As we head into 2017, it’s more apparent than ever that a paradigm shift is occurring. While catalog and direct mail continues to experience a resurgence, we are entering a new reality where many of the older, standard catalog and direct mail list and circulation practices are increasingly being overshadowed by Amazon and the Amazon effect (think Prime). With Holiday 2016 barely behind us, it’s an ideal time to reflect and engage in an honest conversation about the challenges Amazon poses to retailers. As you probably already know, Amazon’s immense influence and its omnipresence in the retail marketplace has an enormous impact on all commerce.
Last week CNBC reported that Amazon.com, Inc. shipped more than 1 billion items worldwide this holiday season — their best year ever. Further fueling the narrative of changing times, more than 72% of Amazon’s customers worldwide shopped through mobile devices. As if that isn’t enough, Slice Intelligence, a research firm that collects and analyzes consumer transaction data, examined 1.7 million online shopping receipts collected from Nov. 1 through Dec. 16 and discovered that the lion’s share of online purchases are going to Amazon (36.9%). Best Buy, the next highest on the list, garnered only 3.9% market share.
The consensus following Holiday 2016 is that marketers are bewildered. Most are feeling intense pressure to find ways to adapt to the rise of Amazon, its marketplace, and the sweeping implications it represents to the retailing landscape. CEOs, CMOs and mid-level managers are under immense pressure to come up with a plan to adjust their business models to compete or adapt. Many are wrestling with similar lines of questions: How do we know who are customers are? What customer data do we have access to? How do we curtail the loss of visibility, and finally, how do we compete with Amazon going forward? But where to begin? How do established retailers begin again in this new environment? The bottom line: no matter what you think about Amazon, if you’re not adapting, you’re very likely losing. There is now a much-diminished margin for error, and there are very few second chances. It’s time to get serious about elevating your merchandising and marketing strategy, and developing a more comprehensive audience development plan that incorporates circulation, digital, social and browse intent.
MERCHANDISING and MARKETING
Business as usual won’t cut it anymore, and that’s particularly true as it relates to merchandising and marketing. As Kathleen Schultz, one of CohereOne’s merchandising consultant’s quips, “it’s all about the stuff.” The emphasis on merchandise ideation must return to paramount importance. Companies must play an active role in curating demand and excitement as it relates to their products, after all, it’s the one area where brands can still compete.
Companies must also better understand their inventory metrics, including commissioning deeper analysis into merchandise assortment planning, in order to glean new merchandising information and unlock productive insights. Companies also need to seek ways to exert greater control of their supply chain to boost margins, develop new product lines, and drive growth. A sign of today’s increasingly complicated environment is that suppliers have now become competitors, thanks to their participation in online marketplaces (such as Amazon).
Companies must also get better at leveraging technology. Leverage browse intent to test and optimize the development of more sophisticated acquisition and retention programs, including the finely tuned use of digital and postal triggers (yes, triggered postal mailings!) with personalization. Sophisticated acquisition, retention, and reactivation plans serve as a solid base, but efforts must expand to incorporate emerging and pervasive use of digital and social trends, including compelling creative content.
Increasing use of programmatic triggered email and direct mail allow for powerful, timely personalized customer touch points with opportunities for compelling creative. This powerful one-two punch can deliver higher ROI metrics while delivering more relevant content. Going a step further and synchronizing catalog, email, direct mail, and targeted display offers even more opportunities to win. In addition, it’s important to reemphasize that in the age of Amazon, it’s not enough to have a website you tweak every two years. Smart marketers know that investing in ongoing SEO and Conversion Rate Optimization, coupled with more advanced contact strategies, give the best opportunity to further move the needle.
WHAT TO DO
First, it’s past time to audit your existing catalog and direct mail circulation operation. Programs on autopilot represent a bygone era. Instead, let’s develop a more comprehensive audience development plan that incorporates acquisition, retention, and reactivation. Remember, a solid audience development plan is the foundation for both direct and digital marketing efforts and having that plan is now more crucial than ever. The same goes for testing and planning and for building a supporting ecosystem surrounding digital acquisition efforts.
Second, recognize that social media interaction is integral to the mobile user experience — remember that 72% of Amazon’s customers shopped through mobile devices! Understand that social acquisition channels need to become more sophisticated. Social is more routine nowadays, so it’s necessary to optimize audience development.
Third, stop debating the merits of each marketing medium and begin testing the optimal use in terms of developing an overarching contact strategy. Email can be a great driver of ROI and foundational to a contact strategy. Don’t overlook Instagram as a vital tool in communicating value propositions and visual merchandising or Facebook as an acquisition vehicle. Even if isn’t your thing, understand that Disney electing to create shows on Snapchat might have reverberations on marketing. The point is each medium has nuances we need to test and explore.
Finally, what we are experiencing is a consumer mandated change. Too many brands believe they can respond to this rapidly evolving world of commerce by using in-house resources. This is a mistake. Much of the innovation and industry expertise required to make a successful and fundamental shift requires a wide array of knowledge in marketing and the retail business, as well as specialized technical skills and a track of record of successful client experience. And always test, refine, re-test and repeat!
The bottom line is this: it’s going to take work, but the journey begins with a single step. We’re here to help.