In today’s retail climate, doing nothing is riskier than doing something.
Usually the status quo is at least a “safe bet” — you might not grow tremendously, but you won’t rock the boat the wrong way. Today, that’s no longer the case. Retail has hit a point where doing nothing actually carries significant risk.
The Need for Change: Evolving to Meet the Needs of the New Consumer
Evolving consumer expectations and behaviors have ushered us into a new era of retail, known as Consumer 3.0.
In this era, consumers have become “hyperadoptive,” meaning they’re adopting new products and experiences more rapidly than ever. Knowing they have more choices, consumers have become extremely selective, prioritizing experience, value and convenience above all else — including brand loyalty.
These shifts in consumer behavior have created an enormous need for change. Specifically, brands must find new avenues to get closer to consumers, whether that’s digitally, through direct mail and billboards, through pop-up stores or anything else.
The Risk of Doing Nothing: Heading Deeper Into the Retention Death Spiral
As the age of Consumer 3.0 takes hold, many brands are looking down the barrel of the “Retention Death Spiral,” a situation in which:
- Repeat purchase rates keep declining while the time to purchase keeps increasing
- This situation forces brands into a perpetual promotion cycle, putting marketing at odds with merchandising and hurting their ability to maintain margins
- To avoid this hazard, brands can send more emails or buy more ads, but as send volume and ad impressions climb, revenue returns on these channels decrease
Three key challenges have contributed to the Retention Death Spiral:
- Disconnected product catalogs, which hinder marketers from connecting shoppers to the most relevant products that they’ll actually want to buy
- Latency in audience data, as Forrester finds that it takes 78% of marketers several days to more than a week to get campaign or audience data, limiting their ability to act on consumer intent to buy
- Inability to scale personalization, since any ways that marketers can act on data typically require very manual efforts and/or are limited to a small percentage of shoppers
Critically, the longer brands wait to resolve these challenges, the deeper they’ll fall into the Retention Death Spiral — which makes the risk of doing nothing extraordinarily high.
How Did We Get Here? Exploring What Needs to Change with the Status Quo
How did we get here? What exactly is wrong with the status quo? Research reveals some alarming trends.
To start, Forrester reports that although retailers rank personalization as a top priority for creating a better shopper experience that aids in customer acquisition and retention, 88% don’t think their efforts in this area are effective.
This ineffectiveness largely stems from the fact that retail marketers struggle to turn insights into action, face organizational silos around data ownership and have inadequate martech to support new strategies.
Recent surveys from Bluecore support this position, revealing that:
- 40% of retail marketing executives consider “effectively accessing and actioning on data required to execute personalization strategies” the biggest challenge facing their teams in 2020
- Only 37% of marketers can easily access data and 91% rate taking action on data as “challenging” or “not possible”
These trends are alarming given Raconteur’s stance that without an ability to act on customer data, personalization efforts go to waste.
The Upside of Change: Quantifying the Opportunity Facing Retailers
Despite the enormous challenges of the status quo in retail, incredible opportunity exists for brands that can make the necessary changes.
Specifically, brands that focus on making changes to address data access and actionability challenges as well as the underlying martech issues can find their way out of the Retention Death Spiral. Beyond just finding their way out of the Retention Death Spiral, there’s room for growth as well.
Forrester’s research reveals that making changes like improving access to data, eliminating organizational silos and providing better martech can lead to benefits like greater customer loyalty, more cross and upsell opportunities, better return on marketing spend and more frequent purchases.
Ultimately, these improvements can work together to increase a brand’s customer experience index score, where an improvement of even one point can lead to a revenue gain of $2.44 per customer — or millions of dollars across the entire shopper base.
Meanwhile, brands that adjust their strategies and martech to support more agile, customer-centric direct-to-consumer (D2C) marketing strategies see an average 30% growth in annual customer lifetime value (compared to a reduction of 5-15% with the status quo) and a 5:1 return on investment on channel spend.
Finally, brands like Jockey, Stride Rite, Anthropologie, CDW and Hammacher Schlemmer that have already undertaken change efforts have positively influenced commerce revenue and digital customer experiences. Key results include 16% increase in channel revenue, 500% increase in inbox placement rate and 230x increase in return on ad spend.
Capitalize on the Opportunity: How to Approach & De-Risk Change
Change always comes with risks, but given the gap between the status quo and consumer expectations — plus the results industry leaders have realized since making a change — doing nothing is now riskier than making a change.
With that in mind, what’s the best way to approach change and effectively de-risk those efforts to achieve your goals? Download Bluecore’s eBook spotlighting the top retail change agents of 2020 to discover how 10 retail marketers from brands like Volcom, Dermstore, Paula’s Choice, GreaterGood and Cabela’s Canada made it happen and to get actionable tips on how you can replicate their success.