Today’s shoppers are spending more time online searching and researching products than ever before. As the Internet continues to grow as the first stop in a consumer’s path to completing a purchase, multichannel retailers need new ways to extend their in-store marketing and advertising initiatives on the Web.
According to a recent report from Forrester Research, U.S. retail sales influenced by online research is expected to reach $1.1 trillion by 2012 (nearly half of total retail sales). Though this forecast is in itself startling, the truly astounding news is that more than 90% of these sales will take place not online but in the store!
Much has been written about the rapid growth of e-commerce and the predicted damage it would have on brick-and-mortar stores. But the emerging reality is that the Internet is much more effective as a marketing vehicle, while the store is — and will remain — the more effective purchasing vehicle.
The “shop online, purchase in-store” phenomenon is driven by two primary consumer-shopping needs: efficiency and convenience. Shoppers are using the efficiency of the Internet to research products on retailer, manufacturer and comparison shopping sites, and they are using the convenience of the local store to see, touch and ultimately buy the product.
The top multichannel retailers have taken notice of this trend and have responded to it both on their own Websites and in their online advertising. Cutting-edge retailers are doing what successful, trusted merchants have done since the dawn of retail — arming their customers with the information needed to make smart purchasing decisions.
They are improving the utility of their online sites far beyond the facilitation of e-commerce, primarily by becoming “information hubs.” Retailer sites provide an ever-increasing amount of highly useful content, such as rich, in-depth product guides, consumer reviews, cross-product comparison functionality, and timely sales and promotion information.
Furthermore, retailers are delivering and blending local promotions and components of the in-store experience into their Websites. In-store sales and weekly circular advertisements, as well as store locators, are typically available and highly visible on most multichannel retailer sites. In-store product availability is becoming more prevalent and is offered on sites such as Target, Wal-Mart, Sears, Best Buy and Circuit City.
Additionally, many of these retailers have moved beyond inventory or product availability: They have effectively put the cash register into shoppers’ homes in the form of “buy online, pick up in-store.”
This functionality is blurring the lines between what typically have been mutually exclusive, channel-specific activities, and shoppers appear to be navigating easily between both channels. As more and more retailers offer this functionality, shoppers will expect this to be standard from all multichannel retailers.
Beyond multichannel retailer sites
During the last few years, most multichannel retailers have made great strides on their home sites to better address the needs of their shoppers — with the ultimate goal of retaining them by serving them better. More recently, multichannel retailers have turned their attention to the broader Internet in order to acquire more customers and drive them to their stores.
To market to these shoppers on the Web, multichannel merchants are presented with a complex problem. Specifically, online retailers need to find their primary customers — and find as many as possible — in an increasingly fragmented online landscape by communicating a strong and clear brand message, presenting compelling, up-to-date offers, and customizing the promotion to a shopper’s location.
Additionally, they have to verify that it is cost-effective. To solve these advertising challenges, leading multichannel retailers are aggressively testing a multitude of innovative tactics across many media types, including display advertising, search, new distribution technologies and mobile.
Detailed below are three of these devices: localized rich media banners, widgets that deliver local sales and deals, and local promotions embedded into publisher sites.
Branding + call-to-shop in the local store One approach is to use localized sales and promotion information embedded in rich media banner ads. These ads accomplish three objectives: They reinforce a retailer’s brand and messaging; they can lead to Internet sales for the shoppers who want to buy online now; and they drive in-store sales and traffic using the current local promotions.
These ads are geo-targeted for the viewer (based on publisher site registration data or reverse Internet Protocol lookup) and they are automatically populated with relevant, in-store promotions.
Rich media allows for a highly interactive and informative shopping experience. These ads can include video and contain many of the same functions that are on multichannel retailer sites, including product and category search and browse, in-depth product information, add-to-list, find other stores, and e-mail/RSS signup.
Most third-party publisher Websites can run these ads, and collectively these sites provide consumer reach that rivals newspaper and television, along with sophisticated targeting capabilities.
Several savvy retailers, ranging from home improvement chains to food and drug stores to mass merchants, are running these rich media online ads. Shoppers have shown that they like them, as they are more than 70% more likely to interact with the ad. And they spend nearly 60% more time with the ad on average than non-localized rich media banner ads (based on campaigns that ShopLocal has been involved with).
As online advertising relevance continues to innovate and improve through behavioral, contextual and demographic targeting advancements, these ads will become increasingly precise at delivering the right offer to the right person at the right place and at the right time.
Widgets and embedded local content With the growing diversity and popularity of vertical and customer segment sites, blog sites and social networks, retailers are looking for new ways to reach their target shoppers. Two tactics that can aid these efforts are the use of widgets and embedded local promotion data on publisher sites.
Widgets, self-contained snippets of code that can be installed quickly by shoppers on their desktops, personal Web pages or cell phones, offer a simple way to quickly reach shoppers, especially younger shoppers. They can provide retailers with an engaging and entertaining method to bring their brands and locally promoted products to their audiences.
For example, office supplies merchant Staples has created a unique widget in the form of an “Easy” button that can be loaded to a computer desktop. By including a shopper’s zip code in a widget, retailers can direct interested shoppers to the local promotions and in-store deals on the retailer’s Website.
Embedding local promotion content on targeted publishers’ sites The retailer typically sponsors a section of the publisher’s site that features its local promotions in the body of the page, thus becoming the primary content on this page. Site visitors are geo-located by zip code, and the retailer’s local promotions are presented. Staples executed such a partnership with the Disney Family Website during the 2007 back-to-school shopping season.
The one-stop, multichannel shopping marketplace
Today, many of the channels that consumers turn to represent distinctly separate shopping experiences. This results in shoppers spending significant amounts of research time visiting various Websites, sorting through newspaper ads and catalogs, and making trips to various stores to determine the best product options and deals for them.
This is particularly true for bigger ticket items and products that shoppers like to see and touch prior to purchase.
As consumers continue to adopt the Internet for more and more of their shopping research, the need grows for a one-stop, online shopping marketplace that provides consumers with a single view of in-store and online offers across retailers. For retailers, this creates another option to reach in-market shoppers, especially those shoppers for whom a particular retailer may not be top of mind.
Similar to the delivery of the weekly circulars via the newspaper, a multichannel marketplace would deliver the best sales and deals at local stores all in one place online. Different and better than what is “on sale” only, this marketplace would also have what is “for sale” and available locally.
Next-generation shopping sites such as ShopLocal.com, Krillion, NearbyNow and Yokel are emerging, and all are pursuing solutions that are fashioned to bridge the online/in-store gap.
Definitive measurement: closing the loop
The concept of rapidly growing Internet-influenced, in-store sales seems highly plausible. After all, respected industry analysts are predicting it, and shoppers are using Internet-based resources more and more.
But does the Internet actually drive in-store sales? Has the “loop” between Internet marketing and in-store sales been sufficiently closed to warrant a radical alteration of multichannel retailers’ marketing mix?
The short answer today is that proof is a matter of degree and depends mostly on where the retailer is interacting with the shopper on-site or off-site. The likely eventual answer is that proof will be definitively established, regardless of place of interaction.
On retailer Websites: Multichannel retailers — especially those that have enabled “buy online, pick up in-store” functionality — are close to closing the loop here. It has been widely reported that for some of these merchants (electronics retailers, in particular) “buy online, pick up in-store” transactions represent as much as 50% of total in-store sales.
Additionally, shoppers’ use of the weekly in-store promotion tabs of 50 top multichannel retailer sites was up 36% in 2007 vs. 2006 (as tracked by the ShopLocal Index). Regular surveys of these shoppers reveal that 53% shop at their local store within the same week of the online weekly ad visit, and that 95% shop the store within one month.
Forrester Research reports that shoppers spend an average of $154 on additional merchandise once they visit the store.
Off retailer Websites: Multichannel merchants are still wrestling with closing the loop and how to verify the impact of Internet advertising initiatives on their in-store sales.
Part of the issue is a classic “chicken or egg problem.” Retailers don’t want to spend money on activities that drive unacceptable return-on-investment, but they will need to spend at sufficient levels to feel comfortable with the resulting conclusion.
Retailers use a variety of tactics to discern in-store lift from these off-site activities. These include executing shopper surveys, using e-commerce sales as an indicator of in-store impact, advertising exclusive Internet-promoted local offers, temporarily halting all but online promotions in designated geographies, and hiring third-party consumer panel measurement services, such as comScore, to track results.
As multichannel retailers experiment more, they will find what works and how to value it compared with other advertising alternatives.
The bottom line
In the near term, multichannel retailers say they will focus primarily on creating information-rich shopping experiences on their own Websites. Their sites will provide shoppers with tools to make informed choices and center on answering key shopping questions: What product is right for me? Where can I buy it? Is it on sale?
Ultimately, and once sufficient proof has been demonstrated, the leading multichannel retailers will extend this experience beyond their own branded sites to the entire Internet in various formats that best reach their targeted customer sets.
Merchants who focus on relationship-driven communication — no matter where it takes place — will enable their shoppers to get the most value out of their shopping experiences.
And these shopping experiences will be increasingly characterized by the use of the Internet for research, followed by trips to local stores to complete the sale.
Bob Armour is chief marketing officer for ShopLocal (www.shoplocal.com), a Chicago-based multichannel shopping and marketing services/solutions provider.