The reasons retailers struggle to attract digitally-savvy consumers are…
Markdowns, returns and out-of-stock merchandise make it difficult for North America retailers to lure new digital consumers.
This was according to “Retail Index: 2018 Analysis & Holiday Outlook,” a study from DynamicAction. The study, which tracked online purchases of general merchandise, home goods and apparel (excluding Amazon and grocery transactions), revealed that new customer orders are down 5% year-to-date compared to 2017. First- and second-time buyers are down 8% compared to 2017, and there has been no weekly increase year-over-year in new customer orders since April.
Retailers are relying on marketing in hopes of attracting new shoppers, but these costs are on the rise. There was an average 5% increase in marketing spend this year, investments that soared 60% just during the summer months (June-September). Similarly, orders that used a promotion are up 2% for 2018 so far, compared to 1% for all of 2017. However, margin impact due to promotions is also on the rise, up 3% year-to-date.
North American retailers have also held more inventory this year, with extra inventory increasing 21% between this year and 2017. A surplus of merchandise is also causing more markdowns. In fact, orders placed using a markdown are up 5% for 2018 compared to last year. The margin impact of these markdowns is up 27% year-to-date — and 18% in August alone.
Customers are eager to get their hands on this discounted merchandise, but they aren’t keeping everything they buy. Free shipping is up 13% year-over-year so far in 2018, but so are returns. In fact, the value of returns has jumped 36% so far this year.
In addition, there is a downward trend in the availability of products that customers are seeking online in North America. For example, there has already been a 3% drop in online product availability when a shopper was ready to make a purchase. Merchandise was out-of-stock 13% more frequently in the month of August, alone, according to the study.
“Pulling inventory levels into alignment ahead of the holidays will be paramount to driving profitability through the lens of ‘views availability,’ or ensuring specific products customers are seeking do not fall into fragmented or out-of-stock levels prior to the holiday season,” the study revealed.
CSA Exclusive: Technology drives customer engagement across Ahold Delhaize USA
Supermarket giant Ahold Delhaize wants to get closer to its customers in North America, an endeavor that is being lead by the company’s retail business services division.
The Netherlands-based company created Ahold Delhaize USA in January, 2017, a move that brings Ahold Delhaize’s seven U.S. companies under one operating arm. The merger includes Stop & Shop, Food Lion, Giant, Hannaford, Giant/Martin’s and Peapod, as well as Retail Business Services (RBS). This U.S.-based shared services company, which is comprised of associates in various support groups within the organization, provides cost-effective, best-in-class support services that enable these retail brands to accelerate their individual and local strategies.
“Being able to capture the best that each group had to offer was one of the pieces of the merger that excited many of us,” said Dan Harriman, director of pricing and promotion services at Ahold Delhaize USA’s retail business services.
“Our six local retail brands are focusing on delivering to their customers, while the seventh unit, RBS, focuses on improving technology solutions and best practices around business processes,” Harriman explained. “We are also continually evaluating which areas will best enable our brands to effectively deliver pricing elements to our customers, while managing their business needs.”
Harriman discussed with Chain Store Age how technology solutions such as price forecasting tools, analytics and machine learning are helping Ahold Delhaize USA to better serve customers and even localize the shopping experience.
How does technology play a role in customer service and the overall in-store experience?
A core piece of the Ahold Delhaize USA restructure was to focus on the local brands, and how they could better engage the customer. It is a bit cliché to talk about leveraging technology for personalization, but that is truly the next step in this goal.
We need to move away from talking to groups [of customers] and to empowering our local brands to have a dialog with each person who shops in our stores. Our marketing departments and the newly formed Peapod Digital Labs will empower the brands to have those conversations. While I don’t know everything they are working on, these departments were formed with the goal of driving digital and e-commerce innovation, technology and experiences to meet the changing needs of customers of its local brands, regardless of when, where and how consumers choose to shop.
How does technology play a role in the company’s pricing strategy?
From a pricing perspective, technology needs to be transparent. My team’s goal is to allow the brands to think more about their message and who they are talking to, and less about the details of executing an ad, and how it to make it work. If we can make execution simple and more efficient, our merchants can focus on what is most important: serving the customer.
We currently use the Base Price Optimization and Markdown Optimization modules from Revionics. Base Price elevated our analyst from being a “logic engine” to being a true analyst, or as we say, “a trusted advisor to our merchants.” The technology’s abilities to influence decisions by offering reliable forecasts on scenarios that can be quickly turned around can help shape strategy and execution.
The systemic processing of competitive and cost data adds efficiency and consistency to strategies, and creates more predictable margin results. The markdown tool works efficiently because our merchants and pricers no longer have to focus on each item that leaves our assortment. A brand sets an overall strategy, and while markdown executes in a way that reduces margin spend and reclaim, the pricer and merchant get to focus on elements that can add more value.
What is Ahold Delhaize’s approach to artificial intelligence (AI)?
AI and machine learning has been making an impact for some time, and are always growing. In the pricing area, it is helping our team members make better decisions. By taking in data to create better models, we can better understand how customers will react; create scenarios and options for our merchants, and create dialog with other partners to understand the end results of decision we make.
My team and I look at a need and work on a solution. Sometimes AI is a benefit and sometimes it is not — it all depends on the requirements and nature of the project. In the next year, we hope to address a variety of projects, and I would say that about half would benefit from a solution that incorporates some type of AI or machine learning.
What is your take on fully automated stores when it comes to the future of food retailing?
Visiting the Amazon Go store in Chicago left me with several operational questions, including how to have a conversation or engage with the customer. In a traditional store, you will almost always have an opportunity for a team member to interact with the customer and be your brand ambassador. Online, your tools can collect data and make suggestions, present information, and otherwise interact. In an automated store however, you don’t have that opportunity in real-time so the question is how do you engage them in a meaningful way?
Walmart expands interactive content strategy in a big way
Walmart just made a new move in its war with Amazon — but this time, the battle is moving beyond retailing.
Walmart announced on Thursday that it entered into a strategic entertainment joint venture with Eko, a developer of interactive video technology. Through the project, called W*E Interactive Ventures, the two companies plan to develop original, interactive content that will enable Walmart to connect with customers in new ways, with the goal of driving deeper and more frequent engagement.
The content could include a range of offerings, from cooking shows to interactive toy catalogs. It will also allow viewers to participate in and shape stories as they are unfold. The result will be an experience unique to each participant, which will create more engaged and emotionally-connected audiences, according to Walmart.
The partnership also expands Walmart’s entertainment ecosystem. The retailer already has a strong physical and digital video presence, through stores, websites, video-on-demand service Vudu and the recently launched eBook platform, Walmart eBooks, with Rakuten Kobo.
The deal also positions Walmart to compete with the likes of on-demand video subscriptions, including Netflix and Amazon’s Prime video service.
Walmart’s relationship with Eko is not new — the discounter is a previous investor in the eight-year-old video technology company, alongside companies including Sequoia Capital, Intel Capital, Warner Music Group, Samsung, among others. Through the joint venture, Walmart will also participate in Eko’s next funding round.
“Our partnership with Eko will help us accelerate efforts to deepen relationships with customers and connect with new audiences in innovative ways and is one part of an overall entertainment ecosystem we’re building,” said Scott McCall, senior VP for entertainment, toys and seasonal, Walmart U.S. “By partnering with organizations across the industry to create original, interactive content, we’re bringing the next generation of entertainment to customers and delivering memorable experiences they can only find at Walmart.”
Earlier this week, Walmart announced another content partnership with U.S. movie studio Metro Goldwyn Mayer Through the deal, the studio will create content for the discounter’s Vudu digital platform, according to Reuters.
Walmart spokesman Justin Rushing told Reuters, MGM will create exclusive “family-friendly content” based on their extensive library of iconic intellectual property (IP), and that content will premiere exclusively on the Vudu platform.
Eko also has a history of teaming up with movie studios, including MGM Studios and Sony Pictures Entertainment.
“Through interactive content, Walmart will ultimately connect with its customers on a much deeper, more meaningful level,” Yoni Bloch, CEO of Eko, said in a blog on Walmart’s website. “Through our partnership, we’re combining forces to bring the next generation of premium interactive entertainment to a diverse, mainstream audience.”
To read about Bloch’s thoughts about the Walmart partnership, click here.