Research & Insights

The New Retailer: It’s all about the Path to Purchase

by Nomtha Ngumbela

In 2017, Walmart noted that 90% of Americans live within 16kms (10 miles) of a Walmart store and further estimated that they serve over 140 million customers a week! At an average speed of 60km/hour, the journey would take a reasonable 16 minutes a trip worth making on a weekly basis. However, what the likes of Walmart traditionally ignored is that today’s customers shop across multiple channels and multiple devices all of which they use independently and interchangeably.

This is due to the fact that consumer’s interactions with their favourite brands and retailers have expanded astronomically since the advent of the internet and mobile enabled apps. As a result, most customers navigate their shopping experience between traditional instore brick and mortar establishments, the internet through computers or laptops and mobile phones, social media or make purchases via conversations with store representatives.

In this insight, Effectus explores the importance of omnichannel retail, how certain retailers have gotten the strategy right and how those that have not are now scrambling to match their competitor’s innovative business models.  We explore what the future of customer experience will look like and why higher customer expectations are putting pressure on retailers to evolve. 

What is multichannel and omnichannel retail?

Multichannel retail offers several paths to purchase between a consumer and the retailer as well as several avenues for communication between the two participants.  It is clear that to offer consumers value and ensure satisfaction, retailers must have a seamless integration of all of their channels with minimal distribution and inconsistency in the offering. 

An omnichannel solution describes a connected and seamless shopping experience between all the multichannel touchpoints on offer by retailers to their customers.

The image below shows a visualization of just this: customers utilize multiple touchpoints during their path to purchase. The seamlessness of each channel should allow for an integrated journey from identification of the item on, for example social media, to direction to a safe portal for payment and delivery of the item. The customer should have the ability to use a digital receipt received from the initial stage of purchase to return the item to the physical store without any hassle. A true omnichannel experience displays low latency and high integration.   

The e-Commerce Titan: Amazon.com Inc

Incorporated in 1994, Amazon initially delivered books of varying genres by mail to consumers, but has since transformed into a global powerhouse for online shoppers and third party merchants alike. Amazon’s most popular subscription base membership program boasts over 85 million subscribers in America alone at an annual subscription of $99 (R1 753). The company describes their competitive landscape as consisting of ‘a broad array of competitors from many different industry sectors around the world.. (Including) physical e-commerce and omnichannel producers of products we offer and sell to consumers and businesses..’ In essence, their playing field is big and their list of current competitors is endless. This article, however, will focus specifically on their retail based competitors.

Amazon’s growth is well known and well documented for good reason. Jeff Walcoff put it perfectly in 2017 when he said

“..Every time another retailer makes a move, Amazon is well onto the next journey”

The e-retailer’s dominance has not occurred due to a lack of effort by competitors like Walmart and Costco, however, as these retailers have made efforts to retain their lead and neutralize the e-retailer through initiatives such as:

• Building e-commerce capabilities
• Accelerated shipping time (Walmart introduced 2 day shipping as early as 2017)
• Updates to store layouts
• Mobile enabled Android and Apple compatible apps

So why then does the Bank of America state that Amazon controls 44% of all U.S online sales while the nearest competitor in line, Walmart, sits at 7%?

Worldwide marketplace

In the chart below we plot 4 major US based retailers.

On the left-hand side, we plot 4 retailers by the number of physical stores they currently operate. As can be seen, Walmart in its 58 years of operations has expanded to include 11,484 stores across all its operating regions. In comparison, Amazon has 536 stores across all of its locations of which 479 (91%) are Whole Foods stores a business purchased in 2017. On the right-hand side, the same stores are compared on a graph, but this time plotted by market capitalization.

This is where things get interesting: Despite having the least amount of physical stores, the innovative, consumer focused and seamless omni-channel operating model of Amazon has allowed the company to surpass the value of its competitors, like Kroger, who have been operating for over a century!

Amazon understands that they are unable to compete on a physical store basis and instead focus on enhancing their digital shelf space offering and giving consumer access to the worldwide marketplace. The importance of this is undisputed given that, for example, the top global online marketplaces like eBay, Amazon and China’s JD.Com and Taoboa sold $2.03 trillion in 2019 alone. Even now, digital commerce growth has no sign of stopping, with gross merchandise sales growing 18% in 2019 and will likely continue on this path as consumers shop online as the fear of contracting the Corona virus persists.

The reality traditional brick and mortar operators now face is a need to firstly, invest in building and developing their ecommerce capabilities and secondly, ensuring that these new channels connect harmoniously to their current sales avenues.

Customer Centricity

SuperOffice describes a customer-centric operating model as one that ‘provides a positive customer experience before and after the sale in order to drive repeat business and enhance customer loyalty.’This definition highlights four key elements required for a company to be sustainable retailer of the future:

1. Customer Experiences
2. Sales Growth
3. Repeat Business
4. Brand Loyalty

Let us focus on the first element: Customer Experiences. While investing in accessible, robust and innovative worldwide marketplace is a key weapon retailers must have in their arsenal, visionary companies put immense focus on their ability to have an operating model which places customer centricity as one of its main pillars. Why is this? Looking at the numbers from Deloitte and Touche, it was found customer-centric companies were 60% more profitable compared to

companies that were not focused on the customer.  This makes sense given that in everyday physical interactions, the average person spends 30-40% of the time talking about him or herself, a figure that jumps to 80% when individuals are online.

In developing a strong omnichannel strategy, retailers like Amazon therefore place great focus on ensuring that the cross-channel experience is flawless for all of its 85 million customers.  Consistency is key and brands that are able to offer consistent engagement across multiple channels and interactions with customers will grow in strength and brand loyalty. In order to do this though, companies must leverage insights and customer behavior data to map out the customer journey and develop the best and most personalized strategy and approach to ensure a successful acquisition during the purchase path.

Where to next?

The article has introduced two foundational concepts that stem from increased omnichannel retail: global marketplace with digital shelf spaces and the growing trend of data informed customer centricity. However, this by no means an exhaustive exploration of the retail evolution. With more technology, less latency, greater quality and higher consumer expectations, the emergence of new innovations like drone delivery, self-driving car deliveries, 4D enabled purchasing will quickly become a reality and heighten the expectations and a need for further evolution.

Understanding customers by utilising (amongst other tools) consumer driven data, stakeholder suggestions and feedback provides businesses with confidence when formulating and implementing new ideas as well as igniting special moments during a customer’s path to purchase. This is important as the modern customer does not want to just buy things; rather they want to have an all-encompassing experience full of mass personalization as well as quality content on each of the platforms they engage with. When this is not satisfied by retailers the result is often a huge cost to a retailer’s brand loyalty and image as new consumers become aggressive ‘social sharers’ of bad experiences. Amazon is just one of the ways Effectus has capitalized on the above-mentioned emerging retail trends and we continue to invest in innovative companies monetizing these concepts as they lead the charge in consumer retail. Who will decide on which retailer comes out on top in the coming years?  Will globalization push new competitors to the forefront of the global market place? Perhaps these are further topics for discussion in the next instalment offering insight into the thinking behind