Retail habits set to change

26 November 2010

NEW YORK: Retailers need to adopt a nuanced response as the popularity of social media, mobile commerce and location-based services impacts on purchase habits, the Boston Consulting Group has argued.

"Many retailers are unsure how much to invest in these channels and the effect they will have on their marketing, pricing, loyalty programs, and customer relationships," the company said in a study.

"Yet no one doubts that they will play critical roles in the future of retailing."

A survey of 53 major firms found 95% planned to boost their expenditure on measured internet platforms like paid search in the next three years, followed by social media on 94% and mobile on 85%.

Direct marketing registered 51%, beating PR's 42%, cable network TV's 34%, sponsorship's 30%, promotions' 27%, magazines' 25%, outdoor's 17%, radio's 13% and newspapers' 4%.

Brands are finding business opportunities via social media platforms such as Twitter, including gaining consumer insights and stimulating word of mouth.

But unflattering remarks can quickly spread across social media, and are almost impossible to control.

Despite this, BCG suggested "even mixed reviews are better than no reviews", particularly as properties like Facebook now "rival traditional media for audience reach."

For example, approximately 70% of Facebook's 500m users are drawn from America, with Starbucks boasting 17m followers and allowing people to monitor their accounts and buy gifts.

Qzone, owned by Chinese organisation QQ, attracts 458m active members, alongside upto 6.2m using its gaming hub at any one time.

YouTube also receives over 2bn views a day, offering enormous potential for ads, product demonstrations and installation instructions.

Turning to mobile, BCG referenced Germany when discussing the impact of smartphones, where penetration is set to hit 67% in 2013, with a further 21% owning 3G devices.

Currently, this medium generally delivers less than 2% of sales but yields around 4% of online traffic, with Google using GPS and zip codes to help users find nearby stores.

Sears has trialled a system enabling consumers to scan barcodes and read reviews, while price comparison services such as RedLaser have greatly empowered shoppers.

Elsewhere, Amazon Remembers lets customers take photos of products or price tags in bricks-and-mortar outlets to discover how much it charges for the same goods.

German giant Metro also has a mobile app containing shopping lists, detailed information and the ability to pay via wireless transmission.

Ikea's augmented reality iPhone application means buyers can see what products will look like in their home or office through taking a picture and "virtually" positioning the item concerned.

In Japan, NTT DoCoMo employed location-based technology to send time-limited coupons to passersby near Gap's stores.

Foursquare has partnered with Pizza Hut in the US, rewarding the "mayor" of each restaurant - the person visiting most often - with a free portion of breadsticks.

According to BCG, new tools allow manufacturers to sell directly to consumers, so retailers must build their brands, ensure offline best practice is replicated digitally and not be afraid to experiment.

Nordstrom, the department store chain, recently integrated its online and offline inventory and relaunched its website with consumer forums, communities and user-generated content.

Today, the firm's multichannel clientele spend four times more than their single-channel counterparts, while e-commerce sales rose 26% in the opening nine months of this year, when physical purchases were up 8.9%.

Data sourced from Boston Consulting Group; additional content by Warc staff