The e-comm tide is changing, and the retail dinosaurs are evolving!
2018 was a black year for traditional brick and mortar retail businesses in Australia. Some would describe it as death to the high street, with seemly every news broadcast reporting about another high profile brand going out of business. In Oz, victims included: Toys R Us, Laura Ashley, Ed Harry, Roger David, and SKINS. Adding to the shocking year, a senate inquiry was launched into the franchising industry, and on the surface every restaurant or celebrity chef was facing Fair Work for underpayment of staff or was being forced into voluntary administration like Adriano Zumbo. Of course, the year was capped off by the $486M loss reported for jurassic park retail giant, Myer.
Overseas, the picture was mirrored. In the UK, House of Fraser and HMV were just two casualties of shifting consumer behavior. They too had a parliamentary inquiry into the sustainability of High Street and town centre retail in Britain and a proposal of a Digital Sales Tax. In the US, Sears Holdings (owner of Sears and Kmart) filed for Chapter 11 bankruptcy in October and announced it would close 142 unprofitable stores by the end of 2018.
Yet for online retail, the only darkness came in the form of Black Friday – which shone brighter than ever.
This US established concept, which heralds America’s Christmas shopping season since 1952, has now firmly cemented itself down under. Further proof that Black Friday, as well as other high-profile November online shopping dates, are taking hold – from Single’s Day, Click Frenzy and Cyber Monday – is a Commonwealth Bank card data report. This revealed a 3.7% decline in spending between November and early-January from traditional retailers, while Citi researchers reported a foot traffic decline of 9% between Black Friday and Boxing Day.
Roy Morgan’s annual Christmas retail sales forecasts – conducted in conjunction with the Australian Retailers Association (ARA) – did indicate that Australians will spend nearly $51.5 billion (an increase of 2.9%) across retail stores during the Christmas trading period from November 9-December 24 (46 days). However, it also predicted that the slowest growing category will be Department Stores, for which spending is forecast to increase by 0.3% to $2.943 billion.
Many retail experts feared that November’s online success would detract from December’s overall retail results and yet December is still the largest online month of the year. Visits grew by 2.2% YoY in December to reach 1.1 billion, whereas November only grew by 1.3% YoY to reach 1.0 billion, according to the latest Hitwise Internet measurement report.
Boxing Day and Black Friday saw the strongest YoY growth
In particular, Boxing Day was the largest single retail day, drawing over 58 million visits on the 26th December. This was 33% greater than the next largest retail day, Black Friday, which drew 43.6 million visits on the 23rd November. Compared to other key retail days, both Black Friday and Boxing Day posted the strongest YoY growth of 7.5%.
Boxing Day’s spike was driven by traditional retailers.
eBay dominated the online space with the 3.7 million visits on Boxing Day, followed by electronics retailers, JB Hi-Fi and Harvey Norman. Harvey Norman, along with Myer, posted triple growth compared to the previous week. Interestingly, eBay and Amazon both saw more visits and weekly growth on Black Friday than on Boxing Day. Whereas, traditional and fashion retailers like David Jones, Myer and The Iconic, leaned toward Boxing Day, seeing larger growth than on Black Friday
The brick and mortar dinosaurs are evolving!
Myer converted more visits to online purchases than any other top retailers, including David Jones, with a comparatively high conversion rate of 2.68%. Product deals and multi-channel tactics were key to this. Myers converted traffic predominately from Search (at over 50%), but additionally through Social Media (Youtube– 4% and Facebook – 3%) and Rewards sites (OzBargain– 2% and Cash Rewards – 2%).
NB: .AU conversion rate benchmark (0.5% – 1.5%).
What does this mean for consumer products and e-commerce businesses?
Regardless of whether you sell online or via traditional brick and mortar channels, e-commerce has undeniably changed buyer behaviour and how products are discovered. No one knows this more than the traditional retailers. In the last 24 months, traditional retailers have moved from property businesses, to becoming media businesses by investing in rebuilding dominance over the customer journey and on-selling this to brands they stock.
In the ongoing Standoff between brands (with both e-commerce and wholesale distribution) and retailers (with both e-commerce and foot traffic), the retailers seem to be pulling ahead significantly. Retailers are now charging significant investment to brands for posting via retailer social and owned media channels, or requiring brand funded Search Marketing investment to direct the user to retailer e-commerce sites, rather than brand sites. As a result, brands are not securing traffic, sales, or customer data which leaves them unaware of how much sales are being converted online vs in-store and who their actually customers are. In the former example, the cost to post via a retailer channel is often 50x higher than the cost of boosting content themselves, and only goes to build their following and increasing the rate card value.
So, what should consumer product brands focus on for 2019?
Number one: Start acting more like an e-comm brand.
1. Search Marketing: If a user is searching for a product and your brand pops up, you’re closer to a sale. Brands need to understand the principles of Search Marketing and ensure their content marketing is adapted to suit the customer journey. Moreover, they need to take control of driving traffic to their own website to ensure they’re capturing data.
2. Better Content Marketing (not just social): More investment in Rich Media content (video) and gated content housed on the website, with a focus on engagement, rather than just reach. Better website content will improve organic search results and will lower the cost of search marketing.
3. Data Acquisition: For the last 15 years, brands have given their customer data to social media. Now, these channels have become the gatekeepers of data, limiting access to followers and organic reach without paid amplification investment. Smart brands are now doing the numbers compared to other channels and have started questioning the value. Therefore all channel strategies must focus on collecting, qualifying and leveraging user/customer data to the brand’s advantage.
4. Email Communications. Focus on the quality engagement of email communications (to gain open and click-through rates). Users/customers have gone to the effort of providing a brand with personal details, so treat them with more respect and personalisation of content.
And what should e-comm brands focus on?
1. UX & CRO: E-commerce is getting stronger demand. E-comm is also changing the behaviour and expectations of a customer/brand experience. Customers expect slick and simple to navigate interfaces, clear product information, product recommendations, and payment and delivery convenience.
2. Marketplaces (including Affiliates): eBay or even OzBargain and Cash Rewards are now credible online shopping destinations (the new department stores) for consumers and sophisticated brands are learning new ways to leverage them without the need for perpetual discounting. In many cases, just being in the marketplace creates greater brand awareness through the sheer volume/reach they offer.
3. Social: Everyone is on Social Media. Right? We think you should forget Social Media when it comes to solid online sales conversions (in a last touch point model). As proven from the Myer example above, only 3% of conversions came from Social. However, from a last touch point valuation, social underperforms in direct conversions. In an attribution model, social is traditionally regarded as the start to the customer journey. This aforementioned conversion rate is pretty standard across most industries, however Homewares, Beauty and Travel can be slighter higher at 4-5%. Youtube sits in two categories (social and search). Youtube is classified as the world’s second biggest search engine. Our prediction is that the nature of the content (edu-tainment), the channel subscribing functions and user comments/interaction make it one of the most powerful social media tools around. Whilst shopping conversion is still relatively low, the shopping function is in relatively early days and the way product content is searched for (and linked to Google), makes it one of the most interesting channels to watch and leverage for conversion growth.
4. Search: As proven in the Myer example above – over 50% of conversions resulting from search – search marketing has always attributed more to online conversion than any other channel. This is followed closely by email, at around 34%. When someone is searching online for a product, they are most likely to be looking for a product to purchase. This means that as long as the brand, the price, and the experience fit, the conversion is likely to follow. Google Display advertising is also assisting the performance of search marketing, especially form a retargeting perspective.
5. Email: In a recent youth market survey, over 88% of Gen Z and Millennials expect brands to communicate to them via email, once they have shown interest in a brand. So, think about it like this: Social Media and Display are the window displays or visual merchandising of a brand. However, email is for when the potential customer decides to enter the store. A good email is the equivalent to a good sales representative. The more attentive they are, the more personalised a service and the higher the repeat traffic and the sales conversions.