emarketer webinar: omnichannel retail—seven trends in 2015

© 2015 eMarketer Inc.

Omnichannel Retail—Seven

Trends in 2015

Yory Wurmser

Retail Analyst

May 14, 2015

Made possible by


Agenda

What is the state of omnichannel?

Are physical stores losing their importance?

How are consumers using their phones to shop?

Will location-based services like beacons change the

retail world this year?

How are retailers using personalization to help attract

shoppers?


State of Omnichannel


Consumers are already living an omnichannel life


Omnichannel is

intrinsic to how

most US

Internet users

shop


In some product

categories, more

than half of US

internet users

have mixed

online and

offline shopping


But retailers still lag behind consumers


Only 5% of US

retailers in a

2014 survey

said they had

executed

on most of their

omnichannel

strategy


Seven Trends that Will

Drive Omnichannel in 2015


Trend #1: Physical Stores

Retain Their Mojo


Foot traffic is down in retail stores

7.1% drop

in holiday season foot traffic in the US*

* November 30, 2014, to January 3, 2015, compared with same time period in 2013, as measured by RetailNext


… and ecommerce sales do represent a growing

portion of retail sales

US retail ecommerce

sales will grow by

$43.4 billion in 2015

US retail ecommerce

sales growth will be

14.2% in 2015


But physical stores still dominate for sales

generation

Total US retail sales

will grow by

$173 billion in 2015

75% of the growth in

total retail sales will

come from offline


The in-store

experience

continues to be

the most important

channel for digital

shoppers when

making

a purchase


Pure-play ecommerce companies are finding

benefits in a physical store presence

“The world has become

lonelier through

technology and through

urbanization. Having a

great human one-to-one

experience is unique

these days.”

—Andy Dunn, CEO and

founder of Bonobos

“We did not predict just

how much promise

physical stores would

have for our business

from a profit perspective.”

—Jennifer Fleiss, co-founder

and head of business

development at

Rent the Runway


Even Amazon is looking into ways to

approximate the brick-and-mortar experience

Amazon locker

Pop-up store in San

Francisco

Refitted food truck selling

Kindles

Same-day delivery

Firefly visual-search tool

Source: @emilysteel, twitter via HuffingtonPost


Trend #2: Consumers Want

Flexibility in Fulfillment


Consumers want flexibility

“ One of the things we’re always trying to do at Barnes &

Noble is serve our customers in ways in which they want

to be served, in ways in which they’d like to consume

content. In the book world we’re used to dealing with not

just channels but formats, so the point is: We want to

mix and match those channels and formats so

that we can find the right customer experience

where someone’s going to go, ‘Oh, that’s

perfect.’

—Jaime Carey, chief merchandising officer at Barnes & Noble


And at the same

time, US internet

users show strong

interest in a range

of fulfillment

options


Stores can play

a central role in

enabling quicker

and cheaper

online fulfillment

through

‘distributive

fulfillment’

Image source: Shopatron

Online Order

Order management system


Majority of consumers have used in-store pickup

70% of online shoppers say that they have used buy online, pickup in

store services*

Source: Forrester via Internet Retailer


Trend #3: The Smartphone

Is the New Retail Hub


1.6% of total US retail sales in 2015 will be made

directly from mobile devices

Mcommerce will

grow 32.2% year

over year in 2015

Mcommerce will

account for 22%

of ecommerce

sales in 2015

$4.524 trillion

in offline retail sales

$76.79 billion

in mcommerce sales

$252.27 billion in

other ecommerce sales

Source: eMarketer


Mobile influences a huge share of US retail sales

28% of US retail sales

were influenced by

smartphones in 2014 = $1.0 trillion*

* Deloitte Consulting research


Mobile’s influence will only increase

“ I absolutely see mobile impacting

80-plus percent of every in-store

purchase over the next few years.

I see mobile becoming the

dominant sales driver over time.”

—Jeff Simpson, director at Deloitte

Consulting


Smartphones

used mostly

to enhance

the in-store

experience

Leading Uses:

1. Find local store

2. Take a picture of

a product to share

with a friend

3. Search for a coupon

in-store


Smartphone metrics are up across the board

Smartphone visits

and orders grew at

twice the rate of

tablet orders and

visits during the

2014 holiday

season*

* on Branding Brand’s platform


Smartphones are

gaining share of

US retail

mcommerce

sales from

tablets


Trend #4: Context Is More

Than Location


Some 86% of

US marketers

polled in 2014

used or

planned to

start using

mobile

location data

in their

marketing


Location is important, but it works in tandem

with behavioral data

“ Location is a useful trigger, but it’s not

the only one. For me, behavior is by far

the most important one. Knowing that

someone added something to their cart

and didn’t check out is far more

interesting than knowing if they’re near

a store. Location is only a secondary

trigger off of something else,

probably behavioral.”

—Paul Adams, VP of product at Intercom


Hyper-local

messaging is

set to grow

rapidly

Beacon-related revenues

are expected to rise

nearly 1,000% in 2016


Current use of beacons is centered on coupons

Half of beacon-triggered

messages are for coupons

(Source: Shopkick via BI)


Beacons’ real power is contextualization

“ In the 1.0 approach [to beacons],

retailers used them as another form of

delivering coupons. Brands and

retailers are realizing that where

these devices are really powerful is

in the personal delivery of

information and contextualization.

... I want the store to be tailored to me.”

—Maya Mikhailov, co-founder and CMO at

GPShopper


For beacons, 2015 will be about resolving four

major challenges:

1. Scaling beacons requires a middleware layer

2. App penetration is low for most retailers

3. Beacons only work with existing customers in stores

4. Marketers lack experience building a notification

strategy that enhances the shopping experience


Trend #5: Enterprise

Mobile Is on the Rise


Clienteling apps are transforming sales

Burberry Customer 360

Customers share shopping history

Information is piped to iPads held

by sales associates

In-store customer behavior is

tracked with RFID

Dick’s Sporting Goods

“Endless aisle” showing range of

options for customers

Integrated inventory view for

associates


Enterprise mobile extends expertise to broader

range of associates

“ We’ve been able to take the expertise

of the A associate [the expert], and

give this selling experience via mobile

device to the new associates—what

we would call B, C or D associates.

It’s a win for the retailer and it’s a win

for the customer.”

—Ken Morris, partner and co-founder,

Boston Retail Partners


Retailers are getting better at providing

information to their associates via mobile

Edgell Knowledge Networks found that:

35% of retailers let associates track and manage orders on their

mobile device

32% of retailers provide associates with customer information

29% of retailers let associates track and manage inventory on

their mobile device

Source: EKN, 2014


Good service generates sales

31% Premium in sales from excellent customer service

Source: Edgell Knowledge Network, 2014


Ultimate expression of digitizing the physical

store turns it into a showroom for online store

Restoration hardware converted its

stores to design galleries

Associates with iPads have access to

digital catalog

Trailing 12-month (TTM) revenue had

20.4% growth (as of Jan. 31, 2015)

3-year CAGR for revenue is 24.9%


Trend #6: Data Integration

Underpins Omnichannel


Digital shoppers

say inventory

visibility at a

physical store is

the most

important

omnichannel

retail capability


A unified customer view also boosts growth

rates

Based on McKinsey’s

analysis of big-box stores

with unified analytics

compared with otherwise

similar competitors

without unified

analytics.*

* McKinsey, “Digitizing the Customer Decision Journey,”

June 2014

10%

2%Without unified

analytics

With unified

analytics


… but current

systems limit

what many

retailers can

do


Trend #7: Personalization

Works in Tandem with

Trust


A majority of

US consumers

value privacy

over relevant

offers


Loyal

customers

generally

trust the

retailer

already


Consumers don’t

mind when

purchase data is

used for

personalization


Consumers love some in-store omnichannel

technologies, but cringe at others

Cool

% of US internet users who rate tech as ‘cool’

In-app scanner linked to product

reviews: 76%

Interactive store map with

directions from current location

to searched items: 69%

Personalized mobile notifications

triggered by in-store location:

44%

Creepy

% of US internet users who rate tech as ‘creepy’

Facial recognition technology

informing sales associates that

you’re a high-value customer: 75%

Salesperson greets you by name as

you enter based on mobile device

ID: 74%

Videos triggered by facial

recognition technology: 73%

Source: RichRelevance 2015


Use data discreetly to minimize privacy

intrusions

“ People don’t need to know we’re sending them a

message because of where they actually are.

We just need to get them the right messages

at the right time in the right place, so it feels

magical.”

—Jennifer Kasper, group VP for digital/new media and multicultural

marketing at Macy’s


Takeaways

Seven trends will influence omnichannel this year:

1. Brick-and-mortar stores still play the dominant role in retail

2. Consumers expect flexibility in shopping and fulfillment

3. Mobile is the new retail hub

4. Context is more than just location

5. Enterprise mobile is becoming more important

6. Data integration underpins all of omnichannel

7. Personalization is key but requires trust

Final point: Omnichannel is now intrinsic to retail


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Yory Wurmser

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