What can we learn from the ‘Best of the Best’ in retail?
I came across the RetailX UK Top 500 report last week and started nosing around to see who was top (congratulations Amazon) and whether there were any trends or anomalies as yet unseen by peers far better than myself.
Summit Media on the lessons learned during the pandemic from the biggest retailers
At a glance, the answer is no. Brexit, digital transformation and the impact of Covid are the top priorities for retailers operating in a landscape moving faster than ever before. But, on closer inspection, I realized that as our Changemakers in Retail summit currently partners with 28 of the top 500 retailers (which is 6%), I should look within our client experiences to see what we can learn from the ‘best of the best’ in retail. Here’s what I discovered.
1. The customer journey is changing
2020 was a year of enormous change in customer behavior, with customers consuming twice as much online content than in previous year according to Forbes. But behavior has been evolving for a long time prior to the pandemic and the writing was on the wall for retail giants like Arcadia and Debenhams, who failed to invest and harness the power of online.
Accelerated by the decline of the high street, new online features and technologies are helping customers find what they need more swiftly than ever. Take the 30% year-on-year increase in zero-click searches, for example. Or the idea that I can search and get the information I need without needing to click and visit a brand’s website. Or the fact that 82% of customers now reference social as the channel they are most inspired and influenced by when making a purchase.
Changes in behavior are accelerated by technologies. Technologies are accelerated by changes in customer behavior. And it is happening in real time before our very eyes. We estimate that having the insights to fully support and hasten the customer journey could be worth +20% growth for brands in the next 12 months, limiting journey exit points and improving ROI efficiency.
So just like some of Summit’s clients, like Pandora, Specsavers and Durex, now is the time to truly dive into your customer journey and create a road map that marries customer experience with investment.
2. Paid social is where search was ten years ago
Search has enjoyed a resurgence in the last year with e-commerce booming as a result of lockdown. But despite a good year in 2020 and expected ad revenues of +20% in 2021, search will remain under pressure as a channel as a result of its maturity, growth potential and intense competition, especially from social platforms which have seen 100% growth throughout 2020.
No doubt search will remain the primary sales channel (although not the primary digital advertising channel), but the opportunity for retail performance marketing is paid social and finding the right combination of platforms, content and audiences to match the ‘bang for buck’ seen in Search. It is not surprising that great retailers supported by great agencies can do Search standing on their head – they’ve been practicing for nearly twenty years. But paid social, although more complex, has enormous rewards when done correctly, as explained by Summit’s head of paid social Carl Hutchison.
The window for first mover advantage in social commerce is closing and we are seeing more of our retail partners, such as Joules and The Range, increase their channel budgets knowing returns through paid social are comparable to the rich returns of paid search. Social commerce, already launched by Facebook and Instagram in the US and worth close to 5% of all e-commerce, is coming to our shores and will further fragment retail and accelerate the appeal of social from inspiration through to conversion.
3. The agency/in-house paradox
The majority of our retail partners aspire to run their marketing in-house, but staffing recruitment, retention and scale means they compromise and default to a hybrid model. Hybrid models work. And good agencies are not afraid of helping retailers fulfil their ambitions of having more control over activity and costs.
Retailers and brands outside the ‘Big Six’ should appreciate there is a journey to be made in developing an in-house team with experience and scale – but you should set targets and reward partners for helping you get there. Prioritize general marketing skills before developing specialist skills on your most important channels and don’t assume the path is linear. People come and go. Demand is seasonal. So Summit’s recommendation is to have a flexible model with support that means you can invest in short-term agency help when it counts and take every penny of revenue off the table when the time comes.
Of Summit partners, jewellers H.Samuel and fashion and home brand La Redoute are leading the way with flexible working models and fantastic in-house teams that have fuelled enormous e-commerce growth – and show that with a little flexible help, tomorrow can always be your biggest day of the year for sales (as has been the case for both these fantastic retailers).
Clearly these are big topics that need time, energy and investment from the retail sector, but if you get them right there is immediate and long-term payback. There is enormous growth opportunity in e-commerce right now (most Summit clients have grown e-com by more than 50% in the last 12 months) which can be unlocked by having the right experience and scale at your disposal to meet the needs of a customer you have researched and know well, through a broad and measurable channel mix.
For more information on the topic, do tune in to our Change is Now and Retail Reset webinar series or sign up for the next episode here.