10 Years After - What's Really Changed About Consumer Behavior

Yesterday marked the 19th annual Washington Retail Seminar, hosted by Tom James of Opus Law Group, a Seattle firm specializing in retail law. 

I've spoken at this even a few times over the years, usually on some variation of the "how e-commerce/multi-channel is impacting brick and mortar retail"  theme,  since the audience is largely rooted in land based selling.

As I prepared for yesterday's presentation, it occurred to me that the first time I spoke at this conference was in 1997, when were in the early stages of our e-commerce effort at Eddie Bauer.  I covered the coming e-commerce revolution, how this new sales channel would ultimately play a significant role in every retailer's business. Obvious now.  Not so back then.  I was talking to alot of skeptics.

So now it's 10 years after - and consumer behavior is profoundly different than it was a decade ago.  A few highlights from the presentation:

• We've come a long way:  over 650,000 companies sell online in the U.S.  17 e-commerce sites toped $1B in sales last year - most of them are multi-channel with a strong brick & mortar presence (JC Penney, Sears, Victoria's Secret, Staples, Office Depot, etc.) 83% of e-commerce sites reported profitable operations in 2006 (Shop.org SORO report)
• Search is the driving force: As much as 25% of e-commerce traffic is coming from search, as much as 55% of e-commerce sales start from a search engine query.  Over 300 million searches take place every day, over 13B every month.  Who's getting those searches? Google of course, to the tune of nearly 70%.
• Still room to grow in terms of penetration: Online sales were just over 8% of the total U.S. retail market in 2006, online ad spend was just over 6% of total U.S. ad spend.
• In many ways, it's about offline influence more than it's about online sales. People are researching online, buying offline in record numbers, with up to 1/3 of offline purchases influenced by online research.

Now, this isn't just because companies have put up websites and people have started using search engines.  There are many influential factors that are pervasive in our lives today that didn't exist 10 years ago:

Wireless access,Ipods, TiVos, Blackberries, Blogs/Wikipedia/MySpace/YouTube and a whole host of self publishing tools, digital cameras, RSS, and of course Google (they are 9 years old, publicly traded for  the last 3).

The combination of e-commerce with the list above means that the very nature of selling is different than it used to be, and alot of the fundamentals of merchandising and marketing just aren't true any more:

• Time and place don't matter- it's not about being in front of your TV at a certain time or being in your office to get your information.  Whatever you want to read, watch, listen to, buy or research is available in a portable format whenever you want.
• We trust each other for information, as much as the "authorities" - anybody can publish an opinion, post a photo or a video and we're increasingly seeking each other out as the source of truth vs. relying on a network or an editor or a company to tell us what we want to know.
• We're not alone - sure, people talked about the web being a "social media" from the very beginning, but it's not about email and clunky message boards anymore.  Websites are truly collaborative efforts between companies and consumers, and consumers can share with one another.
• Hierarchies of information are becoming obsolete - search means  that consumers can bypass homepages, decision trees and other "front doors" into the information that they want.  This means that marketers and merchants are no longer in control of the path, among many other things.
• General interest is irrelevant - it's not about the Top 40 songs or the best selling books.  It's about the niche products that appeal to the needs and preferences of individuals. More business is being done in small quantities of many skus. It's The Long Tail coming to life.  And people are looking to find those things online, starting with a search.

Now, based on this, if you are still looking at merchandising and marketing the way you did in the 20th century, it's time for a change.  The consumer dynamic requires that retailers undergo significant process and organizational change in order to tap into the immediacy and amount of customer information that is is now in our grasp. (see my previous post : Are Your Merchants and Marketers Fighting? The Real Reasons Why).  Things look different now:

       

These changes should give us more than enough to work on over the next 10 years - here's what's likely in store:

• Consumers will search for, find and covet quality niche retailers, both online and offline
• Big chains will struggle with operationally and organizationally with demands for segmented and individualized offerings
• Product content (user generated or otherwise) will finally get the credit it deserves as a strategic asset, forcing operational and technical issues to get resolved(see my previous post: Ecommerce leaders: The One Job That Should Be On Your "Must Hire" list)
• Lines between social networks and commerce will continue to blur and influence one another, and as a result...
• Retailers and agencies will develop ways to tap into social media for product and brand insights
• Search will evolve beyond text to display, video and personalized results, altering the economics and logistics of search marketing
• Consumers will continue to get more comfortable with small screens, making mobile media and commerce critical to retail strategy at last

So, save the date. Retail 2017 should be quite an event.  And the skeptics?  They'll be out of business by then.

Comments

[roger willcocks]

Very insightful piece, Sally & I think "on the money". I might crib some!