DTC, Social Commerce, the Store and the Shopper

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12/16/2021
Path to Purchase Live: The Digital Experience ... A recap of the key takeaways from the virtual event’s engaging sessions and panel discussions.
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The Physical Store: New Realities, Opportunities

The COVID-19 pandemic upended the retail landscape in ways few could have imagined. Grocery items throughout the center store that had been languishing for years experienced unprecedented category growth, even as e-commerce sales soared. In 2021, shoppers returned to physical stores in droves. Amazon opened 39 new Amazon Fresh stores and its first-ever department store, while Target continued to execute on a $4 billion investment strategy to open new stores and remodel existing locations.

“Now, everyone is asking: How do I maintain or even accelerate this growth as the pandemic recedes?” said Peter Cloutier, growth and commercial strategy lead for ChaseDesign. Cloutier, along with ChaseDesign President Joe Lampertius, outlined steps for continued retail improvement during a virtual session titled “The Physical Store: New Realities, New Opportunities” on Nov. 3 as part of Path to Purchase Live.

Cloutier and Lampertius focused on four strategic areas:

• Creating better category shopping experiences to drive incremental growth;

• New digital tools and technology driving new growth in stores;

• Corporate and brand partnerships delivering innovation and meeting shopper needs; and

• How brands and retailers are turning the former pain point of checkout into a win.

Part of creating better experiences is improving wayfinding and bringing excitement back into stores, Lampertius said. The Starbucks Signature Aisle endcap display — first introduced in Safeway stores back in 2013 and since rolled out to a number of different retail chains — has transformed the once-mundane coffee category. “It is a great example of how retailers can leverage one brand to change the way shoppers approach an entire category,” Lampertius added.

Retailers also create excitement by introducing exclusive new products like Hello Bello, a plant-based premium diaper brand available only at Walmart. Stores also feature popular DTC brands like quip dental products and Winky Lux cosmetics. “People are taking their photos next to Winky Lux displays and posting them on social media,” Cloutier said. “It is one more way to surprise and delight customers in-store.”

Partnerships between retailers and individual manufacturers can dramatically improve the shopping experience. Target used this strategy to reinvent its beauty department, fostering ease of shopping and motivating new product discovery. Meijer did the same for its baby department, Lampertius said. Retailers can achieve similar results by partnering with other retailers. The Kroger/Walgreens collaboration, now three years running, has brought many of Kroger’s owned grocery brands into Walgreens stores and helped advance Walgreens’ goal of becoming a food destination, Lampertius said. Other successful partnerships include Walmart/Gap and Target/Levi’s, he noted.

Physical and digital tools are best utilized when blended together to improve the in-store shopping experience, Cloutier said. For example, iRobot’s Roomba self-emptying vacuum experienced double-digit sales increases due to the augmented reality demonstration that allowed in-store shoppers to see how the product worked in real time. Retailer apps can also enhance the brick-and-mortar experience with functionalities like item finder, store maps, price checkers and mobile payment. “Walmart’s store design built to work seamlessly with their app is where shopping is going,” Cloutier said.

Self-checkout is an often-cited pain point for shoppers, according to many research studies. While mobile payment is often touted as a solution, Cloutier noted that only 25% of today’s consumers use smartphones for payment. Working with ChaseDesign, American Express introduced a “just walk out” store, which runs on a credit card scanning system, at Barclays Center and various pop-up locations (including one at the U.S. Open). Attendees could scan their credit card through a turnstile, pick up what they want and leave. The concept (which is similar to Amazon Go, but with no phone or app required) represents a new avenue of growth and innovation for mass retailers, Cloutier noted.

“Fan satisfaction was up dramatically and they spent more while they’re there,” he said. “It’s been a phenomenally successful experience.”

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Why Every Brand Should Be DTC Curious

“DTC is more than a sales channel – it’s a connection channel that enables brands to have more meaningful relationships with their customers,” said Jane Butler, Google managing director of pureplay retail and DTC, during her session on Nov. 3.

Butler teamed up with Ali Nehme, global chief commerce officer at Publicis Groupe, to make the case for DTC at a time of growing concern over protecting consumer data privacy. Given the deprecation of third-party cookies and new privacy regulations that may further limit third-party data collection, they argued it is critical for brands to have a viable first-party data collection strategy afforded by DTC. “First-party data will help with the privacy landscape, but more than that, it is the future of modern marketing,” Butler said.

There are some common themes in what consumers look for in any DTC brand — one being an emphasis on the company’s values, Butler explained. “50% of consumers shop for brands that stand for something or have an interesting backstory — whether it’s using recycled products or being ‘made in America’ or being associated with a cause,” she said. “We often see founders of these businesses very personally involved in the storytelling and making that connection. It provides a validation that the brand understands who the customer is and aspires to be.”

For example, Bombas was created when its founders (Randy Goldberg and David Heath) learned that socks were the most sought-after item in homeless shelters. The company now makes an equal donation to shelters with every purchase of a Bombas item, which also includes underwear and T-shirts. “Their message of trying to help solve the problem of homelessness is very clear,” said Butler, whose ad testing work with the company revealed that ads emphasizing the giving component of the purchase outperformed all other Bombas creative.

Traditional brands have paid close attention to these DTC success stories and are increasingly diving into the realm, said Nehme. He highlighted three major drivers of the trend:

• Data and insights: DTC generates privacy-safe, reliable data
that can be leveraged to personalize messaging and engagement, as well as produce deeper customer insights. “Our research shows that the ROI on such a tactic or strategy is 0.8x, which means that every dollar spent gets you 8 dollars back,” Nehme said.

• Experimentation: “You’re not going to be the best DTC brand from day one,” Nehme said. “Being able to conduct test-and-learn experiments, cut the risk for product development and go to the consumer faster is very important.”

• Brand affinity: DTC has a proven halo effect on other channels. “Once you stand up your DTC program, you will very likely see the ROI across other brands,” Nehme noted.

Butler expanded on these drivers with tips on best practices in DTC, starting with the need for a full-funnel approach. “You want to make sure the brand is engaged and easily discoverable across all channels, including social media and all of your owned and operated sites,” she said. Having sufficient automation technology in place is also critical to be able to leverage first-party data effectively online. “You’ve got to be able to make that automation flywheel spin to adapt to the ebbs and flows in consumer demand and changes in consumer behavior, as we learned over and over during the pandemic,” Butler added.

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David Allison

Activating Shoppers: Behavioral Science

When asked to sum up his approach to behavioral science-based marketing, Valuegraphics Founder David Allison loves to tell the story of “Three Friends in an Alley.” It goes something like this: After a long night of drinking, three friends are walking home together and suddenly face a decision of whether to head down a dark alley or take another path. According to Allison, only one piece of information — primary values — is needed to predict what each individual would do next. The friend who values safety over everything else wants the group to avoid the alley at all costs. The friend who values adventure suggests going down the alley. And so on.

The moral of the story is that purchasing decisions are often made at an emotional level based on instinctive human traits, or values, and not simply according to rational theories of marketing built on demographics and shopper insights. For this reason, marketers must understand the underlying psychological principles of behavioral science in order to predict consumer behavior with more accuracy, Allison said during the opening keynote session on Nov. 2.

To be clear, Allison is not advocating that companies dispense with traditional marketing techniques. On the contrary, he puts “valuegraphics” (his proprietary methodology for leveraging the principles of behavioral science) at the base of a three-legged audience insight stool that also includes demographics and psychographics. “You need all three legs in order to understand your target audience and motivate them to do what you want them to do,” Allison said.

The valuegraphics model borrows ideas from The Human Genome project, which found that 56 components or values were important enough to dictate all human behaviors and emotions. Allison develops customer profiles and marketing strategies based on this concept for organizations ranging from The United Nations (humanitarian causes) to Lululemon (loyalty programs) to PayPal (B2B merchant engagement).

Allison offered a deep dive on how to implement behavioral insights in a recent Valuegraphics report called “The Food Shopper Study.” Comparing the most important values for online food shoppers versus in-store shoppers, the study found distinct differences in the factors that determine purchase behavior among the two broad groups. For example, whereas online shoppers are motivated by financial security more than anything else, that same value drops to the bottom of the list for in-store shoppers. “If you want to talk to one group versus the other, you have to realize that very different values are driving their decisions,” Allison explained.

Let’s say a retailer or manufacturer wants to build a platinum loyalty program around three specific values that are known to be important to online shoppers: personal responsibility, wealth and social standing.

Those insights could inform the development of loyalty features such as a matching dollar program that allowed the shopper to determine where to donate the money, which would tap into personal responsibility, or a membership program with an annual dividends check to trigger values around wealth.

“The point is not necessarily that these are exactly the right ideas, but they do show how you can use values to make decisions,” Allison said. “Now you know what these shoppers care about, and not just demographic descriptions of who they might be.”

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Influencer Marketing and Social Shopping

One byproduct of changing shopping behaviors during the COVID-19 pandemic has been the acceleration of social commerce. The number of U.S. social commerce buyers grew by 25.2% to 80.1 million in 2020 and will grow another 12.9% to 90.4 million in 2021, according to Statista. U.S. retail social commerce sales will rise by 34.8% to $36.09 billion this year, representing 4.3% of all retail e-commerce sales. Apparel remains the largest category for social commerce, but consumer electronics, cosmetics, home decor and consumer goods are also key players.

Brands can capitalize on these trends by applying best practices in influencer marketing to their social commerce strategies, said Alessandro Bogliari, co-founder and CEO of The Influencer Marketing Factory, during his Nov. 3 session.

Social commerce refers to the process of selling products directly on social media. The entire shopping experience — from browsing and product research to checkout — happens within the social media platform. This distinguishes social commerce from e-commerce, which is buying and selling goods via a website or dedicated app. With social commerce, brands can interact more with customers and set personalized discounts. The algorithm itself showcases products and brands that the customer is more likely to purchase.

There are some rules of thumb that apply to all brands in social commerce, Bogliari said. For example, it is critical to partner with influencers who can share product knowledge authentically and direct shoppers to additional sources of information outside the social media platform. As one respondent in a recent Influencer Marketing Factory survey noted, “Even if we, Gen Z, know how to buy directly in-app without leaving a certain social media, I feel that the majority of the time we prefer to save a specific item seen on a social media post and visit the brand website to gather more information, such as brand values, customers’ reviews, and also we want to use desktop browser extensions like Honey to find potential discounts.”

Bogliari advises marketers to keep apprised of updates to social media apps and features of major social commerce platforms, which include the following developments:

• Instagram: Customers can “Add to cart” or “View on Website” products of brands they follow or they find in the Shop section. Shoppable story stickers are also an option.

• TikTok: Partnered with Shopify to enable in-app purchases and revealed that it will introduce shoppable live streams and affiliate links for influencers.

• Pinterest: With Buyable Pins (only available in the U.S.) customers can easily buy products directly from the app with the “Buy It” button.

• Facebook Shop: Sellers can create their online store (like on Instagram) and customers can buy directly on the app with the buy button or ask questions via Whatsapp, Messenger and Instagram. The Live feature to sell products will be available soon.

Every social media platform should be approached in a unique way. “You need a different message and different tone of voice for each platform,” Bogliari said.

No matter where the content is distributed, Bogliari says that brands should always avoid an overt sales pitch. “If you want to play smart on social media, you want to be sure you are telling a story about the product or service,” he said. “Embed the product in some content that is informative or entertainment — and, in most cases, keep it short.”

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