that approximately 30pc of shoppers want new ways to shop other than going to the supermarket - from one-hour delivery times to automatic delivery based on previous purchases.
People will continue to shop for fresh and perishable goods like meat, bread and fruit in-store but for non-perishables, including the majority of FMCG brands, the next generation of shoppers want to shop online," says Finian Murphy, strategic planner with Ignite Research.
"All retailers will have to provide an integrated dual-channel shopping experience - bricks and boxes - with convenient supermarkets selling great fresh produce and boxes of non-perishables delivered to your door when you run out," he adds.
The research notes that Irish shoppers spend around €24.6m every day or €9bn a year. As much as €6m a day, however, is spent by shoppers who are unhappy with their existing shopping habits.
Some 57pc said they hate queuing, 25pc believed that their time could be better spent while 22pc complained about retailers not having enough space. Somewhat tellingly, 26pc said they would like to shop online for their groceries. But the market is still small in Ireland and although 14pc of people have bought groceries online, ecommerce sales by Irish retailers are still only worth an estimated €1.1bn a year.
By 2020, however, this is expected to rise to around €2.2bn and to €3.3bn by 2027, according to Ignite.
But there are a number of reasons why online grocery shopping has been slow to take off. Some 53pc of the respondents in Ignite's research said that they like to see what they are buying in-store with 43pc indicating that they also like to choose their own fresh products. A further 16pc noted delivery times offered by online retailers don't suit their own schedules.
"Irish retailers are capable of responding today to the fundamental shift in how people want to shop. Seamless integration of ecommerce and delivery innovation is vital to defend against the likes of Amazon.
"Brands also need to build upon their legacy work and ensure they are chosen not from the shelf but from the mobile screen," says Murphy.
As a new breed of younger tech-savvy shoppers emerge, now is the time for brands and retailers to ramp up their digital presence if they are to remain relevant with the customers of the future.
To compete with the likes of Amazon, the ability to harvest and use actionable customer data will be key to their success. Those who don't keep abreast of these changes may ultimately face extinction.
"Brand managers need to act now for this new way of shopping. Brands will need to reinforce their values with consumers, and move investment from in-store point of sale to digital channels. Integration with digital shopping lists will be key - think 'click to add' to shopping list," says Murphy.
"Amazon is the great frenemy. As a marketplace, it allows brands to sell direct to people, but equally will offer its own private label option stealing share from brands.
"Amazon's algorithm has no interest in brand values, so in the long term, brands will need to think how to forward integrate - understanding consumer patterns and repeat purchase, and ultimately selling to consumers direct through subscription models."
Contact John McGee at firstname.lastname@example.org
Sunday Indo Business