The Branded Pantry

More news from the online and mobile shopping front over the last couple of weeks continue to support the notion that the complex world of trying to convince shoppers to become/remain loyal has become a lost cause.  There is plenty of hope to regain loyalty, but more about that later. 

11% of online shoppers made a purchase from their smart phone in the 2010 holiday season, a five-fold increase from 2009!   

A third of all online shoppers accessed retailer sites and shopping applications to compare products or pricing either stand alone, or as they were standing in front of a desired item in a physical store.   

About 35% of all smart phone users have downloaded some sort of bar code reader application meaning, we have just scratched the surface of mobile shopping usage. 

As it expands it will both move out (more users) and down (more categories, more often per user.).   

Last week Amazon announced earnings and a variety of other actions that will accelerate its dominance over the current online environment. 

1.    At $34.7 billion dollars they would be (if Amazon just sold groceries) the 6^th largest grocer in North America.  Just below SUPERVALU and far north of Loblaw and Publix.

2.    Their growth rate, despite their size is accelerating not shrinking.  They had the strongest growth since 2000. 3.    Total growth over last year was 40%.  North American growth rate…their most developed market was 46%.  4.    They added 13 distribution centers worldwide last year, an increase of 33%.

5.    They account for over 10% of total online sales in North America.

As importantly, they continue to look for ways to innovate in the shopper loyalty arena.  Their new AmazonTote program allows for direct-to-home delivery of almost all products offered by Amazon, quite an expansion from the AmazonFresh grocery deliver service.  Both are limited to the Seattle area but this clearly represents continued experimentation with loyalty methods to offset what might be perceived as an Amazon disadvantage to retailers with store pickup models.  Sears Holding too offers a delivery model, primarily on Groceries for the moment, called MyGofer in a number of cities.   

All of these alternatives and the results being generated clearly demonstrate that the consumer is ready to be led into a variety of areas as they search for shopping nirvana.  Part of this willingness to be led away from last year’s shopping model and store, stems from early-adopter gadget intrigue.  No question about this as many of the applications are limited in product scope, not all that friendly to use and not connected to other shopping support and shopping applications.    

There is also no question that shoppers are driven to these applications in the hope of finding the ultimate or best deal possible on desired items. Today’s economy drives shoppers to look for the best deals they can get their hands on and the number of applications to help them achieve this goal, continue to explode.  Shoppers feel foolish paying full price for anything and with a little effort and patience the panache of having the coolest thing first, is quickly being replaced by having the coolest thing and paying the lowest price for it.   

All of these things drive shoppers further and further from loyalty schemes except when the loyalty scheme involves price.   As this movement continues to explode combined services will evolve to protect shopper loyalty by providing a package of value wrapped in convenience, that will trade price protection assurances for loyalty on an expanded set of products.  Will it be Amazon that develops this?  Walmart?  Or will it be your local Grocer?  Shopper 5.0, mentioned in earlier blogs (http://brandedpantry.com/2011/01/03/porous-four-store-walls/ ), starts to unravel this potential.

Situation: A good deal of hoopla, and more than a bit of angst about the significant and growing roll of mobile shopping comparison applications in traditional shopping trips by customers has been on tip of tongue and pen since Black Friday.   

Consumers seem quite willing to use their smartphones to:

Check availability of comparable products

Switch stores, even if the consumer is in one store and finds a better deal for the desired item elsewhere.

Buy the product online while doing the comparison if the item is available at a better deal in an online environment.

It would seem according to Retail Insights that 45% of consumers with smartphones have used them to perform due diligence.    

The CEO of Walmart claims that this is the era of pricing transparency.    Some manufacturers and retailers look at this as an opportunity, others with more than a bit of trepidation.   The retailers looking toward opportunity feel that if they can get the consumer into their store for a “hotter” special, based on a price compare they might be able to move that same consumer into more profitable additional purchases.   It is clear the trick to success in getting the hotter special is not going to be easy to master.  Those with misgivings correctly view this movement as accelerating the demise of retailers who do not have competitive pricing.  Others hope to hang on by either controlling the new technology (both using it to attract shoppers from other stores and to better the offers of other retailers that might sway their consumers) or controlling the environment in the store so that “we will block mobile phone reception in our stores.”    Yeah sure, good luck with that.    Still others hope that their “superior customer service” will win the day.  Not so much, as a study by Accenture indicated that most experienced smartphone shoppers would much prefer staring into their phones rather than chatting with store personnel.  

Vision:  Mobile adds yet another dimension to the multi-store, multi channel choice game that is developing for consumers.  Electronic coupons, online ordering for a variety of delivery options (online, via mail, store pickup), shopping comparison tools and the like.  All of these developments seem aimed directly at the heart of shopper loyalty to specific retailers, particularly for oft-purchased items.  These applications fly in the face of what retailers had hoped to achieve.  They had hoped to convince shoppers to go to one place to buy everything.

In reality, at least for oft purchased, items consumers want the same thing.   In our view: Customer needs drivers fall into a hierarchy that is definable with a finite number of common variables, but with infinite time and intensity variation.  Some of these are:

1.    Convenience -What I want, when I want/need it.  

2.    At a price I am willing to pay,

3.    Don’t make me work hard to get it. 

4.    Occasionally surprise and delight me with relevance. 

5.    Anticipate my wants and needs

6.    And . . .  don’t do anything that will make me go or look elsewhere. 

We believe, structured appropriately these new technologies can be bundled to help the shopper achieve a new level of loyalty to the retail entity which creates a loyal devotion to meeting these needs for each consumer.    We call the vision around this development Shopper 5.0.  Done well, it could produce more retailer loyalty than anything ever built .

Hurdles: The applications are not yet there.  Nor will all of the potential power of these applications come together in a cohesive model easily.  Finally, the product data necessary to support the necessary applications and comparisons does not exist today, particularly for FMCG products.  Some retailers rely on product differences in order to avoid being directly compared with other retailers, particularly in the electronics and durables arena.  This product information area needs a rework in order to support these new applications. Lots to come in this arena.

Much more on this to come.