Whether you’re selling/marketing food, clothing, gadgets, or services, this research is going to give you valuable insights on how the digital age is changing the way consumers shop and what you can do to survive the digitization.
Above is the link to the entire paper so you can get more details. Below is the management summary that you can read.
The retail revolution – the next wave of digitization is reshaping trade.
Traditional physical retail stores are facing their biggest challenge since the dawn of the World Wide Web 20 years ago. Digital technologies in the form of smartphones, touchscreens and information infrastructure are set to revolutionize retail outlets in the future. But even 10 years after the end of the New Economy, the Internet is far from the sole source of retail goods. Only 4.7% of German retail sales volume is generated online. In a comparative buyers’ study, we explored how modern consumers buy food, clothing, consumer electronics, home improvement products and telecommunications services. We surveyed online buyers and users of physical retail stores, broken down by retail sectors, in order to understand how buying behavior has changed, and to deduce how it will evolve.
Status quo of retail sectors
More people buy food online than at kiosks or gas stations.
Online commerce has penetrated the telecommunications industry most deeply. One out of every two customers concludes his or her contracts online. Hybrid sales dominate fashion and consumer electronics. 58% (fashion sector) and 56% (consumer electronics sector) of our respondents shop both online and in physical stores. Sectors such as food and home improvement are still strongly characterized by physical stores. In those sectors, 91% and 70% of the respondents shop primarily in stores. Yet the next wave of digital commerce will also cover these sectors. More people already buy food online than at kiosks or gas stations.
Time to market
The majority decides within two days.
Not least due to the immediate availability of information, purchasing decisions are made today on an extremely short timeline. With the exception of consumer electronics and telecommunications services, the overwhelming majority of consumers need two days at the most from the initial idea to the purchase (food: 93%, clothing: 86%, home improvement: 71%). While the number of routine and impulse purchases is very high for food and clothing (58% and 66% choose spontaneously in the store), purchases are planned at short notice in the other sectors. With the spread of the mobile Internet, this trend is set to continue. Consumers will make their decisions even faster in future. Retailers and brands must therefore convince potential buyers within a very short time.
Those with expertise seek information independently. Those without ask friends and sales staff.
Buyers combine three sources of information in order to make good decisions in such a short time: media, social contacts and sales staff. The most commonly used sources for independently gathering information are newspapers, television and the Internet (48-90%). 43-68% use recommendations from friends and acquaintances as an orientation. 24-80% seek assistance from sales staff. Significant differences exist from sector to sector. As a rule, the more media-savvy consumers are, the more likely they are to obtain their own information. The less experience consumers have in a particular shopping sector, the more likely they are to also ask friends, acquaintances, or sales staff. Men thus tend to seek assistance more with regard to food (27% of men vs. 21% of women) while women are more likely to turn to a salesperson when buying consumer electronics and home improvement products (80% and 84% of women, 65% and 76% of men respectively). For retailers and brands, it will become increasingly important not only to sell, but to provide customers with the right information in the right location.
The majority observes with interest, only early adopters buy.
Even in this fast-paced age, consumers remain interested in new products. The absolute majority of consumers take note of new products on the market without actually buying (53-78%). New products capture attention, but do not sell immediately. Being the first to have new products is important only for a minority of 3-7%. However, the actions of many of these early adopters have a strong impact on their social environment.
Online presence of brands
Brand websites are indispensable.
Traffic to brand websites is decreasing, while Facebook user numbers are growing. The purchasing process does not reflect this: visiting brand websites remains an indispensable part of it. The less developed online sales and the more important impulse buying is for a sector, the less important brand websites tend to be. Thus only 12%, 23% and 27% of food, clothing or home improvement product buyers visit the brand website before making their purchases. In the case of consumer electronics and telecommunications services, the percentages are much higher at 56% and 82%. Newsletters also play a role. They are often used as a way to stay informed of new products. Facebook pages and smartphone apps do not yet play a significant role in the buying process. In future, Facebook pages and apps will also sell.
Retailers benefit more from the Internet than vice versa.
Retailers dread consumers who look at products in the store and then order online. Physical retailers complain of bearing the costs while online shops make the sale. The phenomenon is real: 27% of food, 24% of clothing, 62% of consumer electronics and 41% of home improvement online shoppers, as well as 40% of those who concluded contracts online for telecommunications services, previously visited stores. Yet the opposite effect is much more pronounced: 35% of food, 27% of clothing, 65% of consumer electronics, and 59% of home improvement shoppers, as well as 59% of those who concluded contracts for telecommunications services, obtained information online before making their purchases in stores. Despite possible online price advantages, physical stores benefit from the immediacy of their offerings. The stronger retailers communicate locally what they have in stock and on sale, the more they stand to benefit from this effect.
Price comparisons, coupons and discounts
Prices are being driven to unhealthy lows.
Miserliness is no longer cool – as a famous German tagline used to proclaim – but the price nevertheless continues to play an important role. Consumers have learned that branded products can always be bought cheaper. 40-65% of the respondents postpone their purchases until prices drop or products are on sale. 53-65% seek out retailers that offer discounts. To find such deals and discounts, a significantly greater number of people still rely on brochures and advertising inserts than on the Internet. New forms of discounting are also taking shape. For example, the depth of discounts can be linked to the disseminator effect of the network or the size of the buying group. While low prices are a very effective tool to promote sales, they can inflict lasting damage to brands and create the expectation that products will always be available even cheaper.
Routine trips to trusted dealers.
People used to go to the shop on the corner. Today, consumers have their regular stores where they shop routinely. That also holds true for online shoppers. Approximately one in every two consumers regularly shops in the same business. For food, that figure is as high as 82%. The only sector where that is not true is telecommunications. Trusted online retailers are also a factor (33-50%). This also holds true for offline buyers. Such retailer loyalty is practical, saves time and is a firm part of consumers’ everyday routines. Unlike the past, modern buyers also frequent a wide range of additional shops. For example, 40-66% shop in the location they happen to be in at any given time. 33-50% sometimes travel further to shop. In the future, buyers’ regular stores will be able to hold their own if retailers facilitate routine purchases for their customers. At the same time, however, the number of additional locations will increase significantly and will challenge those regular stores.
Inspiration at the POS
Stores are too rational.
It pays for physical retailers to provide additional incentives to profit from the short-term nature of the buying process. Surprisingly, they have considerable room for improvement in this regard. Currently, customer communication and product presentation are dominated by a rational approach (70-85%). Fashion and home improvement stores are the only ones to deliver a semblance of inspiration (25% and 18% respectively). Faced with considerably more aggressive pricing, growing competition from new points of sale and massive improvements in digital shopping experiences thanks to tablet computers and smartphones, physical retailers must take immediate action. New digital technologies such as touchscreens and interactive display windows and advertising spaces offer a variety of applications to that end.
Motives for online shopping
Convenience is more important than price.
Online shoppers have the reputation of being price-focused. Yet price is the primary consideration for only 22-36%. Indeed, consumers buy online primarily out of ease and convenience, the lack of fixed opening hours, and the fact that they do not need to carry the products home themselves – and this holds true in all five sectors. They also appreciate the greater selection offered by online retailers (31-52%). Especially in the food sector, more choice plays a decisive role. Buying behavior with regard to consumer electronics differs significantly. There the price is much more important. For physical retail outlets, turning the multitude of touchpoints into points of sale holds great potential to let them serve customers whenever they have the time and inclination to shop. This will require changes such as the introduction of new ordering and delivery models.
Brand loyalty is decreasing.
Brands continue to play an important role in the purchase process. Yet commitment to individual brands has decreased. Buyers often purchase products from a variety of brands. They switch brands, experiment, and are open for inspiration (12-54%). Most buyers’ decisions are based on product-specific criteria rather than the brand (31-57%). Purely price-driven buyers are a minority, however (8-25%). In future, the number of newly emerging niche products and brands will continue to increase. Only brands that focus on the customer relationship rather than the products can expect loyal customers. All others will experience much tougher competition. For retailers, digital technologies provide the opportunity to extend their range considerably and to test the sale of new brands online.
Assistance and distraction.
Smartphones will play a central role at the POS in future. Yet they not only act as shopping assistants, but also as a serious source of distraction. At present, mobile phones tend to divert attention from buying, rather than supporting the purchase process. But even today, some consumers already use their mobile phone to make better purchase decisions or buy cheaper elsewhere. Presently, fewer than 10% of respondents currently use their smartphones in stores in most retail sectors. These figures are significantly higher for consumer electronics and home improvement products. With the increasing penetration of smartphones, this is set to change in the future. Retailers will gain a wealth of opportunities to sell, and to provide information, navigation and assistance.
The retail revolution
Social commerce: Friends to salespersons.
Brands and retailers are beginning to weave social media into the sales process. In future, Facebook, Twitter and the like will not only be communication tools, but also sales channels. Retailers will turn friends and acquaintances into affiliates in order to meet the growing needs of consumers for personal guidance and orientation. They thus gain quality and flexibility. They can personalize the shopping experience, make more relevant offers and require less staff. Initial approaches are pointing toward this development. Even today, users who tell their friends what they are buying or where become eligible for discounts. Twitter is being used actively for sales assistance and product announcements. Retailers use Facebook to identify customers at the start of the buying process, present personalized offers and deliver recommendations from their friends. The first online stores are opening within Facebook. And the key to the success of new players such as Groupon is that many consumers shop together.
Shops to playgrounds.
After the emotionalization of shopping in the 90s and the event-driven nature of the 00s, retail outlets will be transformed into playgrounds over the next 5 to 10 years. The retail trade must reinvent itself to remain relevant in the digital age. Physical stores are losing their added value. New incentives to enter a store and spend time there are needed. It will take new approaches to create loyal customers. New concepts are needed to help familiarize customers with new products and solutions. Brands and retailers must find new ways to generate social dynamics. Games provide the answers to all of those questions. They are far more than a pastime – players take part voluntarily and enjoy themselves. They learn and make discoveries. Players train and want to get ahead. They are communicative and want to see how they measure up to others. While some approaches for turning stores into playgrounds already exist, these are just the first steps and isolated campaigns. In the future, such elements will be integrated permanently into the buying experience.
New points of sale
From advertising space to involvement space.
The era in which physical retail outlets and e-commerce were separate and competing spheres is drawing to a close. In the future, consumers will buy in numerous physical locations and via a variety of physical media. The triumphant progress of touchscreen computers and smartphones is making this possible. Consumers will be able to browse and make purchases at display windows and outdoor advertising spaces. They can also use touchscreens to order products in stores or view additional information. Tablet computers let sellers present products more effectively and sell them directly. A variety of new digital services will support this buying process via sensors. Orders are then delivered or are ready for collection in the store.
- Is E-Commerce Changing the Way You Shop? (business2community.com)
- Advantages Of Electronic Retailers Online (electronicretailguide.wordpress.com)
- Showrooming in Apparel: Turning a Threat into an Opportunity (euromonitor.com)