New doesn’t always mean better

Posted by David Buckingham, CEO

The death of physical shops and, indeed the high street, has long been predicted based on the proliferation of online shopping. We’re bombarded with stats around just how much people spend online — last year in the UK, we spent £133bn online, according to Capgemini. And while this represented an increase of 16% from 2015, does it really give us an accurate picture of the retail space? To put the figures into perspective, in 2016, online shopping accounted for 8.7% of global retail sales, while in the UK this was higher at 15.6%. This means that the remaining 84% of retail sales took place… in store.

That said, there was a recent story in the media about an innovative new platform that connects big brands and customers directly, in effect bypassing the supermarket. It’s anticipated to save consumers up to a third of the cost of branded goods compared to shopping in-store. Of course, this starts up the debate once more, will this new technology mean the end for the supermarket? The answer is mostly likely: no.

Aside from the statistics that more than 80% of products are still bought in a physical shop, demonstrating the ongoing popularity of buying in-store, what about customer experience? What about the immediacy of picking something up, paying for it and taking it home, all in a matter of minutes?

We should note that the idea of selling directly to the consumer isn’t necessarily a new one and it’s certainly not an approach that is restricted to the grocery industry. Global brands like Nike and Under Armour are just some of the brands proving that direct-to-consumer selling works, and it’s on the rise. Unilever and Procter & Gamble have both launched initiatives selling directly to consumers. In addition to establishing a connection with consumers, brands that shift to direct-to-consumer not only benefit from cutting out the middleman, but also gain better and more direct access to shopper data.

So despite the appetite we have for shopping online, does this signal a massive sea change?

Probably not. Yes, this approach may appeal to more budget-conscious shoppers and yes, they could save money, but as anyone who’s ever shopped for groceries online can attest, there are a lot of factors to consider: the minimum spend threshold, the cost of delivery and the fact that not all brands and items are available online.

But that doesn’t mean it will be smooth sailing for brick-and-mortar retailers either. Competition is only ever going to become more fierce, and they will have to try that much harder to retain and attract loyal customers.

It is likely that buying grocery products directly from the brand will never actually become a true replacement for supermarkets. Whether that is due to the customer experience, the immediacy factor, or the sheer choice available in store, consumers are more likely to share their budget around — spending via whichever channel gives them the best options and choices at the time.

Shoppers can be apathetic when it comes to grocery store loyalty and, as a result, retailers have been competing on how to drive greater loyalty and spend levels since the dawn of time. By all accounts, this will only intensify as we go forward. But more so, it is improving ways that will drive loyalty, such as personalisation, that will play a decisive role.

The in-store customer needs to be incentivised to come back, to spend more and to choose one supermarket brand over another — and over an online-only competitor. Again, personalisation is key, giving retailers the opportunity to demonstrate to their customers that they ‘know’ them and can tailor offers to suit their purchasing behaviour and needs — whether this personalisation takes the form of targeted communications (via email, text or even post) or specific, relevant offers and promotions in store and at the till. Ultimately, it will be the customer that feels understood and rewarded who will be more likely to shop with the brand, remain loyal and tip the scales in favour of the in-store experience.

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