The obstacle course that lies ahead of the fledgling cannabis retail industry
Our exposure to cannabis is, for lack of a better phrase, getting higher. With past squeamishness dissipating and an increasing number of countries deciding to decriminalise it, cannabis is now showing up in beverages, body lotions, sweets and pain relief gels. There’s a faintly faddish similarity to the craze for product developers in the early 20th century to include radium in practically any existing product, from chocolate to water to suppositories, after its discovery by Marie and Pierre Curie in 1898. Much of this was down to purveyors of quack medicine hawking its supposed curative properties, when they were anything but…
But unlike radium, cannabis doesn’t poison you, and has been used medicinally and recreationally for centuries. People have been smoking and baking with it – even Queen Victoria used it as a painkiller. However, as it’s been a controlled substance for most of the last century, what we know about its chemistry and physiological effects is mostly anecdotal, as researchers and pharmaceutical companies have until recently refrained from getting involved with it.
The early adopter advantage for countries legalising recreational use
You may be forgiven for thinking that countries that have already taken the jump to legalise the recreational use of marijuana (the psychoactive strain of cannabis) are the most likely to become frontrunners in all subsectors of the market. But these pioneering markets – such as the Netherlands, Canada and an increasing number of US states – have a slew of regulatory and supply-related hurdles in front of them that they need to jump before their markets can mature, enabling them to truly capitalise on their economic and social risk-taking.
The Netherlands, for example – famous for its “coffee shops” and libertarian attitude to cannabis for the past 50 years – can’t jump onto the global cannabis growers’ bandwagon as it’s hamstrung by the fact that, although smoking pot is decriminalised in the country, supplying it is not. Therefore, unless coffee shops go out of their way to buy from private growers whose stock doesn’t exceed five plants, they will need to source their offerings elsewhere – such as the black economy.
In Canada, where cannabis for recreational use was legalised in 2019, an initial “green” rush was halted by the double whammy of sluggish supply and a lack of demand at the premium prices of the legal market. As a result, contrary to legislators’ intentions, almost half of customers stuck with the well-oiled black market.
In the United States, the country best posed to lead the charge for recreational cannabis, retail marijuana sales are expected to reach $8.7 billion (£6.2 billion) in 2021. However, business in the 17 states where marijuana is already legalised is held back by federal law under which the use and sale of cannabis of over 0.3 THC content is illegal – as well as by a degree of resultant, and understandable, consumer hesitancy.
The thriving UK cannabidiol market
This brings us to the two most important compounds of the cannabis sativa plant, or cannabinoids: virtuous CBD or cannabidiol, and dubious THC (Tetrahydrocannabinol), the psychoactive component that makes you high.
Britain may not be a frontrunner in the recreational cannabis market, but it is certainly a leader of the pack in products which harness the supposedly beneficial abilities of cannabidiol to ease symptoms of cancer, anxiety and depression and relieve inflammation and pain.
The CBD-infused beverages market in the UK is said to have the potential to take on the £1.2 billion energy drink sector. Moreover, the pandemic has seen CDB products soar as customers increasingly sought out healthy purchasing options.
To crack down on proliferating poor quality products with THC content exceeding the UK watershed (0.2 per cent), or not delivering on the CBD percentage promised on the label, edible products containing cannabidiol were classified in January 2019 as novel food (anything that wasn’t consumed to a significant degree in the UK before the classification was introduced by the Food Standards Agency on 15 May, 1997).
Another factor that has necessitated rigorous quality control is cannabis’s propensity to absorb detrimental substances from the soil, such as pesticides and other contaminants. This has given rise to a flourishing global cannabis testing market serving food and beverage, medicinal and recreational cannabis markets alike.
The deadline for CBD businesses to submit valid novel food applications to permit the continued sale of CBD products in the UK was 31 March 2021.
However, influential retail publication The Grocer found that on 19 April, the list of products with validated novel food applications were owned by only three brands. As an act of generosity as well as pragmatism, the FSA decided to allow products with submitted but not-yet-validated applications to stay on the shelves with the presumption that they will in due course be granted status.
Although strict regulations, such as the FSA’s for CBD products, are often seen as underhand efforts to thwart a booming business, they should bring consolidation and increased credibility to the market and the players that survive. Besides, the cannabis industry, following the legalisation of CBDs and medicinal cannabis in several countries and recreational in a few, is most probably beyond the point of no return.
Zita Goldman covers digital transformation with a focus on demystifying digital technologies and showing how they fit into a broader sectoral, macroeconomic, legislative and societal context. She has a passion for connecting the dots of current business and financial news and explaining inconsistencies, for giving hype a reality check and looking behind buzzwords for fresh meaning.
The changing shape of the ecommerce landscape
Ed Bussey, Chief Solutions Officer and Matt Wurst, VP Client Management, Jellyfish
The retail world is undergoing a paradigm shift, with the way people shop online fundamentally changing. Search engines, marketplaces such as Amazon and social networks such as Facebook are increasingly providing shopping alternatives to traditional ecommerce sites. In time these platforms will be the dominant drivers of online commerce.
The key to winning is content. Content has always been king, and in this world of fragmented and decentralised commerce its value is even more acute. A brand’s content is increasingly its sole means of connecting with consumers across this ever-growing list of channels and platforms.
What passed for a respectable ecommerce strategy a few years ago is no longer going to deliver the desired results, as consumers move to platforms where brands have less control over their customer relationships and data.
To avoid losing market share, brands must establish and optimise their presence across these platforms, using content to capture attention and trigger consumer action. All this while competing for prominence, not just with other brands but all of the other distractions within these environments.
While not responding to these challenges could be catastrophic for a retail sector already under immense pressure, the growth opportunities are tremendous for those retailers that quickly adapt. Digital platforms enable them to tap into new, ready-made demographic and geographic audiences, where the platforms have often already borne the brunt of user acquisition costs. The retailer’s challenge, in this context, is to establish a presence on the most relevant platforms and optimally engage with the audiences there. But how do they do that?
1. Create a new blueprint
The fast-changing digital landscape demands a completely new customer acquisition and retention blueprint, with new strategies, tactics and skill sets in content creation, distribution and measurement. Retailers can’t be on every platform, so the starting point is to understand which platforms their audiences are using and how they are using them, based on an integrated view of the entire digital landscape, rather than partial, siloed perspectives on individual platforms. Only then can they properly prioritise and maximise the efficiency of their budgets.
2. Unlock the potential with optimised content
A platform presence is only as good as the content used to optimise a retailer’s discoverability and impact on that platform. Content is the key to unlocking the potential of platforms. However, as each platform is underpinned by different usage scenarios and algorithms (think Amazon performance versus TikTok or Facebook), the challenge is to find the right formula to adapt your content for each one. Strategic partnerships with these platforms can help, enabling retailers to look under the bonnet and see how they work.
3. Amplify reach with scale
In this decentralised landscape, retailers need to make their budgets spread further, amplifying the reach, and hence ROI, of their content. The trick is to adapt their content, at scale, for each of their international markets, and at every point in the purchase journey – from the first piece of media a consumer may see, right through to the pre-purchase product content that will persuade them to buy.
Maintaining content quality at scale, whether in-house or via traditional agencies, was challenging when retailers only had to worry about their ecommerce websites. It is now completely unfeasible in today’s dispersed digital landscape. The solution is to combine human creativity with efficiency-driving technology that can carry out the time-consuming and repetitive elements of the content creation process. For instance, Jellyfish’s global network of more than 10,000 skilled content creators can deliver five million words of content per month as it is powered by technology that streamlines the content creation process.
4. Focus on performance
A relentless focus on measurable content performance is the final pillar to success in the fragmented platform landscape. Ongoing measurement and optimisation, based on a perpetual feedback loop, not only improves results but maintains relevance in the face of the market’s unprecedented rate of change. It ensures the content moves the needle on crucial retail KPIs, such as product page conversion rates, visitor or advocate numbers, basket sizes or product return rates.
The new digital landscape may appear daunting, but these are exciting times with vast opportunities for brands to deepen their relationships with their existing and new customers by engaging with them in a plethora of new ways. And in many respects it’s nothing new. Retailers have been optimising the merchandising of their products in shopping malls for years. They just need to apply the same principles, combined with some algorithmic expertise and a lot more measurement, to the digital world.
For insights into the ecommerce content of 100 leading US retailers, read Jellyfish’s report here
Why Total Commerce is the future of ecommerce
Callum Campbell, CEO, Linnworks
Commerce is increasingly happening in multiple online environments, wherever consumers are spending their time. Effortless commerce was already emerging as the next phase of online retail, but this has accelerated over the past 12 months, as online shopping broke record after record – particularly in categories considered essential, such as online grocery sales, which grew by more than 79 per cent in 2020 according to ONS. Consumer expectations to shop whenever and wherever they wanted to, combined with time-pushed buyers looking for frictionless shopping journeys, mean consumer choice has increasingly followed the path of least resistance.
Effortless consumption – the growing expectation for convenient shopping experiences – was also a key finding in Linnworks’ recent survey of 1,000 shoppers. The overriding takeaway from the research is that consumers want seamless, connected shopping experiences, and convenience is the main priority for most shoppers when choosing a retailer.
So what does this mean for retailers looking to grow, or merely be competitive? It means that brands need to be everywhere their customers want to shop. At Linnworks, we call this Total Commerce – the ability to be present in the many environments where your customers are. Delivering an omnichannel experience through your selling channels and creating a frictionless experience so your customers can create a shopping journey based on their needs is the first step. For example, buying online and collecting in store, or offering a range of payment or shipping options at checkout so your customers can choose key elements of their transaction journey that are most convenient for that purchase.
But Total Commerce means staying fully connected to your customers, taking your selling strategy one step further to a complete multichannel retailing strategy where your brand is present in multiple commercial environments. This can include marketplaces, social commerce, and any other emerging selling platforms. Rather than expecting your customers to seek you out, you need to be present in the channels where they operate day to day. Facebook has coined the phrase “discovery commerce”, which is about connecting the right product to the right person to win the sale – a reverse of the e-commerce trend for businesses to expect customers to actively search for them.
Delivering Total Commerce presents two key challenges for retailers.
Firstly, staying connected to your customers by accessing multiple commerce environments requires both specialised capability and knowledge. You need to understand what your customers want in each of these channels and how to serve their needs. For example, a customer looking for your product on a marketplace may just want to find your product quickly for a frictionless repeat purchase, delivered as fast as possible, but may come to your website for a more involved brand experience or to be rewarded for their loyalty or for more complex delivery options. To understand and build the right customer experience and product mix for each selling channel requires a detailed level of understanding and constant analysis and optimisation of each channel.
Secondly, continuously adapting and controlling commerce in all these environments simultaneously is complex, costly and technically challenging. Being able to maintain and manage all your selling channels with their individual logistical requirements is essential to maintaining overall control over your commerce operations. Running inventory management, order management and shipping operations efficiently is key to not only having the right product in the right place at the right time, but also to maintaining your customer experience and capturing every selling opportunity.
The key to successfully implementing Total Commerce is integrating your commerce technologies and multiple selling channels into a single selling and operations platform such as Linnworks. Having full visibility and control by connecting your major carriers and fulfillment services, alongside your own technology stack, will allow you to sync your operations across all selling channels. Automation of tasks across the logistics process, and complete visibility over business information, are essential for demand planning and stock management to ensure maximum profitability.
The effortless economy and evolution of selling platforms offers a huge opportunity for brands and retailers to scale up and grow. To achieve this, brands must commit to a Total Commerce approach both in their selling strategy and right across their operations to ensure they win the sale every time.
To survive or not to survive – that is the retail question
Marco de Vries, CEO, Openbravo
Retail has traditionally been one of the fastest-changing industries. However, the pandemic has accelerated this change at an unprecedented rate, driven among other aspects by an exponential growth in online sales.
In 2020, according to Statista and based on data from the US Census Bureau, online sales in the US reached 14 per cent of total retail sales, or $792 billion in value. In 2015, that figure was just 7.3 per cent, showing how rapidly online has accelerated in recent years and in 2020 in particular.
This rapid shift towards online shopping, with the emergence of new consumer habits and preferences, and the need for new services heavily influenced by social distancing, have forced retailers to review and adapt their operations in a very short time. The traditional resistance of many retailers to change and innovate has been put in second place, as they realise they face an entirely new situation that has put the survival of their businesses at risk.
Among these changes is omnichannel, which has become an absolute priority, confirming a need that already existed before the pandemic, but is now much more urgent. In this new omnichannel reality, physical stores face new scenarios that force them to acquire new capabilities. Perhaps the most important challenge is the obligation to develop a totally new role as logistics centres for order preparation.
Businesses also need to offer new shopping experiences, at a time when both the number of store visits and the time buyers spend in stores has fallen. All of this is also influenced by the impact of social distancing caused by the pandemic, which has given rise to new practices that will likely remain for some time. This has pushed many retailers to evaluate options such as self-checkout terminals, curbside pickup and other options that enable low-touch in-store scenarios.
In dealing with their customers, retailers are also facing radical changes in their values and priorities. New generations of buyers expect greater environmental responsibility from brands. They expect value sharing and collaboration, and want to be more involved in the creation of new products. Sustainability, customisation, co-design and co-creation are now prominent terms in the retailer lexicon, and have a big impact on retail operations.
All these changes are taking place in an increasingly complex technological environment, with the emergence and incorporation of a greater number of innovations. While offering additional benefits and options for retailers, new technologies increase the complexity of their systems map daily.
Faced with this situation, retailers are forced to replace legacy systems and adopt new technological solutions, which must not only offer broad support for a variety of omnichannel scenarios already proven by other retailers in the market, but also – and critically – offer a level of flexibility not seen to date. This flexibility is needed to ensure faster implementation and introduction of changes in weeks instead of months, and to simplify critical tasks such as integration with other systems.
This will allow rapid evolution and adaptation in the future, with new processes, payment methods and channels, thus supporting the concept of business resilience, which has been widely used in recent months. Your existing legacy systems won’t respond well to these needs. In this situation, there is only one real choice. To paraphrase William Shakespeare, to survive or not to survive, that is the question.
It is no accident that those retailers that recognised early on the need to embrace omnichannel retail have shown the best results during the pandemic, and many retailers whose results have disappointed are in the process of transformation. But those that have done neither face a real risk of disappearing.
Rapid delivery grocery apps have flourished during the pandemic – but will they permanently change how we shop?
Billions of dollars are flowing to support companies you may never have heard of – startups with memorable names such as Zapp, Deliveroo, Getir and Gorillas. These speedy delivery companies have become the go-to for many grocery shoppers trying to avoid busy supermarkets during the pandemic, and have caught the eyes of venture capitalists.
Investors have closed over US$7 billion (£4.9 billion) in deals backing these companies in the first quarter of 2021, nearly four times the value in the previous quarter.
But is there still a place for these rapid delivery services in a post-Covid world? Much of that depends on whether shoppers can – or want to – change their delivery habits.
Changing consumer habits
As the pandemic hit in early 2020, consumers quickly shifted their grocery shopping habits. Instead of risking disease exposure and waiting in long queues, consumers started to rely on delivery services, and for many, it became a habit.
These services’ relatively small markup for groceries, given the convenience of the almost immediate delivery, is exactly what these companies need to achieve their goal of changing consumer habits. In contrast, the more traditional delivery services of large supermarket chains typically deliver groceries without a markup, as long as the minimum spend is met.
Research has shown that many consumer decisions, such as which coffee to buy, are habit-driven. After all, consumers would take hours in the supermarket if they had to ponder anew each product choice. Instead, they typically buy the same pasta they bought last time without much thought.
Like these choices, ordering groceries via app has become a habit for many people that doesn’t require much deliberation. Rather than planning meals for the next few days, consumers might factor in the option to rapidly order anything they need. This might create a habit of following every whim or satisfying every ice-cream craving.
Habits are difficult to break, especially when the habitual behaviour seems to carry little cost. Every smoker knows this logic: a single cigarette has virtually no harmful impact on a smoker’s health, so it seems not worth the effort to resist temptation. However, the costs of having multiple cigarettes add up, ultimately endangering the smoker’s health.
For rapid food delivery, the costs to the consumer are also relatively small – at first. Prices might be a bit higher, but the convenience seems worth it. Ordering easily via app becomes tempting, and there are no obviously compelling reasons to resist. Many companies will also throw in initial discounts for first-time customers.
Once a consumer has ordered rapid delivery a few times, the service is likely to replace past behaviour, like a quick trip to the corner shop. If the consumer then continues ordering rapid delivery, a habit is formed. In fact, research shows that consumers who perform a behaviour regularly for about six weeks have created a habit.
Currently, rapid grocery delivery is only available to consumers in large cities. Despite the stereotype that such services would mostly be used by tech-savvy younger consumers who are experienced with app-based services, many older consumers also value rapid delivery.
The long-term costs
At the moment, the future costs of a rapid delivery habit are relatively invisible, but after the pandemic, you can expect to see costs – financial and social – materialise.
As delivery companies gain market share, they might hike prices up slowly. So far, rapid delivery companies have been backed by venture capital to finance their costs, but they will need to be profitable in the long run to survive. So some price increases in the future seem inevitable, as has been the case with other venture capital-backed consumer apps.
Also invisible are the social costs. Smaller grocery stores and restaurants that are often family-owned may be pushed out of the market. Although rapid delivery creates jobs as well, delivery drivers face tight deadlines and receive low wages with little job security.
Forming new habits
Once a habit is formed, it’s difficult to break. But transitional phases, such as returning to the office after a long time working from home, can nudge people to rethink unwanted habits. As life slowly returns to pre-pandemic normality, consumers have an opportunity to reevaluate which business models they want to support.
Consumers wanting to reevaluate their habits should do the following:
Covid-19 changed consumer lives dramatically and rapidly, with little time for reflection on these changes. Now, the reopening is slower, and consumers have the opportunity to anticipate and actively plan for the coming changes. This opportunity should not be wasted, but should be used to change consumer shopping for the better.
Looking into the future of retail
With high streets currently in lockdown, physically shopping for anything other than essentials remains virtually impossible. As a result, some more innovative and inherently flexible specialists have been able to take advantage. These smaller shops have been very quick to up their online games, and have launched delivery services which often seem more responsive than some of their larger competitors. In addition, of course, corner shops have thrived as consumers often use an amble to the local shop for the essentials as part of their daily exercise and know that their trip will probably be much less stressful than going to the supermarket.
In fact, according to research published by Barclaycard covering 16 to 22 March, the week before tighter restrictions were put in place, there were peaks in consumer spending. Compared with the same period a year earlier, the research found that spending in specialist food and drink stores including off licences and greengrocers, had increased by 80 per cent.
What caused this? In short, people were making more journeys to the shops – not because the basket size was bigger as such, but that the media, and their own concerns that food would be scarce, created a “popping back” mentality, whereby shoppers would top up what they had already purchased in the days leading up to the restrictions. Of course, most of the shortages were temporary, but in reality, the pandemic will have caused some brands to struggle and possibly fold altogether.
But now that the initial panic buying is over, shoppers seem to have settled into new routines, and it’s clear that some retailers have coped better than others in how they have handled things as seemingly simple as making sure their customers are safe and distanced while shopping. For many it has been a test, and after the lockdown has finished, I have no doubt that some customer loyalties will be changed permanently, and that online will play a greater part in the marketing mix, though probably not to the extent it reached during the peak of the crisis.
If the situation has taught the sector one thing, it’s the importance of crisis communication and being responsive. Within a few days of shelves being emptied, all the major retailers had issued statements explaining what they were doing to manage supplies and informing customers that there was no need to panic buy. When this had little effect, policies limiting the number of items that could be purchased were introduced, as well as special shopping times for key workers and vulnerable members of society. The next stage was for retailers to limit their ranges and focus on the “big sellers” at the expense of smaller and more niche brands. This was no doubt a shock to the smaller producers, but some retailers such as Morrisons recognised this and promised to pay these suppliers immediately.
The role of advertising
The media is currently full of advertisements promising shoppers that retailers “are in this with you” and “share your difficult times”, and I wonder whether the great British public will soon become a little tired of this “coronavirus-washing”. Will the public come to see it as a jaded approach, similar to how some see retailers jumping on green issues as simply paying lip service? No doubt once the lockdown is lifted, we’ll see hundreds of adverts with people throwing back the curtains to a bright and sunny morning, but again, it’s likely consumers who will soon switch back into focusing on price and value.
Online – the saviour of the day?
Online shopping, however, has come into its own, as customers see it as a convenient and safe way to buy food. It’s fair to say that none of the retailers could have built an infrastructure that could have coped with the demand in time, and delivery slots soon filled up for weeks ahead. Some services have had to temporarily close while they catch up, and no doubt extra capacity will be built in to cope with expected demand.
We may also find that online remains a larger part of the market than it was before coronavirus visited our shores, or that some smaller brands permanently disappear from our shelves. We could also see completely unexpected trends in what and when we buy, and retailers and producers will need to keep a close eye on the data if they are to adapt to the new environment.
So where does this leave food retailing after a turbulent few months? With the benefit of hindsight, we’ll be looking back on this as a time when some retailers got it right and others less so. We’ll see it as the moment we discovered how easy (or frustrating) online ordering was, and we will remember when we discovered the local specialist shop we had previously driven by on our way to the supermarket. We may also see it as the time when we finally realised the value of our food, and how finely balanced our supply chains are. How those working in the food sector, from the farmers to the shop workers who keep the shelves full every day, are some of the real heroes in our society and how, dare I say it, we should be paying more for what is, without doubt, some of the highest quality food in the world.
For more information or to join CIM’s Food, Drink and Agriculture (FDA) group, visit sigs.cim.co.uk/food-drink-and-agriculture/
To take advantage of our online training, visit cim.co.uk/training/list-courses/digital-marketing-channels/
by Mark Dodds, chair of the Chartered Institute of Marketing’s food, drink and agriculture sector interest group
Private Label: leveraging growth in post pandemic times
Lisa Bahmann-Rocher, New Business Development and Pre Sales, Trace One
Retailers and suppliers were hit with unexpected supply chain shortages due to the pandemic. Shoppers were stockpiling household and shelf-stable goods, causing major unforeseen out-of-stock situations.
While we cannot forecast private label sales will continue to increase, it is imperative retailers keep the momentum going by leveraging shoppers’ short-term switching behaviour into longer-term shopper loyalty.
Now is the time to learn what’s working, what needs to be improved and where the gaps can be closed. We recommend retailers take a hard look both internally and externally at their current private label strategy.
Retailers can conduct an internal audit or diagnostic to assess their private label strategy and programme across the following areas: marketing, merchandising, quality, pricing, innovation and assortment.
Regardless of an umbrella, category-specific or quality-tier branding strategy, does your customer understand the positioning or value proposition? Have you developed a highly recognisable visual and corporate identity and do you follow a consistent messaging strategy? Are your guidelines clearly communicated throughout your organisation? An appealing visual identity and strategic brand architecture contribute to the success of your private brand programme.
Has your private label brand communication been clear and based on consumers’ needs? If so, has the brand communication been consistent in its messaging? Have private label guidelines been implemented so everyone across your organisation is aware of them, from corporate to store level?
Private label products packed in recyclable packaging or edible packaging should also be considered. Business applications provider CGS conducted a survey in November 2018 that found 68 per cent of US internet users thought product sustainability was an important factor in making a purchase. What sustainable packaging initiatives have you implemented or are considering implementing for your private label packaging?
Where private label products are placed on a shelf plays a critical role in sales. The ideal product placement for private brands benchmarked to the national brand is eye level next to the market leader, allowing for shoppers to easily compare both choices. However, it is not always possible to position at eye level, especially if there are several variants to compare to the brand leader. If this is the case, the products could be separated vertically and placed beside the relevant market leader variant.
If you’re unsure about the best product placement, image recognition technology combined with POS data has proven to indicate the optimal shelf location and number of facings. Secondary placement, gondola ends and cross merchandising will also offer incremental opportunities for private label awareness and sales revenue.
According to an IRI Private Label Study, over 70 per cent of US consumers believe private label products are just as good quality as national brands. The importance of delivering high-quality private label products consistently cannot be understated. Private label products are under more scrutiny than national brands since national brands traditionally are more trusted.
Do you know how the quality of the best private label supplier compares to the leading national brands in that category? Does your QA organisation regularly test your products and competitor products?
When retailers are developing a private label pricing strategy, the pricing of the national brand reference or benchmark needs to be considered. When a private label product has no comparable branded reference in the premium or value quality tiers, retailers can utilise several factors to determine pricing.
Once pricing is determined, pricing gaps must be regularly monitored and national brand promotions taken into consideration, which will also cause pricing gaps to narrow. Establishing price gap guidelines to allow for promotions and competitor pricing is recommended. Studies have shown an increase in private label price gaps causes an increase in private label sales and vice versa for price gap declines.
Private label is at the forefront of innovation since retailers have the freedom to work with suppliers to develop new categories and concepts and launch faster than national brands. Innovative private label offers the potential to differentiate and redefine consumer brand expectations, ensuring increased customer loyalty and generating higher profitability.
As the share of private label penetration continues to rise and consumers are continuing to trust private label quality and performance, retailers can launch a steady stream of innovative products that go beyond the traditional brands’ offering.
The right private label product assortment is key in creating a customer experience that builds loyalty. Management of the private label assortment requires in-depth data analytics, consumer behaviour – including purchase preferences and patterns – need states, usage occasions and lifecycle planning. By conducting regular analyses, retailers can identify opportunities to refine the assortment.
Range optimisation allows the retailer to align the range, ensuring the right products with the right attributes are available in the right channels.
Speed and agility are required to implement new initiatives, reduce time to market, stay ahead of the competition and ultimately enhance shopper loyalty.
Retailers need to respect consumer privacy or pay the price
Richard Jones, Chief Marketing Officer at Cheetah Digital
As consumer attitudes towards data privacy shift and regulations rise to protect them, it’s up to brands, including retailers, to shift with them. Here’s how.
We’re coming to the end of an era – the data free-for-all era, where marketers could use any means possible to track and target consumers with zero regard for how it made them feel. Right now, as we watch monolithic tech companies shift their entire models to fall in line with privacy regulations and consumer privacy desires, it’s time for retail marketers to shift with them, to a better way of connecting with consumers.
You can’t fake knowing who your consumers are
It used to be that Facebook, Google or third-party integrations would let you personalise campaigns at scale. Marketers could splash their ads and campaigns in front of their intended audience, but they would never have to really know that audience because these platforms did it for them. Now, with the depreciation of the third-party cookie, the blocking of tracking on iOS 14, and other privacy-related actions, it’s time for retail marketers to take charge of their futures by owning their own data.
How the value exchange plays into this strategy
Here’s what Google is advising – know your consumer. In fact, it has recommended that all marketers start building out their own first-party databases and will support those that do. The International Advertising Bureau (IAB) is telling marketers to build these relationships using a value exchange.
What’s a value exchange? Simply put, it’s offering consumers something in exchange for their data – data that you can then use to build out campaigns that appeal to that individual alone. This includes sharing special offers, personalised discounts, exclusive access and more. It goes beyond simply gathering every data point – it’s intentional and done with respect and openness to the consumer about how and when their data will be used (this collected data is known as zero-party data).
The technology to do this is readily available, either through “experience” platforms that make it easy to collect, parse and integrate data into campaigns, or through a loyalty programme that wraps up the data-gathering and rewarding engagement into one platform.
Cheetah Digital’s Customer Engagement Suite (CES) is a tool that puts the value exchange at the heart of its customer engagement strategy. It helps marketers to manage every stage of the customer lifecycle, while sitting atop, and being fed by, a Customer Data Platform (CDP). It offers an Experiences platform, a Messaging platform, a Loyalty platform, and a Personalisation platform all seamlessly integrated to help you understand who your customers are, and gives marketers the tools to connect with consumers at the moment it matters most. It’s the tool that puts data ownership in the hands of the brand marketer instead of third parties.
What if retail marketers don’t change their strategies?
Retail marketers have an abundance of data and they’re some of the best candidates to start collecting the zero-party data that can come from offering a value exchange. They’ve got one of the most engaged audiences – it’s simply a matter of marketers tapping into their existing connections.
Or, they can continue to try and passively work with the walled gardens of third-party platforms. They can sit back as consumers grow tired and fed up with being tracked and snooped on across the internet. They can watch as tech companies and privacy regulations make their current third-party databases obsolete and irrelevant. They can fade into the obscurity of the likes of Sears and RadioShack.
The savviest retail marketers, however, will see this as an opportunity ripe for change. They will digitally transform their data strategies, refocusing their efforts into gathering data and building campaigns that grow their relationships with consumers, because those relationships are what matter. They’re also what will carry brands through the next wild and unpredictable shift in marketing practices.
Set your brand up for success with a future-proofed data strategy, learn more about the Cheetah Customer Engagement Suite by visiting www.cheetahdigital.com.
Cheetah Digital is a cross-channel customer engagement solution provider for the modern marketer. The Cheetah Digital Customer Engagement Suite enables marketers to create personalized experiences, cross-channel messaging, and loyalty strategies, underpinned by an engagement data platform that can scale to meet the changing demands of today's consumer. Many of the world’s best brands, including Neiman Marcus, Hilton, Walgreens, and Williams-Sonoma trust Cheetah Digital to help them drive revenue, build lasting customer relationships, and deliver a unique value exchange throughout the entire customer lifecycle.
A digital platform to manage retail business
Edward M Durbin, Director Global Retail Industry Group, VMware
It doesn’t matter whether retailers are big or small, with physical stores or online-only, that source direct or have complex supply chains and logistics to manage; they are all in the same fight when it comes to digital experiences. To win the hearts and minds of consumers, retailers can’t just talk digital; they need to think digital-first.
As Matthew O’Neill, Industry Managing Director at VMware points out, “There is a ready-made digital audience hungry to experience new online services, but they’re not yet excited or compelled by what they’re being offered over the last year. Retailers have a real opportunity to differentiate themselves by taking a digital-first posture, creating apps that attract, engage and retain consumers either online or in their stores. Retailers with digital in their DNA have everything to play for.”
The role of apps is critical. Retailers appear to realise this – a Forrester study noted that 86 per cent of retail CIOs said promoting better customer experience through improved apps is “very” or “extremely” important. Or, as Jarek Matschey, Retail Industry Director EMEA at VMware, puts it “applications are the new storefront for customers, and they are the most important tools for the employees.”
Jarek Matschey, Retail Industry Director EMEA, VMware
The point about employees is an important one, and often overlooked. Giving employees the right tools and access to relevant and timely information not only makes them more productive and allows them to deliver a higher level of service to customers, but also keeps them safer and shows employers care for their well-being. All enabled through apps.
Of course, wanting to deliver better experiences through apps is one thing; being able to actually deliver it is another. Eighty five percent of respondents to the Forrester study said that choosing the right platform for each application (whether on-premises, or private, public or hybrid cloud) was either “very” or “extremely” challenging.
Those CIOs struggling with choosing the right platform need to reset, think about what they actually need their apps to do, and then find the environment that best supports those requirements. It might be they need to capture customer data with an engaging, agile and flexible app that can work across multiple devices and operating systems, so public cloud could be the answer. Yet they then need to keep that data secure and stored in compliance with privacy regulations, so the back end of that app might reside in an on-premises data center. So, rather than being all-in on one type of cloud, they actually need a multi-cloud model which allows them to move apps, workloads and data around as they require it.
What it all comes back to is building a platform. Consumers and employees expect new experiences that make their lives easier – apps are the platform from which to do that. The apps themselves need to be supported by infrastructure that enables them to operate at an optimum level – here, cloud (in all its forms), is the supporting layer. Underpinning all of that is a digital foundation which makes life easier for the retailer – allowing them to
develop and deploy apps, manage multiple clouds, and secure it all, in a consistent manner.
In doing so, retailers can create a platform on which to thrive. Or, as Matschey puts it, “retailers who are able to adapt, who are able to use customer data, create the right applications for their employees to be efficient, create the right apps to interact with their customers, will be the winners.”
Watch the full videos here.
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The power of great retail places
William Kistler, Executive Vice President & EMEA Managing Director, ICSC
Once upon a time, the marketplace was the centre of commerce. Traders brought their wares to the centre of town. They knew their customer, and traded gossip along with goods. When the marketplace moved into more permanent “stores”, these places became the heart and soul of cities.
Today, e-commerce offers an alternative to location-based commerce. When people know what they need and can get it without leaving the comfort of home, why go to a store? Add indifferent, ill-informed service and you have a recipe for the success of e-commerce.
Retailers that underestimated the appeal of online shopping are the fodder for frontpage stories of “retail armageddon”. Less newsworthy are stories of reinvention, innovation and “bricks and clicks” success. Those that understand the power of place to excite, engage and inspire are leading a renaissance in how and where we shop.
Nespresso stores exemplify this evolution. They are temples of experience, a brand showcase where you can touch, see, smell and even taste their product. While happy for you to buy something, the outlet also wants you to engage with the brand and buy both in-store and online. This halo effect of physical stores driving increased online sales is well documented.
Thriving retail, dining and leisure places are more essential than ever to the vitality of cities. They have been the catalyst for city centre regeneration from Bristol to Birmingham and across Europe. They have brought life back to cities, helping to attract new jobs, residents and investment. Great retail places have unique power to create and sustain successful communities!
Using returns to reimagine the consumer experience
The rapid growth of e-commerce due to the Covid-19 pandemic is making the future arrive faster; even now, the landscape of retail is being redefined by the shopper. Consumer desire for convenience positions merchandise returns as a top and growing priority. Research from the National Retail Federation shows online returns doubled in 2020 and are a major driver of the overall increase in returns, adding cost, complexity and service to the list of issues to address. Returns are a moment of truth in retail: how will you use them to reimagine the consumer experience?
Consider these statistics from our Consumer Returns report and other sources¹, including Barclaycard, Boston Consulting Group, Incisive, Northwestern Kellogg, NPR, National Retail Federation and CNBC, which indicate a large, unfulfilled opportunity to stop a known drain on sales:
Consumers are leading the dialogue about what makes a great return experience, and retailers need to listen and respond with an improved consumer experience. What are consumers saying about returns that impacts you?
Boston Consulting Group says people care about the basics: price and the ease of returning goods. It’s becoming even more important in an omnichannel world.
Appriss Retail helps you address returns directly and turn gaps in the consumer experience into gains that generate profits across channels. Our decades of expertise help collapse long timeline projects and assist retailers in becoming more agile, responsive and relevant to consumers as they purchase and make returns.
Improving the omnichannel returns experience
The volume of data within a retail organisation has exploded. One of the benefits of omnichannel commerce is that a retailer can learn much more about its consumers, products and employees than before. However, optimising the omnichannel return process can be complicated. Consumers want easy, hassle-free returns, and retailers face a difficult balancing act of maintaining sales, boosting loyalty and reducing risk.
Appriss Retail solutions use the immense computing power of AI and machine learning to find patterns in a retailer’s volumes of data and offer 1:1 recommendations faster and better than any human could. Data science helps us perform three important tasks in real-time to deliver better omnichannel return experiences for our customers:
Returns can be your moment of truth
Throughout 2020, we helped our clients pivot to meet new consumer needs and concerns. Along with helping them manage the mechanics, we were able to reveal an important hurdle: in most retail organisations, there is no single owner of returns responsible for the consumer experience and the revenue impact. Yet these focus areas can lift sales by 1.5 per cent and influence profits, making them equally vital to the ongoing health of the organisation.
There are only so many dials a retailer can turn to build both engagement and profitable revenue. When retailers partner with Appriss Retail to optimise returns, they are able to generate more consumer insights. These insights can be used to reduce risk and offer targeted incentives at the point of return to capture incremental sales and profits. They also offer retailers a unique opportunity to let consumers know their returns experience can be personal and easy – a strong reason to keep shopping.
by Steve Prebble, President, Appriss Retail
 All statistics in this article were drawn from our own research as well as from articles from: Barclaycard, Boston Consulting Group, Incisive, Northwestern Kellogg, NPR, National Retail Federation, and CNBC
Reshaping the supermarket post-pandemic
Dr Kris Hamer, VP Research, Retail Insight
Shoppers have flocked online out of concerns for safety and convenience over the past year, but a business model skewed towards e-commerce is not necessarily one that they are keen to pursue post-pandemic.
However highly online grocery shopping rates on the customer experience scale, the fact remains that it is an expensive and inefficient channel for retailers to maintain. Then again, economic pressure on the brick-and-mortar model means grocers have to make their assets work harder than ever.
As in-person sales of non-food categories have fallen significantly – the majority moving online – retailers are over-spaced. Grocery is being asked to shoulder the cost burden despite its relatively small footprint. It’s increasingly clear that the pre-pandemic supermarket model is no longer fit for purpose in a post-pandemic world.
But as with many challenges, there is great opportunity.
First, it’s time to move away from binary thinking – that grocery fulfilment can be either online or in-person, either dark store, fulfilment centre or retail outlet. It’s time instead to look at a next-generation hybrid model.
Taking advantage of forward-deployed inventory, grocers can get product closer to shoppers than the majority of dark stores ever could. In-store fulfilment for e-commerce benefits customers who enjoy the convenience of in-person and online, wherever and whenever they need it. Recent research by Adobe has shown that 47 per cent of retail executives expect to open hybrid stores across 2021.
But reshaping the grocery retail space is not just about making the most of its footprint. Grocers should look to squeeze more out of their entire operation, from missed sales from poor inventory management processes through to the unnecessary costs caused by excess waste. UK supermarkets look set to lose £2.4 billion through waste in 2021 alone, and food waste levels are only growing. This might represent the only easy money left on the table for grocery retail as it can be quickly improved by adopting an effective dynamic markdown strategy to ensure product sells through at the right price at the right time. It’s only by delving into the vast amounts of data currently being captured that grocers can gain the insight to fix issues of over- or under-supply and cutting costs for the long-term.
Events such as pandemics have a tendency to bring out the hyperbole – the high street is dead, for example, and everyone will shop online for evermore. The reality will of course be more nuanced. From the perspective of both cost and experience, in-store retail is still vital for long-term growth. However, the future lies with a new type of store that will cater to the post-pandemic shopper and will be supported by a more efficient supply chain backed up by dynamic markdown strategies. In order to achieve this, supermarkets need to understand the data today to build an effective, efficient and responsible hybrid retail model for tomorrow.
by Paul Boyle, CEO, Retail Insight.
Retail in the time of Covid-19: phase three
Emerging from the second phase of Covid-19 (social distancing), the retail industry is taking stock of consumer sentiment as well as short and longer term impacts and the overall prospects for recovery. Globally, on average across multiple scenarios that we’ve analysed, we expect a $2.1 trillion loss in total retail sales compared with Forrester’s pre-Covid-19 forecast. Lockdown-enforced store closures, demand surges in essentials categories, local and national-level regulation, and profound societal changes are already significantly changing how retailers manage store networks, operating procedures, customer experience, employee experience, and – of course – bottom-line sales. We’re finding that online consumers are:
• Worried – but retain hope for normalcy. Forrester’s Consumer Technographics research in mid-April found that 61 per cent of US online consumers are worried about an economic recession – only slightly fewer than online consumers in China (65 per cent) and the UK (67 per cent). Not surprisingly, online consumers have told us that they have cut back on unnecessary spending but also that they – at that point – had increased their spending on essentials such as groceries and cleaning supplies. The good news: close to half of these online consumers also “hope to resume [their] usual shopping habits soon.”
• Cutting back on nice-to-haves but buying more essentials. Online consumers have told us that they have cut back on unnecessary spending but also that they – at that point – had increased their spending on essentials such as groceries and cleaning supplies. The good news: close to half of these online consumers also “hope to resume [their] usual shopping habits soon.”
• Warming to contactless payment and pickup. Online shoppers in China, the UK and the US are using contactless payments more often to avoid touching in-store screens and hardware. And approximately one in five online consumers in China and the US would like “more places to offer kerbside pickup.”
With no clear episodic end to the pandemic, retailers and brands need to proactively manage phase three (management) – which we estimate will last from mid-May 2020 to early 2021 – areas such as:
• Weighing the guidance of medical institutions and global and national experts (WHO, CDC, ECDC) with local government regulations – and each individual organisation’s tolerance for risk. For example, in Italy, we’re now seeing limited opening hours for formerly “non-essentials” goods shops (e.g. books, children’s clothing), and some US states are gradually opening salons and stores.
• Multiple recovery (peak and decline) scenarios at different times across multiple regions. Retailers need to have in place processes, operations and both employee and customer communication vehicles and protocols (think PPE, tools and data) to swiftly close and reopen in response. They’ll also need pandemic management protocols (PMPs) for multiple regions for both stores and their supply chain.
• Supply chain planning to safeguard employees, operations and third parties. Expect lots of analysis for retailers and brands in this crucial area, aided by technologies from supply chain control towers to AI-powered retail planning.
• A new normal for many aspects of life. Shopping itself is changing – from growing contactless payments and pick up to in-store protocols (staffing, one-way aisles, queueing and more) to significantly altered employee and customer experiences. In fact, employee power is one of four “shocks” that we foresee distinguishing employer winners through the 2020s. As for corporate headquarters staff, they may return to the office sometime – in limited numbers – but in an office likely unrecognisable from the way it was just months ago.
Much change is still ahead for most retailers, whether they’re barely keeping up with surging demand or simply trying to salvage sales. As an industry, retail is resilient and generally adapts (and innovates) through adverse times. Do right by your employees and customers: watch the economy, and build the operational flexibility now to navigate rapidly changing conditions throughout Covid-19 phase 3 and beyond.
Find out more about Forrester’s Retail research content here.
Originally published in Business Reporter's Future of Retail campaign.
by Fiona Swerdlow, VP & Research Director, Forrester
How conversational commerce is redefining retail
Over the past year, huge swathes of consumers have turned to online shopping. E-commerce is expected to account for 21.8 per cent of global retail sales by 2024, which means retailers are rushing to accelerate their digital transformation and deliver seamless online experiences to all their customers.
But how to go about doing this? And how can you, as an ambitious retailer, ensure you’re understanding your customers enough to achieve long-term success?
Delivering value where it matters
In the commerce industry as a whole, delivering a first-class user experience should always be top of the agenda. According to Zendesk, 75 per cent of customers are willing to spend more and buy from companies that give them a good customer experience.
The more you prioritise your CX by building loyalty, growing trust and creating engaging online experiences, the more successful you will be.
Now more than ever, customers expect the convenience of all sales channels having the same information and being connected, alongside instant product data at their fingertips.
The solution? Delivering a unified commerce experience through a conversational AI assistant.
These assistants are capable of turning millions of real-time data points on customers into personalised recommendations and actionable insights for your business. This not only enables retailers to provide customers with the exact items they are looking for but also accelerates the customer journey by providing the right suggestions and guidance at the right time.
Transforming the online experience
Based on the user’s unique inputs, conversational AI assistants can take actions on their behalf: recommending relevant products, looking up orders, assisting with checkout and filling out forms – all effectively decreasing the number of actions the user needs to take to find what they are looking for.
By doing this, conversational AI turns time-consuming website browsing into a more efficient and engaging experience. As a result, you can minimise costly returns, reduce cart abandonment and build customer lifetime value.
Those e-commerce stores that have already introduced some form of conversational AI on their websites are increasing their annual revenue by 7-25 per cent.
Delivering contextual conversations
Crucially for commerce, AI assistants can also remember past conversations with individual users. This has two major benefits for both you and your customers.
Firstly, your AI assistant stays in context. It can offer a guided shopping experience, like a skilled salesperson would deliver in a brick-and-mortar store.
Online shopping has infamously been an overwhelming and impersonal experience for many. According to the Rockefeller Corporation, 68 per cent of all customers leave a brand because they think it does not care about them.
By being present as a point of contact throughout the buying process, an AI assistant creates a level of comfort and understanding that builds trust and encourages customers to return to your store time and again.
Secondly, your AI assistant can gather zero-party data from conversations.
Traditionally, e-commerce businesses have used third-party cookies and purchase history to personalise their customers’ journeys and experiences.
However, with the introduction of the autonomous web, cookies will become obsolete.
Forrester Research defines zero-party data as: “Data a customer intentionally and proactively shares with a brand. It can include preference centre data, purchase intentions, personal context and how the individual wants the brand to recognise [them].”
Integrating first-party (individual’s site-wide, app-wide and on-page behaviours) and zero-party data (gained from your AI assistant’s conversations with customers) into a customer data platform (CDP) empowers businesses.
CDPs can use insights to build out robust, individual customer profiles of a company’s most eager-to-engage customers.
With this solid foundation of trust in place, e-commerce businesses can better orchestrate their interactions and use conversational AI platforms such as Certainly to continue optimising their assistant’s approach and messaging.
A conversational web
These two-fold benefits for both customers and businesses point to a conversational approach being the impetus to widespread change across the internet.
By holding the conversation on human terms, people can use their natural language to immediately get what they need, while businesses deliver a natural, hyper-personalised user experience at an unlimited scale.
Henrik Fabrin is CEO and co-founder at Certainly. Certainly is a conversational AI platform built for e-commerce businesses. If you’d like to learn about the benefits gained from using a Conversational AI Assistant, find out more at Certainly.io
High street brands cannot rely on history and familiarity to survive — new research
At a precarious time for the high street, a sense of brand heritage might be considered a great strength. The theory is that well known stores are able to boast – and attract customers with – a proud history of originality and quality.
In reality though, heritage appears to have become something of a blind spot for some retailers. Last year Debenhams (aged 243), Jaeger (aged 137) and Laura Ashley (aged 68), all went into administration before reemerging as online only brands. Similarly familiar rivals including Marks & Spencer and John Lewis are struggling.
My research indicates that one reason for this is retailers continuing to over value their status as heritage brands. As a result, they fail to keep up with changes in shopper behaviour and risk becoming dated, sluggish and digitally inept – unwilling to try new ideas in case they risk the loyalty of their established customer base.
But innovation and agility have never been more important. The threat of digital disruption and evolving shopper behaviour mean retailers need to always look afresh at what they do.
Yet to established high street names, protecting their own heritage means not making mistakes, sticking to old ways and minimising costs for shareholders. It is the complete opposite of innovation, of trying out new and possibly risky ideas.
Take Amazon for example, arguably the most successful retailer on the planet. It evolved from a bookseller into a dominant and ever expanding retail marketplace. It recently opened its first UK checkout-free grocery store and a hair salon to expand its move into the bricks-and-mortar landscape (surely proof that physical shops still matter despite high street woes).
Of course, one might argue that it is easier for a businesses like Amazon to be innovative and agile because of its strong financial backing and technical expertise. But while technology can help to implement innovation, it does not produce it.
For instance, having “smart fitting rooms”, or an interactive touch screen mirror does not instantly make a retail store innovative and attract large numbers of customers.
Consumers’ needs have become more complex. They do not simply go to a physical store to buy something, as they easily do that online. They go to explore, to be inspired and entertained, as part of the “experience economy”.
At the same time, efforts to address these needs should avoid being perceived as sales gimmicks like the “experience desk” at John Lewis, a concierge-style service that tell shoppers about the store and can book them into other services.
One example of a shop successfully mixing heritage with innovation is Liberty London, which regularly refreshes its range of products and services (and even its physical spaces) to encourage shopping. As a customer there, I do not feel I am always being “sold to”, but instead am inspired by the surroundings. As I admire the displays and check out the merchandise, the buying follows on naturally, but the process is subtle and enjoyable. I cannot say I have the same experiences when visiting House of Fraser or John Lewis.
Our research on perceived authenticity shows that brand survival can by no means be taken for granted. It requires a sophisticated strategy which combines convenience and continuity with the ability to survive new trends and look forward.
To survive and prosper in the long term, high street retailers cannot rely on quality, consistency and nostalgia (the known attributes of brand heritage). They need to be innovative, agile and responsive (or better still, pre-emptive) to change.
This is not about asking high street retailers to ditch or dismiss their hard won heritage. But it does mean critically rethinking the meanings of heritage in the retail landscape, both current and future. Failing to do this can have catastrophic consequences.
For heritage has very little commercial value when a retailer is unwilling or unable to break some of the old fashioned rules. Otherwise, heritage would simply mean history – the place where so many established brands have been consigned to after disappearing from the high street.