BearLionHarmony

By the time you finish reading this there will be another meaningful change in the traditional roles of brand and retailer, and it will be brought about by mobile. Read fast.

Human behavior patterns – particularly those around consumer behavior – are being dramatically changed by mobile technologies. This is not a revelation: e-commerce is about 20 years young, and meaningful mobility is coming up on its first decade. There are all kinds of existing processes that enable folks to buy whatever they want online, and people now simply depend on their phones to do it.

What is new, however, is the blending of interests between the brand and the retailer. This fresh collaborative spirit is the result of the competition between the retailer and the brand for attention– if not primacy – in the user’s increasingly noisy life.

Mobile technologies create cacophony by bringing anything and everything to the user’s hand immediately. These technologies are what enable consumer promiscuity by allowing anyone with a smartphone and a data plan to surf freely to get what she wants when she wants it. Thus, what used to be a multistep path to purchase is today contained on a single smartphone screen: Detailed product description, images and videos, other consumer reviews and input can all be had within inches of a “Buy Now” button that allows the consumer to either have it delivered, or tells her which physical store closest or most convenient to her has it in stock.

The key question becomes: Is that screen the user is perusing before she makes her purchase from the retailer or the brand? The answer: It doesn’t matter.

Going Unsteady – The new brand / retailer partnership
Brands and the retailers today share the same goal: Get her what she wants when she wants it. As a result, those who make products are happy to cross into the swim lanes of those who sell products – and vice versa – in order to ensure that her location and acquisition needs are satisfied.

Since consumers increasingly don’t differentiate between the brand and the retailer, brands and retailers can be released from trying to remain fully discrete from each other. To compete successfully in this age of mobile-driven commerce, new types of partnerships between retailers and brands should be forged.

The result of brands and retailers finding new ways to work together should be to create a richer, more rewarding mobile commerce experience for consumers. Continuing to jealously guard their respective “turf” will result in the zero-sum game of consumer abandonment.

A recent whitepaper entitled, “The Brains Behind Omnichannel Retailing” by the folks at FitForCommerce, describes a part of the premise very nicely:

Because omnichannel consumers do not distinguish between retail channels, but instead view the retail brand in its entirety, they expect to find consistent product selection, pricing, promotions and payment methods, and they expect the ability to switch between channels at any time in the shopping process [to be] hassle‐free.

Compelling and accurate, but it is only part of the story. The fact that consumers use mobile technologies to blur the lines between “browsing” and “buying” elevates the concept of “digital shelf” from being defined as third-party sellers to being the processing of data to create the display of purchasing options on the consumer’s screen.

More than the “switch between channels,” consumers today dart between purchasing options as convenience and/or benefit leads them.

Mobile technologies also render the notion of “channel conflict” nearly obsolete, since consumers use mobile to freely traverse channels anytime they choose. Because consumers are able to shop where and when they choose, brands must establish meaningful, direct contact with consumers. For their parts retailers are stepping out to enhance their relevance to consumers by developing exceptional loyalty schemes and – in high-profile cases – developing their own products beyond just private label to compete with the brands’, albeit sometimes with mixed results.

Table Stakes
The time-honored engagement model between a brand and retailer involved both a buyer (brand) and a distribution center (retailer), with plenty of behind-the-scenes handshakes in between. It was an orderly system. As time passed and success for both sides grew, the business model evolved around the shared goals of volume and regularity. The brand’s marketing and sales teams are judged on their ability to meet forecast, and that that forecast is always growing at the very least in-line with the consumer price index.

Today’s commercial model must keep up with the consumer without the traditional “padding” of the middleman that exists in the standard distribution model. The undisputed winner is any manufacturer that can handle the financial and operational impact of managing “eaches,” to say nothing of UPS, FedEx, USPS and other carriers. Managing the distribution of single products in a box – as opposed to cases and pallets of products – is becoming the new normal, and profitability needs to be managed in new and exciting ways.

Moreover, the immediacy and convenience of mobile commerce blurs the roles of the traditional retail sales players: manufacturer, distributor, retailer. Because everything is an equal number of clicks away, search prominence has become vital, good reviews and ratings are critical, and being in-stock is nothing more than table stakes.

Which leaves us with merchandising. Formerly the USP of the retailer, merchandising in the mobile commerce age is about data management that is fine-tuned by consumer profiling – CRM – to create not just an optimized store shelf, but the optimum store shelf for me.

Because the consumer is an equal number of clicks between a great retailer and a bad one, she needs not tolerate a poor shopping experience to find a preferred brand. The consumer simply goes to the next relevant item on the search return to complete the sale. Similarly, a retailer that makes their online shopping experience that much better will have a very real chance at compelling the consumer to break behavior and switch brands. Amazon’s failure in diapers was not a failure with getting people to switch: a sufficient enough number of consumers did switch and disliked the product. The marketer got an A; the product team got the F. Amazon will try again. Consumers will welcome them back, because Amazon has a well-oiled (if not visually elegant) online shopping experience.

It’s The Consumer, Stupid!
In mobile commerce, merchandising is no longer an art form. Online merchandising is a science that is driven by data and the technologies needed to deliver a seamless experience. Neither the brand nor the retailer alone owns online merchandising, they share the attributes that create success. So they must work together to make the consumer happy.

And many are.

An increasing number of retailers are redefining the traditional roles of brand and retailer by opening up their data through APIs. These retailers are allowing qualified partners to leverage the customer intelligence from that data to create exceptional online shopping experienced. Retailers making this move include Walgreen’s, CVS, Best Buy, Lowe’s and more. Here is a quick chart showing who’s a player – and who isn’t – as of this writing in early 2015:

chart

Source: Online search among major big box retailers; January 2015

This is not a one-sided deal: For a retailer to participate with a brand/manufacturer – and vice versa – there must be an exchange of currency. That currency is data. Both sides have developed consumer data that have standalone value. But when intelligently combined the whole can be much greater than the sum of the parts.

Some retailers are starting to get into the API game, while others are thinking about it, and still more haven’t even started. The higher profile players are focused on a few areas: consumers who have a need for repeat visits; demystifying the layouts of the stores with maps; alerts for when services are available. These pioneers are only scratching the surface of the iceberg: consumer engagement with a retailer is deep, while engagement with a brand is rich. Taken together there is a strong opportunity for not only consumer loyalty but for behavior adjustment through direct interaction.

Brand/manufacturers aren’t necessarily any savvier when it comes to leveraging their own data to be shared with retailers. Many CPGs continue to maintain strong capabilities in such classics as circulars and other direct/shopper marketing methods, where the model is finely tuned even though the ROI is relatively small.

What this means is customer data that is jealously guarded by the retailer and by the brand needs to be shared to create the very best environment for the consumer. It is true that, embedded in this data, trade secrets exist that can be leveraged by one party or the other to extract more favorable contract terms. But mobile technologies all but eliminate the differences between brand and retailer for the consumer. Freely available pricing data and user reviews make it easier than ever for consumers to break retail and brand habits. With consumer loyalty as the stakes, the retailer and the brand should be ready to cooperate like never before to keep the consumer happy and engaged.

Buy Any Means Necessary
The retailer may feel that it doesn’t really need the manufacturer, and the manufacturer might think that it doesn’t really need the retailer. The truth is they need each other more than ever to create the right environment to win the consumer’s attention and loyalty. That environment is in the eCommerce space, optimized for anywhere/anytime access, built for convenience, embracing the new rules of retail: immediacy, clarity, convenience.

What challenges the time-honored arrangement between the brand and the retailer is that the consumer doesn’t have time for the distribution or merchandising parts of the equation. She wants the manufacturer’s product, and she wants to pay the lowest price for it in whatever way benefits her most. That last part probably means she wants to work through her preferred retailer where she has affinity points or other perks built up.

All of this is actually a massive opportunity for the brand and the retailer to work together to reinforce the consumer’s engrained loyalty – to the brand and the retailer.

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SOURCES & USES

Searches that resulted in offline sales:
Source: comScore, Neustar Localeze, 15 Miles – http://searchengineland.com/study-78-percent-local-mobile-searches-result-offline-purchases-188660

Keep It Usable blog
http://www.keepitusable.com/blog/?p=493

Marketingland
http://marketingland.com/study-frequent-smartphone-shoppers-buy-more-than-others-42874