Retail: Retail's Final Frontier?

This is the second of a three-part series examining the current and future state of brick-and-mortar retail and how it’s being integrated into other forms of retail. Part 1 ran in our June issue.

The Internet provides marketers with the ability and responsibility to know their customers in much greater depth than does the retail model. The Web model also enables marketers to exploit that knowledge far more effectively.

As we mentioned in Part 1 of this series about the fixed asset distribution models of retail stores, they’re just plain “dumb.” They treat all comers like new customers with whom they have no prior history. And that’s a wasted opportunity.

The Internet can be exceedingly “smart,” however, because it allows merchants to speak directly with consumers in a language they understand, about those things most important to them, at a time they’re most interested in hearing about them.

The Internet represents a real marriage between data segmentation, as developed in the traditional offline marketing world, and the cost-effective ability to conduct one-to-one communications, as developed in the digital world.

Many retailers grew up in an environment of detachment from the ultimate consumer due to long supply chains and intermediate distribution points (retail stores, grocery stores, car dealerships and so forth). The idea of “getting to know” customers often has been more theoretical than practical.

Merchants certainly believe it’s a good idea to know who’s buying their merchandise. But beyond conducting basic consumer research, which amalgamates consumer data at the cost of actionable specificity, retailers are a) culturally ill-equipped to really know their customers in great depth; and b) don’t have the expertise, resources or tools to transact with customers on a real-time basis.

Tools Cheap, Easy to Get
The good news is that Internet tools are readily available to enhance retailers’ ability to make real connections with their customers. They’re quick, surprisingly inexpensive, easy to implement and deliver deep customer insight in real time.

One such tool relies simply on the premise that consumers actually have a vested interest in your online prowess. They want you to be more effective in marketing to them. Therefore, if you ask them in a systematic, unobtrusive way to help you understand why they do what they do on the Internet, what they like and don’t like, what they want and don’t want, they will tell you.

Few retailers have actually traveled very far down this road of attitudinal tracking and modeling, however, relying instead on basic behavioral data. But those who have are reaping the rewards. FreshDirect, an online grocer, became more intimate with customers online, adding real value to the marketing equation. With the aid of innovative online research and analytic tools, FreshDirect samples customers visiting the site and obtains real-time feedback on every aspect of their Web experiences, including:

• perceptions of the site;
• how it’s working for them;
• what’s standing in the way of additional purchases; and
• how the site experience stacks up against the competition.

One actionable insight from this research and analysis: Customers were inconsistent in what they ordered. FreshDirect now recognizes and acknowledges return customers, reviews their transaction histories and recommends on the checkout page additional items they’ve ordered frequently in the past, but not on their current order.

In the first few months of operation, this service has achieved 17 percent usage among customers and a 10 percent increase in the incremental value of an average order.

And this is just the beginning. As FreshDirect captures and understands additional customer knowledge, it anticipates further insights that’ll improve the customer experience and, not so incidentally, help allay growing consumer fear and anxiety that are such deterrents
to spending.

Longing for Mr. Green Jeans
The result is a real-time, regenerative cycle of customer assessment, leading to concept and product improvement, and, ultimately, greater customer feedback.

After all, just below the much publicized (hyped?) consumer concerns over privacy is the very real, inherent yearning for that old Mr. Green Jeans merchant figure — shopkeepers who recognize customers when they walk into the store, know what they want, what they like and what will make their day. They have a history with customers, and they remember it.

Real-Time Access

If there’s one thing that dramatically sets Web merchants apart from traditional retailers, it’s real-time access to all the information they’ve accumulated about each and every customer that can be used every time that customer re-enters “the shop.” That’s what translates into the ability of customers to save time, money and hassle — to ensure they don’t make buying mistakes — by subtly, but dynamically, presenting items you know they want and need when they want and need them.

There’s no more powerful means to establish trusting and profitable relationships with customers. In fact, seasoned online customers not only expect it, but demand it.

In the third and final installment of this series, we’ll go back to the future — sort of. We’ll explore the concept of turning retail stores into showrooms by maximizing centralized online inventory management and limiting SKU countsin stores.

Rick Braddock is chairman/CEO of online grocer FreshDirect (rbraddock@midoceanpartners.com). Donn Rappaport is founder and chairman of data marketing services provider ALC, and CEO of Zumbox, a paperless postal system (donn.rappaport@alc.com).