The retail industry has seen a lot of change over the past five years. Amid a massive downturn in consumer spending and a growing e-commerce sector, some in the technology industry have forecast the complete collapse of brick-and-mortar retail. However, offline commerce still accounts for over 90% of consumer spending, and an explosion of new technologies seek to bring e-commerce tool to the local shopping experience.
Retailers account for a large chunk of advertising spending in the U.S., so ad agencies are keeping a close eye on these developments. Gwen Morrison heads up ad agency WPP’s global retail practice, The Store, and works with some of the world’s largest retailers on daily basis to help facilitate the transition to a more connected and empowered local consumer.
Street Fight recently caught up with Morrison to talk about the transformation of offline retail, what big retailers are investing in today, and the impact of mobile in emerging markets.
It’s been a transformative period in the retail industry over the past few years. Can you talk a bit about where the retail industry is today?
From a wider perspective, the [retail industry is] coming out of the tough economic time when everyone thought the sky was falling. I remember being in a discussion with [Macy’s CEO] Terry Lundgren in 2010, and he essentially something said look, “we don’t know how this is going to end because we have never seen this movie before.” The retail markets came to a screeching halt, and a number of retailers closed their doors. The message in the retail marketing community was just keep breathing. So, at the time, the message was not very inspiring.
I step back to that time because there was a realization among retailers that they could not keep doing business the way they were doing it and survive in that very challenging economic landscape. At the same time, we saw an explosion of digital consumption and widespread adoption of new buying technologies and a general explosion in terms of where and how consumers could shop. It was moment when a lot of entrepreneurs were developing new solutions, which the web technology could enable. We saw things like Groupon hit and reshape the landscape. So when you reflect back just a few years ago and look at everything that has hit the market today, it’s been an incredible period of change.
How have these technological developments — and, in particular, the advent of mobile — changed the way large retail brands shape their strategy?
The real change is in thinking of retail as a consumer-controlled channel. In terms of technology, the key questions retailers need to ask is whether a piece of technology is really going to get used. For instance, we saw a lot of stores introduce kiosks which sort of sat in the corner and were never used.
What technologies are piquing retailers’ interest today?
A lot of the technology which brands have adopted is in area of research — looking at different ways to better understand the shopper’s path to purchase in-store. What’s interesting is that some of these technologies can now flip and go the other way. In other words, we can launch a system where if you opted in you could find your way through the store, and locate what you’re looking for easily.
Once the consumer opts-in, it provides a lot of interesting data because you can start to map how the consumer moves throughout the store. The big focus is on how these technologies can help us learn about the shoppers, but its also on how these technologies open allow the retailer to pass along messaging that’s relevant to him or her at that point of purchase.
What impact will the investment in these commerce-related technologies mean for overall advertising spending?
There’s obviously a shifting of dollars into digital, but what’s worth noting is that the spend in media across the board is a little out of step with the rate in which the consumer is consuming media. There’s still a disproportionate amount of spent in traditional vehicles. But in mobile, for instance, the lack of ad spend by retailers really has to do with the inability track what’s going on.
But in the long run, it’s all about being in the right place, at the right time, with the right message. It’s a critical mantra among retail marketers today. When you think about in-store communication, to get the right message to the right consumer, at the moment a purchase consideration is being made — that’s the holy grail.
Geo-targeting is absolutely where brands want to be. Its a matter of making that stuff really sync with the rest of their programs and trying to figure out the return on investment for their campaigns. But it’s just going to continue accelerating.
You’ve spent a lot of time studying retail strategy in emerging markets. How have these developments affected retail in the developing world?
What’s interesting is that the penetration of desktop Internet in many of these places was pretty limited. In emerging markets… if I talked about e-commerce a couple of years ago in Mexico, people would look at you like you were crazy. Mobile has just catapulted these countries beyond where their poor infrastructure is once held them back. They’re way ahead of the U.S. in terms of engaging with the mobile device.
For instance, I was in Soweto, South Africa, a couple years ago, and the manager at a local Pick n Pay was sending texts to his shoppers about a price cut on Maize. Remember, at that time, Sears was just experimenting with text messages campaigns,, and for the most part, it was not going so well. But here was this retailer in Soweto, South Africa texting customers who barely have electricity in their homes, and they were responding en masse.
Fast forward to today. What sort of mobile technologies are gaining traction with these retailers? Credit is a huge part of the way retailers in emerging markets engage with their consumers largely because banks will not lend money to these consumers but retailers will often extend a line of credit to them. So they’ve been looking at different types of partnerships with mobile offers and wallet very carefully.
Marc Andreessen famously predicted the end of retail. What’s the outlook among the retail community?
It’s interesting. Brick-and-mortar retailers have traditionally seen e-commerce as threat to their business, but that’s starting to change. More retailers are taking a more holistic approach, asking: How does e-commerce improve the way we service our consumers?
When you see Amazon moving into local commerce, you see a lot of retailers saying maybe we’re the future Amazon if we can just do it from the other direction — we already have the brick-and-mortar model in place. What I’m delighted to see is some open-mindedness about this, instead of the sort of doom and gloom that’s become commonplace over the past few years.
So Amazon’s recent push into the grocery business with Amazon Fresh doesn’t scare you?
Just the opposite. It could actually localize shopping in L.A. There’ a scenario in which a person living in Santa Monica can now order a sandwich from a fantastic bakery in Culver City. Amazon could make that happen and bring a more localized experience to the shopper in Los Angeles. These are things that we need to talk about.
Steven Jacobs is Street Fight’s deputy editor.