The State of the Customer: Navigating the New Digital Divide

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NAVIGATING THE NEW DIGITAL DIVIDECapitalizing on digital influence in retail Here is a link to Deloitte’s Navigating the New Digital Divide study, which was released in May of 2015 and a new fresh study will be released in a couple of months: http://www2.deloitte.com/us/en/pages/consumer-business/articles/navigating-the-new-digital-divide-retail.html?id=us:2el:3dp:diginf15:awa:retail:051315:dd

http://www2.deloitte.com/us/en/pages/consumer-business/articles/navigating-the-new-digital-divide-retail.html?id=us:2el:3dp:diginf15:awa:retail:051315:dd




Digital influence has virtually become a part of the retail genome.

In a world where nearly everyone is always online, there is no offline. So it is not about the digital business, it’s just business.


LARGE RETAILERS ARE LOSING SHARE TO SMALLER PLAYERS

U.S. retailer share volatility over time

U.S. retailer industry fragmentation over time

**Deloitte Retail Market Share Index, 2015. *The Gini coefficient measures the relative dispersion of market share where 1 is a pure monopoly and 0 means every firm has equal share

The pace at which share is changing hands is increasing and fragmentation is increasing at the same time. This means that it is small players stealing share, not big players trading share.

The intensity of competition has skyrocketed – fueled by digital


DIGITAL INFLUENCE IS FAR MORE THAN JUST eCOMMERCEDollar impact comparison between digitally- and mobile-influenced in-store sales and eCommerce in the U.S., 20141

1Channel sales calculated using U.S. Census Bureau Quarterly Retail E-Commerce Sales, 4th Quarter 2014; excluding Gas Stations and Non Store Retailers from physical store sales due to scope of survey.

In 2014, digitally-influenced in-store retail sales were more than 5X greater than eCommerce sales alone.

eCommerce Sales

Mobile-Influenced

Digitally-Influenced Sales $1.70T49% of In-store sales

$0.97T28% of In-store sales

$0.30T


DIGITAL INFLUENCE GREW SIGNIFICANTLYDigital influence is 49% (i.e. $1.7T) of in-store retail sales compared to just 14% (i.e. $0.33T) three years ago.

Mobile influence is 28% (i.e. $1.0T) of in-store retail sales compared to just 5% ($0.16T) three years ago.

Source: The Dawn of Mobile Influence, 2012, Deloitte Consulting LLP; The New Digital Divide, 2014, Deloitte Consulting LLP


DIGITAL INFLUENCE RESULTS IN HIGHER CONVERSION & SPENDAlmost 1/3 of consumers say they spend more due to their use of digital during the shopping process

People who used digital while they shopped converted at a 20% higher rate compared to those who did not use digital at all

45% of consumers say digital makes shopping easier for them in stores


DEMOGRAPHICS: HISPANIC AND LATINO CONSUMERSHigher ConversionHispanic and Latino shoppers who use digital during their shopping trip converted at a 37% higher rate, versus 20% for all consumers.

Higher SpendOn trips where they made a purchase, 41% of Hispanic and Latino consumers spent more due to digital, compared to 28% of all consumers.

Greater impact of Social Media49% of Hispanic and Latino consumers are influenced by the their access to social media on trips where they made a purchase, compared to 32% percent of consumers overall.

Hispanic and Latino 49%Overall 32%




DEMOGRAPHICS: MILLENNIAL1 CONSUMERS

Higher SpendOn trips where they made a purchase, 37% of Millennial consumers spent more due to their use of digital, versus only 23% of non-Millennials.

More Social Media Influence47% of all Millennial consumers are influenced by the their access to social media on trips where they made a purchase, compared to 19% of non-Millennials

More BOPUS2

Finally, 19% of Millennial shoppers purchased their shopping basket items online prior to picking them up in-store, compared to 12% of non-Millennials.

Millennial

Non-Millenni

al

1Millennial: Anyone listing themselves as being 18-34 years old in the survey2BOPUS: Buy Online Pick-Up in Store


DIGITAL INFLUENCE WILL REACH 64% IN 2015

Consumers’ digital behavior and expectations are evolving faster than retailers are able to deliver, a gap we refer to as the ‘new digital divide.’

Digital influence continues to accelerate and shift the ground under the feet of retailers large and small alike


DRILLING DOWNPeople have not stopped visiting stores, but digital continues to increasingly impact in-store behavior and store sales. Taking a closer look at the data, we uncovered three key findings that help us understand the trajectory of the digital influence.

1. Simply measuring channel sales misses the larger trend2. Consumers use digital very differently by category3. In-store shopping has digital at the core

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SIMPLY MEASURING CHANNEL SALES MISSES THE LARGER TRENDDigital sales alone – a metric used by most retailers to measure the success of their digital strategy – is a lagging indicator.

The 76% of consumers using digital devices to shop prior to their store trip are making digitally-influenced decisions much earlier in the process.

Retailers have been looking in the wrong places to measure success. Instead, they should be looking for the ‘moments that matter’ throughout the customer journey.

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SIMPLY MEASURING CHANNEL SALES MISSES THE LARGER TRENDRETAILERS SHOULD FOCUS ON THE ‘MOMENT’S THAT MATTER’More and more of these moments are taking place outside of the

store environment, or even outside of the retailer’s control – enabled by digital devices.Moment Definition FindingFind inspiration

The customer informally gathers information family, friends, blogs, social media, and traditional media.

Only 30% of all consumers get their initial inspiration from a retailer or brand’s advertisement

Browse and research

The customer begins matches inspiration to a group of physical products that meet their need.

67% of all shoppers browse retailer sites prior to shopping in stores61% use search engines for their browsing & research activities

Select and validate

The customer narrows the consideration set, makes a selection, and validates that the choice will best meet their need.

67% of all consumers read product reviews during their shopping journey

Purchase and pay

The customer locates the product (online or in a physical store) and determines how he/she would like to pay and receive the item.

13% of consumers used the “buy online, pick-up in-store’ method25% of consumers indicated that BOPUS is their preferred method for receiving their purchases in the future

Return and service

The customer returns to the original place/channel of purchase to seek follow-up related to the item.

Nearly 20% of shoppers would like to initiate a product return or refund from their own digital device.

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Digital influence varies by category

CONSUMERS USE DIGITAL VERY DIFFERENTLY BY CATEGORYDIGITAL INFLUENCE HAS INCREASED IN NEARLY EVERY CATEGORY SINCE 2013

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Consumers are most influenced by digital and mobile in electronics

Consumers showed a very-high social media influence for baby / toddler

Misc. Supplies include Office Supplies and Pet Supplies

Consumers are least influenced when shopping in-store for the food / beverage category

Overall, nearly all categories saw higher digital influence in 2014 (bars) than they did in 2013 (vertical reference bars). However, influence varies by category.


CONSUMERS USE DIGITAL VERY DIFFERENTLY BY CATEGORYWHAT CATEGORIES WILL BE THE NEXT TO ‘TIP’?

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In the Baby/Toddler category:•Consumers are most likely to spend more due to digital, at 46%•Consumers are most likely to be influenced by social media, at 56% of purchases•Over 15% of shoppers made their last purchase through ‘buy online, pick up in-store’

In the Furniture, Home Furnishings, and Home Improvement category:• Consumers are likely to spend more due to digital, at 38%• High traffic shoppers use digital 50% more than low traffic

consumers• Consumers are 37% more likely to convert if they used social

media

Deloitte’s research indicates the next categories most likely be disrupted due to digital are Baby/Toddler and Furniture, Home Furnishings and Home Improvement


IN-STORE SHOPPING HAS DIGITAL AT ITS COREAs inspiration, information, and decision-making have become decoupled from the physical trip, consumers now shop differently.An overwhelming majority – nearly 80% interacted with brands or products through digital before arriving at the physical store. What’s more, 34% of shoppers are using digital while in the store.

Customers in the digital era have become hunters more than gatherers once they arrive in-store.

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IN-STORE SHOPPING HAS DIGITAL AT ITS CORESHOPPERS WHO LOOK TO SOCIAL MEDIA SPEND MORE IN-STORE

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Shoppers were 29% more likely to make a purchase the same day when they used social media to help shop either before, during or after their trip (90% vs. 70% conversion)Consumers who used social media during their shopping process are ~4x more likely than non-users to spend more or significantly more on purchases as a result of a digital shopping experienceRespondents who considered themselves somewhat/very influenced by social media were 6x more likely to spend significantly more than non-users (42% vs 7%) due to digital shopping experiencesNote: ‘Somewhat more’ = spent up to 25% more; ‘significantly more’ = spent 25+% more.


HOW CAN RETAILERS

EVOLVE?



A FEW SIMPLE TRUTHS FOR RETAILERS TO EVOLVEOperating digital and stores as separate business limits the growth opportunity

The digitally-enabled customer experience requires reinvention

There should be no such thing as digital strategy

Retailers need to create winning experiences for their core categories

Adapt the role of marketing to transforming customer behavior

Develop valuable ecosystems

Measure and analyze the right metrics in order to adapt and thrive

The State of the Customer: Navigating the New Digital Divide

Data & Analytics

Transcript of The State of the Customer: Navigating the New Digital Divide