On Sunday June 22nd, Greg Randallpresented in the Annual Booksellers NZ conference.
As a follow up to the presentation, Greg has created a blog article which mirrors the presentation and consists of more information to further bolster points made.
Due to the size of this article, it has been broken down into two parts.
If you are interested in following the Powerpoint presentation while reading these articles, you can download it by clicking here.
Succeeding in the Digital Age
Before we embark on talking in detail what is required to succeed in the digital age its important to first look at quantitative figures which help create a clear picture of the New Zealand and global online environment and how its impacting retailers.
(Source: BNZ Online Retail Sales Index)
In order to understand more about how you should conduct yourself in today’s digital age, it’s important to gain an appreciation of the retail environment in which we all now live. The new reality.
- 2013 total online purchases by Kiwi’s $2.8 billion.
- This comprises 6.2% of traditional retail sales.
- North Island 75% of all online sales.
- Online spend is increasing three times the rate of physical retail sales.
- By 2016 online spending is forecast to hit
- $5.4 billion.New Zealand is losing market share to international retailers.
- 60% of online sales are from local retailers but overseas retailers have shown a 24% increase year on year whereas domestic online sales show a 10% growth.
NZ is going mobile:
- 74% of online users have researched a product/service on their phone.
- 33% of those purchased on their phone.
- 13% have purchased on their tablets (and growing rapidly).
We are now a nation of “Multi-screeners”:
90% of all daily media interactions are screen based: smartphone, laptop/PC, Tablet, TV.
Two primary forms of multi-screening:
1. Sequential screening:
- Moving from one device to another to complete a specific task.
- 90% use multiple screens sequentially to accomplish a task over time.
- 98% move between devices to complete a task within the same day.
2. Simultaneous screening:
- Using more than one device at the same time:
- Can be related i.e. Watching something on TV and investigate further on tablet (TV is a major catalyst for search).
- Or unrelated i.e. watching TV and on Facebook.
Context drives device choice:
In order to develop strategies to drive value out of each device, the context under which they are used becomes important for retailers to understand.
PC/Laptop keeps us productive and informed:
Context: office or home use, productive, task orientated, requires lots of time and focus, serious researching, intensive attitude.
Smartphones keeps us connected:
Context: used on the go as well as home, communicate and connect, short bursts of time, need info quickly and immediately.
Tablets keep us entertained:
Context: primarily used at home, entertaining and browsing, unbounded sense of time, relaxed and leisurely approach.
Example of context in use: Many retailers have store locators prominently fixed on the home pages of their “mobile sites”.
The Consumer is in complete control
The one thing the above stats clearly indicate is, the consumer is in complete control of their own buying behaviour, information gathering, media consumption, engagement, and socialising.
Consumers will interact with brands/retailers when they are ready. Consuming media is the same, not even TV is safe:
- More than 1 billion visit YouTube each month
- According to Nielsen, YouTube reaches more US adults ages 18-34 than any cable network
Compare your tolerance for TV commercials now vs 5 years ago. How do you now feel when you watch a commercial?
The days of the retailers with the biggest marketing budgets winning market share are now over.
Consumers are completely unimpressed with loud flashy expensive advertising. Today consumers want change.
Established in 1906 used to be important. Now it's a liability.
Those retailers who are winning are those who are connecting to their target market on the consumer’s terms.
6 hurdles NZ retailers face when trying to grow Digital channels
Retailers struggle with this change in power and control. Much of their efforts in developing digital channels have been confronted with hurdles, barriers and challenges.
By understanding these issues it provides you the knowledge to prepare yourself and your business to navigate around them saving both time and money.
It’s also important to note, these issues are common across all retailer types and sizes. It’s not just the little guys; in fact the bigger you are the more hurdles and issues faced.
(Sources: PWC Survey, Econsultancy Survey, Greg's experience)
Hurdle 1 - No strategy
Retailers want to grow their eCommerce/Digital channel but have no idea how to do it.
Retailers know they need to be strategic in order to grow digital, but in essence they don’t understand how to create and apply a strategy for digital channels.
Digital is a new business channel, therefore being a channel that has ROI goals and focus, the truest definition of “strategy” still holds true:
Strategy is a unified plan of action designed to achieve long term goals for a business.
There is no need to over complicate this.
Example 1. Large NZ retailers struggle because they have taken their offline traditional retail strategy and tried to apply it online. They open a big store in a different location following some population formula, they then blast some radio and TV advertisements hoping people will come and buy.
The retailer is driven by the strategy of delivering a value proposition of “convenience”.
However they have not considered when people shop online, their motivations are different, their expectations are different, and the definition of their value propositions are different. Furthermore this definition will be constantly shifting.
One day it could be “buy online pick up in store”, the next day its being able to ask an employee a question on Facebook instead of calling.
Kmart in the US struggled for 10 years trying to figure out what their customers wanted in store vs online.
This is a recent TV commercial now with over 21 million views on Youtube. It clearly shows Kmart has evolved to deliver value transcending purely the physical shopping experience.
Another example is Westfield Mall head office. They have been trying to develop an online strategy for years.
Westfield thinks if they build an “online mall” people will go to it, look at the products then go to the retailers and buy. Why? Because this is the behaviour in the physical world.
Westfield is not making the connection of how people behave differently when they are online.
Hurdle 2 - Lack of budget and resource
Time and energy must be put into the digital channel. Do not get caught up in the idea once a website is built and live the work is done.
Your online store must be thought of as a physical store. You would never open a new physical location and ignore it. If anything it requires more attention than the others. Your website must be thought of in the same way. It is another touchpoint for potential new customers requiring a lot of nurturing.
Hurdle 3 - Technology limitations of their existing eCommerce platform
The wrong technology selection will stifle growth and is why a proper RFP (request for proposal) process is critical when considering new technology.
Issues such as having an inflexible front end, limitations in presenting content, inability to connect to other business systems (i.e. CRM), and causing the site to load slowly, are examples of how a technology will clearly lose sales and limit growth of this channel.
Greg Randall wrote an article specifically on the negative effects of slow download speed is to your business. Click here to read this article.
When quickly reviewing the Bookseller retailers who are online, one site took 5.3 seconds for its home page to fully appear.
Anything longer than 2 seconds will result in consumers going back and trying a competitor.
Greg has written an article recently published in the May 2014 issue of NZ Business magazine discussing in detail how technology can become business limiting.
Hurdle 4 - Poor vendor relationships
To be successful in digital is partnering with the right vendors. The challenge is who do you select?
Your digital channel will not succeed with the wrong relationships. Selection is critical to get right. The three core vendor types are:
- Web development companies
- Adwords/SEO Agencies
- Traditional advertising agencies
In PWC survey made a point of discussing the role traditional advertising agencies have in the slow evolution of retailers in digital.
Their inability to think long term and strategic in digital has stunted the growth of many retailers.
If you were to analyse this further, it makes sense. With the digital channel being a business channel it requires a long-term strategic focus. The DNA of agencies is short-term campaign focused; they have never been built for this.
Part of the blame should be put on to the retailer for not recognising the shortcomings of the Agency.
Hurdle 5 - Digital is siloed from the rest of the business
Common signs of the digital channel operating in a silo is:
- The digital staff is separated from the rest of the team. There are no interactions with other departments ie. customer service, logistics, sales, marketing.
- Physical and digital are looked upon as two separate departments.
Physical retail and digital must converge. There should not be a distinction between digital and physical retail...its just Retail.
Hurdle 6 - Culture
The Econsultancy survey indicates 90% of New Zealand senior management and/or business owner’s buy-in to eCommerce. This is a complete contradiction to Greg's experiences.
It’s easily between 20% to 30% in NZ (far higher in Australia).
Senior management/business owners say they buy-in to digital because they have to, none of their actions back up true “buy in”.
Examples of a culture not buying into digital:
- The digital team reports to Marketing.The digital lead has no positional power within the organisation.
- The senior team intentionally recruits a weak individual in the lead digital position. Someone who they can control.
- Very low budget allocated to the digital channels.
Part 2 of this article focuses on the 6 pillars of developing and growing a digital channel. This second half provides you detail on what to focus on and how to build a solid foundation from which to grow from.