Customers Are Shifting Their Behavior

Ok, here's the table from 2018:

And here's the table from 2014:

Now we have a handful of comparisons ... comparisons that tell us what is happening. What is happening, of course, is that customers are shifting their behavior.

Look down the Retail Channel column. These customers purchased in-store the year prior. What do you observe when comparing data four years apart?

• The customer is 4.5 points less likely to buy in-store again.
• The customer is 4.0 points less likely to buy via desktop e-commerce again.
• The customer is 14.6 points more likely to buy via mobile commerce again.

You notice that the retail in-store customer changed his/her behavior. Repurchase rates decreased, and if the customer repurchased, the customer moved orders out of stores and out of traditional desktop e-commerce ... moving the orders into mobile commerce.

Across the board, customers are less likely to buy in-stores, regardless of the channel. So there is a change in behavior ... but the change is dramatic among mobile buyers. As customers increasingly shift to mobile, their likelihood of buying in stores drops significantly ... much faster than if the customer was a prior store buyer or an e-commerce / desktop buyer.

Also notice that the corporate rebuy rate dropped ... this company is less competitive today than four years ago. It's less competitive, and if the trends continue it means that customers are leaving the retail experience.

More on the two tables tomorrow.

What Is Happening Between E-Commerce And Retail?

I wrote about the Migration Probability Table back in 2006. It was a big part of the Multichannel Forensics book that I wrote in 2007.

And it's becoming important in 2018.

Look down the Retail Channel column. Of all customers who purchased in-store in 2017, 58.8% purchased again (corporately) in 2018. 43.6% bought from Retail, 14.8% bought from Desktop E-Commerce, and 12.9% purchased from Mobile Commerce (tablets, phones).

Then I create an index ... I divide the individual channel rebuy rate by the annual rebuy rate. Take the 43.6% retail channel rebuy rate into retail and divide it by the overall annual rebuy rate of 58.8% and you get 74.1%. It means that if a customer repurchases, the customer has a 74.1% chance of repurchasing into retail.

The table has meaning, of course, but it has more meaning if you compare the table across multiple years.

So tomorrow we'll compare the 2018 table (above) to the same table in 2014. And then we'll see what is happening between e-commerce and retail. 

The Interplay Between Retail And E-Commerce

Back in the stone ages at Eddie Bauer (1997), we'd measure how e-commerce customers behaved. When a customer purchased via e-commerce, the next purchase was most likely going to be via catalog marketing, with a retail store purchase much less likely and the e-commerce purchase the least likely to happen. In other words, the e-commerce channel was a "support" channel. It wasn't where the customer wanted to purchase.

The relationship wasn't much different when I worked at Nordstrom, circa 2005. We'd acquire a customer online, and the online customer had a 70%+ chance of placing the next order in a store. We knew we could spend a lot of money on paid search because the online channel was a "support" channel, one that would fuel retail growth.

When I started my consulting work in 2007, the relationship between e-commerce and catalogs had changed ... rather dramatically. E-commerce used to "support" catalogs ... but by 2007 catalogs were supporting e-commerce. The "next" purchase, regardless whether prior purchases came from print or e-commerce was most likely to happen via e-commerce.

A transition happens between channels. It's a transition from old to new. Catalogs used to be a major channel, and e-commerce used to be a support channel. From 2001 - 2006, the relationship flipped. Catalogs became a support channel and e-commerce became a major channel, when you actually measured the dynamic between the channels at a customer level. The period where the channels change roles is "confusing" ... for it seems like the customer is "doing everything" and therefore everything is important. You are led down the wrong path ... at the very time you should be focusing heavily on the emerging channel you instead embrace all channels and you work hard to integrate everything. Integration hurts your ability to capitalize on the emerging channel, while protecting the channel that is moving into a support role. Today we can see the impact of integration ... catalogers who treat marketing like it is 1993, and consequently earn customers who were 40 years old in 1993.

Back to retail and e-commerce.

In 2005 e-commerce was a support channel to retail.

In 2011, the relationship began to change. I would measure retail / e-commerce interactions, and I'd observe a new dynamic. Retail customers became increasingly likely to buy online and became less likely to re-order via stores. And e-commerce customers became increasingly likely to buy online and became less likely to re-order via stores. Our industry read this dynamic incorrectly - viewing this as a good thing. The phrase "omnichannel" dominated thought leadership pieces, pieces that encouraged marketers to integrate "everything". The added complexity helped nobody, and then thought leaders told everybody to create a seamless customer experience (using data of course). Complexity * Complexity = A Lot of Complexity!!

We should have learned from what happened between the interplay between catalogs and e-commerce, and we should have applied those learnings to retail. When the support channel becomes the primary channel, the world changes.

It's 2018 now, and Complexity * Complexity didn't work. Folks call it the "Retail Apocalypse". That's not accurate, of course. It's simply a failure to realize that e-commerce (some would call this "digital") was (is) becoming an equal to physical retail. It's nowhere close to being an equal yet, but if current analytics tell us anything they tell us that we're trending in that direction.

If e-commerce is slowly becoming an "equal" to physical retail, then the way you manage marketing in the offline/physical world changes. You might use your retail presence to find new customers, and then move those customers into your online/digital environment. This is where innovation happens, and it is where a re-definition of retail happens.

Always remember to get out in front of shifts between channels. You don't work to integrate the channels (that adds complexity) ... you work to find new ways to leverage what used to be the primary channel to help support the emerging channel.

Ashley Home Stores

There they are, delivering a couch or whatever. And as long as they have to deliver something, they may as well get some free advertising out of it, right?

So what is your version of the Ashley Home Store delivery truck? What do you have in your bag of tricks that acts as free marketing?

Goat Yoga

Yup - click here.

Read the thing from top-to-bottom. Lots of hustle, trial, and error. But in particular, lots of hustle.

This is different than what a generation of digital expertise teaches us. We're taught to push buttons ... spend money on Google/Facebook, partner or not with Amazon.

Consider what your version of Goat Yoga is. That becomes your awareness program. Your awareness program boosts all of the money you spend on Google/Facebook.

By Item Year Of Introduction

You recall our segments from earlier this week.

In this analysis, we look at the years when items were introduced, and then segment those items by our four classifications.

In particular, I care about the items that fall into the "Newer Customers / Modern Channels" category. These items are the future of any business. I don't see huge swings in this table.

But I do see one challenge.

Overall, look at the distribution of items sold that skew to "Modern Channels".

• Old items (2013 - and before) ... 62% skew to modern channels.
• Items From 2014 ... 74% skew to modern channels.
• Items From 2015 ... 71% skew to modern channels.
• Items From 2016 ... 69% skew to modern channels.
• Items From 2017 ... 62% skew to modern channels.

This company is increasingly offering items that skew toward old channels and away from modern channels.

In other words, this company is electing to embrace old-school channels, aligning them with the most recent assortment of merchandise.

This can work in the short-term.

This is hard to pull off in the long-term.

MCI (Modern Channel Index) by Category

In a recent project I selected the top 500 selling items in the past year, and then classified the items into one of four segments.

1. Newer Customers / Old Channels.
2. Older Customers / Old Channels.
3. Newer Customers / Modern Channels.
4. Older Customers / Modern Channels.

Which segment represents the future of your business?

• Newer Customers / Modern Channels.

Which segment represents the history of your business?

• Older Customers / Old Channels.

I analyzed the top 500 items, splitting them out by merchandising category. Here's what I learned:

Widgets:

1. Newer Customers / Old Channels = 4 items.
2. Older Customers / Old Channels = 37 items.
3. Newer Customers / Modern Channels = 6 items.
4. Older Customers / Modern Channels = 8 items.

Pibits:

1. Newer Customers / Old Channels = 8 items.
2. Older Customers / Old Channels = 7 items.
3. Newer Customers / Modern Channels = 26 items.
4. Older Customers / Modern Channels = 5 items.

Widgets represent where the brand "was".

Pibits represent what the brand "will be".

Think about your marketing strategy for "Widgets".

Think about your marketing strategy for "Pibits".

When I talk about low-cost / no-cost customer acquisition strategies, I'm talking about leveraging Pibits in your digital channels and I'm talking about using Widgets in old-school programs to drive revenue among your long-term loyal customer base.

This isn't difficult stuff.

But it is readily actionable, isn't it?

What would stop you from doing this?