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07/01/2014

Bridging the Digital Divide

As the pace of technology accelerates, retailers are scrambling to get their websites and mobile apps to stand out in an increasingly crowded field.

At the same time, consumers are demanding more relevant, effective tools to keep them coming back. The result is a flurry of innovation designed to allow retailers and CPG companies to provide custom digital offers to consumers according to their previous purchases, favorites lists and current locations. Some retailers now ask consumers to answer a few questions about preferences, such as their favorite ethnic food, when they register online. Retailers use the information for targeted offers, says Mark Ledbetter, global vice president for retail strategy, SAP in Atlanta.

"Grocery is a great segment to show how [a] minimal investment of customer-specific data by the consumer can yield great results," he says.

Likewise, retailers that aren't leveraging digital capabilities to better meet consumers' expectations for information on their smartphones are likely to fall behind, suggests a new report by Deloitte, "The New Digital Divide." Deloitte's research, conducted through online surveys with 2,006 consumers in November 2013, suggests digital technologies, via desktop and laptop computers, tablets and smartphones, are influencing 36 percent, or $1.1 trillion, of in-store sales at all retailers, and 29 percent for grocery retailers. And it forecasts the number will rise to 50 percent of in-store sales at all retailers by the end of 2014.

PINPOINTING SHOPPERS

New uses for existing digital technology are cropping up, allowing retailers to push out alerts to employees and consumers alike. And the advent of Apple's iBeacon technology means retailers and CPGs can pinpoint a smartphone-equipped shopper's present location within a few feet and send personalized offers for products in front of them. Duane Reade, the New York drugstore chain owned by Walgreens, in May announced an update to its iPhone app that includes iBeacon technology. Among the app's features include weekly ads and coupons, a pill reminder, Dr. Walk-In, Preferred Store, Shopping List, Steps and QuickPrints from Instagram.

"It is incredibly important for Duane Reade to be where our customers are, including on their smart mobile devices. This update aligns with our goal to provide them with tools, programs and category-specific consumer-generated media that offer relevant convenience, including trusted product and service insights," says Calvin Peters, PR/digital communications manager for Walgreens. The company also offers an iPhone app that gives customers access to a paperless coupon scorecard indicating the specific number clipped and the associated savings, a floor map showing a bird's eye view of the store, a product locator that plots item locations on the store map, and mobile coupon clipping for redemption at the point of sale.

Pharmacies have been among the most active retailers in engaging with customers for routine refills. Smartphones have made it easier for consumers to send in prescription refills, says Amitabh Mudaliar, assistant vice president for retail and client partners at Infosys. "All I do is click a photograph of a prescription I have...and post my prescription online to my retailer, so it becomes very easy to provide a prescription to the retailer," Mudaliar says.

In the UK, continental Europe and Asia, online ordering with in-store pickup is catching on. It's likely to gain acceptance among U.S. retailers as well, says Tom Johnson, consulting partner at PwC. "In a total retail model, we think click-and-collect is going to have more adoption across suburban markets than urban," Johnson says. While some retailers will deliver orders to consumers in their cars in drive-thru lanes, others require shoppers to come into the store with a number or barcode on their phones.

 

"When mobile services align with click and collect, which is individual fulfillment and a concierge-type feel, I think that's the sweet spot myself."

– TOM JOHNSON,

PwC

 

"When mobile services align with click-and-collect, which is individual fulfillment and a concierge-type feel, I think that's the sweet spot myself," Johnson says.

The Bluetooth-enabled wireless Smart Beacon technology is rapidly gaining favor among retailers, says Jim Meckley, chief marketing officer of Mobiquity Networks. "The kinds of things it allows them to do are all based on delivering messages, campaigns, information and offers that are relevant–highly relevant–specific to the end user," he says. "This is allowing the industry to make a leap. Prior technologies weren't accurate enough to really be relevant."

But change isn't automatic. "The challenge that store owners and CPG brands have is in the implementation," he says. "To deliver the experience consumers are asking for, in-store mobile campaigns need to integrate intelligence about shopper history and preferences with location-based data to deliver valuable content at just the right moment. Those who get it 'right' will deliver an amazing shopping experience."

STILL A MINORITY

Yet only 37 percent of shoppers use their smartphones in stores, according to new research by PwC that indicates many consumers are worried about security. In addition, about 32 percent don't own a smartphone, and 33 percent said the screens on their devices are too small. Among those who say they use retailers' or brands' social media, 61 percent said they sought out attractive deals and promotions while 38 percent noted new product offerings.

While smartphone penetration is increasing, text messages that can be viewed on lower-tech phones still have advantages, particularly when retailers want to send communication blasts to employees without having to equip them with pricey smartphones or requiring them to have a computer. "For supermarkets, it's difficult to ask employees to access company information on a personal device, because where does it start and stop," says Stacy Adams, vice president of marketing at mBlox.

Texts can be useful for emergency alerts about weather-related store closings or simple surveys for employees or consumers. "What we're seeing is that because it's so difficult to get people to download and continue to engage with a mobile application, there will always be a use for those basic campaigns, specifically for surveys and notifications," Adams says. "It's the easiest way to receive a coupon as well."

Mobile's and digital's influence on in-store sales
Source: Deloitte, "The New Digital Divide"

While emails have about a 12 percent open rate on average, text messages have a 97 percent open rate, Adams says. To prevent consumers from tiring of offers sent by text message, allow them to select how often they'd like to receive the offers, she says. Text messages also can send reminder alerts of in-store cooking classes, wine tastings and the like.

In the online space, lessons learned from previous efforts that failed to meet expectations are molding future digital development, experts say. For example, while websites operated by brands often failed to drive a critical mass of sales, companies are turning to giant Amazon to reach online consumers. "The commodity players like the P&Gs and Colgates are utilizing the Amazon channel," Ledbetter says. "P&G tried to do direct-to-consumer a few years ago, and it flopped in a big way."

BETTER EXPERIENCE

Retailers also are revamping their online presence to improve the customer experience, says Dan Darnell, vice president for marketing and product at Baynote, a personalization platform for retailers. "As grocery went online with first-generation websites, they're seeing mixed results from that," Darnell says. "They recognize taking a more personal approach is important."

Perhaps more than other types of retailers, grocers have a vast amount of purchase data to draw from in creating personal offers. Still, for large retailers with hundreds of thousands of customers, designing a website or mobile app that recognizes each user and provides relevant content instantly can be a challenge. The small screen size of most smartphones also restricts the number of products retailers can display with an app.

Still, retailers such as Home Depot are moving to an online-first strategy, and investing in the online channel, Darnell says. New software allows retailers to display content based on the consumer's prior purchase history and her current Internet search. "If someone goes to the meat section, you want to push the premium items on top, so it's right there in front of them and they don't have to dig around and look for it," Darnell says.

Typically, most grocery retailers offer websites featuring the same specials for all users. "It tends to be items they want to promote, say blood oranges. If I didn't come in looking for blood oranges, I might not stay on the page," Darnell says. "For the remainder of that content on that page, we want to make it more useful....If you don't really show them something relevant, they're likely to think you don't have it."

DIGITAL REAL ESTATE

The availability of new technology is spurring retailers to invest in digital real estate. "We're seeing an evolution in companies recognizing online isn't an ancillary part of their business," Darnell says. "It's critical to their business. Someone like Home Depot can only put up so many stores. They have to compete with people like Amazon. If they don't take online seriously, a superstore or someone like Amazon could take business away from them."

Safeway's commitment to digital innovation has resulted in several apps, including one that helps consumers create a meal plan and shopping list by selecting recipes they like on the app. Another is dedicated to store locations and product lists.

Retailers "have to find that value-add the customer sees to keep them shopping in their store," says Ledbetter of SAP.

Loblaw's PC Plus awards program lets shoppers earn points on frequently purchased products, while also offering personalized promotions, menu planners and shopping lists.

 

"I really admire what Loblaw has done with PC Plus. They have brought all the things that I, as a consumer, want in a single place. My shopping list, recipe suggestions and offers all in one application, as well as a great blend with what they've done online and in the store, completely blurring all the channels."

– Mark Ledbetter,

SAP

 

"I really admire what Loblaw has done with PC Plus. They have brought all the things that I, as a consumer, want in a single place. My shopping list, recipe suggestions and offers all in one application, as well as a great blend with what they've done online and in the store, completely blurring all the channels," Ledbetter says.

Personalized offers delivered in the store can produce conversion rates of close to 40 percent, compared with conversion rates for print offers of 3 to 5 percent, according to SAP's work with grocers. In addition, average basket size typically increases 16 percent when retailers offer personalized digital offers, and gross margin improves 20 percent.

But the Deloitte report cautions retailers that return on investment in digital technology often tapers off as the amount of investment increases due to cannibalization. As consumers adopt the latest technology, it affects the use of more outdated technology.

BEYOND COMMUNICATION

For retailers, the gains from investing in innovations go beyond communication enhancements. Digital technology is helping retailers better understand shopper behavior. Thanks to insights gleaned from technology, retailers can make changes that increase the profit per shopper, such as merchandising complementary items together, offering bundled products, conducting special promotions/offers and optimizing staffing based on foot traffic patterns, says George Shaw, vice president of research and development at San Jose, Calif.-based RetailNext, a provider of in-store analytics to brick-and-mortar retailers.

But Shaw acknowledges the success of the changes will come down to adoption levels. "The challenge is adoption and getting the technology to give you real answers you can use," he says. "Retailers tend to struggle to keep up with the data stream."

 

"The challenge is adoption and getting the technology to give you real answers you can use... Retailers tend to struggle to keep up with the data stream."

–GEORGE SHAW,

RetailNext

 

Among the data RetailNext collects for retailers is measuring "dwells," or the amount of time shoppers stopped in front of a particular shelf or display. "If they stop for a long period of time and end up not buying products, there's a chance they're confused," Shaw says. Dwell measuring can be accomplished through video monitoring or through Wi-Fi-enabled smartphones.

iBeacon technology will allow retailers to analyze flow and trip patterns through the store. RetailNext also is working on using technology to track sales associates' interactions with customers. By giving sales associates something trackable, such as a name badge, RetailNext can determine how long a clerk at the deli counter is spending with customers and whether the interaction leads to more sales of cold cuts, Shaw says.

Yankee Candle is doing more than measuring dwells through videotaping. Through the use of Qualtrics' mobile surveys on smartphones and tablets, Yankee Candle is getting direct feedback from consumers who stop in front of its merchandise. The goal is to gain new insights into their purchase decisions, says Allison Bleyler, director of consumer insights at Yankee Candle Company in South Deerfield, Mass., which makes candles, holders, plates and shades, sleeves, hurricanes, plug-in fragrances, sprays and car fragrances.

"First and foremost, it's awareness. Did you see that display? What were the new products you noticed?" she says. While Yankee Candle used to ask consumers to fill out paper surveys, by switching to digital questionnaires, the company is receiving a greater number of completed surveys. "It speeds up the testing process. From our perspective, we can get through more individuals in a day than we could have before. It's easier for her to use," Bleyler says. The company has used the insights to determine new product features and improve in-store setups.

Larger retailers, such as Walmart and Target, tend to be ahead of regional players in mobile innovation, Mudaliar says. Often, it comes down to an allocation of resources. "I think there is a fight for investment dollars. Well, do I invest in this campaign or program or technology?"

While regional supermarkets have largely focused on mobile apps that offer a product catalog and basic search, "It's very different with Walmart," Mudaliar says. "This is where they want to make a difference."

Ann Meyer, CEO of L3C Chicago L3C, is a Chicago freelance writer specializing in business.