The future of retail marketing as it adapts to always-on consumers

When it comes to retail, consumers are demanding a state of constant innovation against a backdrop of ever-rising expectations. Shona Ghosh investigates the industry's global future.

The future of retail marketing as it adapts to always-on consumers

When Amazon launched its Dash button in April 2014, many checked whether it was the first of the month. The plastic, branded buttons are connected to the Amazon Prime app, allowing consumers to replenish branded household goods instantly – no logging in, no confirmation of payment. When it became clear that Amazon was serious, observers speculated as to whether the instant-order button might be the future of shopping.

Analysts at investment bank Piper Jaffray described the concept as "automated ordering", claimed it would be the "next wave of commerce" and that Amazon would own this new frontier. It is difficult to conceive of a brand that knows more about how we shop than Amazon, so the prospect of the brand automating shopping has the potential to revolutionise it.

The current state of play in the industry could be described as providing an imperfect solution to First World problems. There is currently no Dash button for ordering Dash buttons, but once consumers have bought them (the initial cost is then taken off the first purchase made) the wireless device will automatically order branded goods. Moreover, Dash was met by a lukewarm response in the US when it launched, with consumers questioning the convenience of receiving 45 toilet rolls at a time. When smart devices don’t turn out to be that smart, consumers can be unforgiving in their analysis.

Shopping: automated

From a marketer’s perspective, the notion that brands will become interchangeable or automated by the likes of Amazon heralds the start of a hugely disruptive force in marketing. Alongside the Dash buttons, Amazon is rolling out its Dash Replenishment Service (DRS) to the UK. The platform will enable internet of things devices to automatically re-order their own supplies when they run low, with Bosch, Siemens, Grundig, Samsung and Whirlpool adding a code to their connected products to facilitate the deliveries.

This strategy provides a headache for marketers, because implicit in this new wave of extreme convenience is the uncomfortable truth that consumers don’t have the time to forge an emotional connection with every given household brand. In fact, when it comes to the weekly grocery shop, consumers are not emotionally attached at all to basics such as dishwasher tablets or lavatory paper. From a consumer’s perspective, the less time they need to spend looking for these items in the supermarket or online, the better.

The Dash button means consumers can order brands such as Ariel, Andrex and Finish literally at the touch of a button, resulting in less time spent lugging around heavy items in person.

In the UK, Tesco is also exploring automated shopping through a partnership with an online service called If This Then That (IFTTT). This software enables shoppers to connect two seemingly disparate services, such as a Twitter account to a Tesco.com account. IFTTT allows users to create conditional statements or "recipes". One example would be instructing IFTTT to add beer to a shopping basket when the user tweets "#iwantbeer"; another might be automatically adding dishwasher tablets to a shopping basket if Tesco’s price drops.

That Tesco is experimenting in this arena is significant, even if it is unlikely to have an impact on grocery shopping in the short term. "All retailers have to look at Amazon as the competition," says David Oliver, head of retail consulting, PricewaterhouseCoopers. "It is either the competition today, or will be tomorrow."

For Oliver, supermarkets are "most vulnerable" to Amazon when it comes to household goods and personal care. "People don’t want to put pet food in the back of their car, [or] want to remember that they’re out of pet food when they’re at the supermarket," he says. "There’s the automation of these sorts of replenishment household items, and that’s the opportunity Amazon will take if the supermarkets don’t."

Shopping as entertainment

Sceptics believe automation is some way off. All available data in grocery suggests British consumers are not yet ready for stacks of loo rolls turning up automatically at the front door.

There are also usability flaws in both Amazon’s and Tesco’s models. For example, Dash buttons are restricted to one brand, creating an enforced loyalty in categories where consumers are more likely to be promiscuous. "In our house, we only buy dishwasher tablets ‘on deal’, because they’re so expensive when they are not," points out Rob Sellers, managing director of Grey Shopper.

So, the fact that the Dash button doesn’t allow users to mix and match between brands is good news for FMCG, but bad news for consumers on the hunt for a bargain. Sellers is also sceptical of a "nerd-first marketplace" when it comes to technology and shopping. Outside grocery, he says, shopping is still a form of entertainment for many consumers.

"If you have to buy a party dress, and you have a couple of hundred quid in your pocket, why wouldn’t you go shopping at Westfield and grab a latte? That’s entertainment," he says. "This country is a nation of shoppers; don’t think that people are automatons."

A nerd-driven environment also fails to account for people’s impulse purchases. Matt Stockbridge, growth analytics manager at Mondelez, says most of the confectioner’s business is still driven by the supermarkets.

"On the impulse side, it’s all about distribution and availability at scale," he adds. "I’m not sure that the current alternatives to traditional trade channels [have found] the answer yet, but that doesn’t mean that they won’t be [the answer] in the future."

For basics, however, even the sceptical Sellers sees a time when data-driven shopping could work, provided it doesn’t get too "scary".

"If a smart device told you that dishwasher tablets were now half-price at Morrisons, and added a few to your basket, that would be brilliant," he says. "It’s watching the deals for you."

Marketing to the machines

Tom Ollerton, innovation director at We Are Social, takes this one step further. He believes FMCG brands may end up marketing to smart machines, rather than consumers.

Eventually, he says, innovations such as IFTTT adding a discounted product to a user’s Tesco basket could be tied to personal assistants such as Amazon’s Echo. If Echo is programmed to buy items on discount, brands may have to learn to appeal to Echo’s algorithms, rather than consumers. "The software driving those machines may well be the thing that ends up buying direct," he explains.

Brands outside grocery are already experimenting with elements of automation that appeal to consumers’ impulse-purchase instincts. We Are Social is behind the Domino’s pizza-ordering chatbot, which lets consumers order simply by contacting the brand via Facebook Messenger and typing "pizza" .

The bot is part of Domino’s "Easy Order" service for loyalists. Consumers log their delivery details, payment method and favourite pizza with the brand. After that, Easy Order lets them buy pizza in "lazier" ways, be it through the bot or tweeting Domino’s with a pizza emoji.

This country is a nation of shoppers; don't think people are automatons.

According to Ollerton, 20% of all Easy Order customers signed up for the Messenger bot after its launch last August. Of those sign-ups, 12% went on to order with the bot. It’s a niche audience, he admits, but one that is "extremely valuable" to Domino’s.

"If a Domino’s customer has an Easy Order account, they have told us they want to solve a problem – they want pizza in their mouth with little effort," he says. Ollerton ties this customer expectation to an evolution in impulse-buying behaviour; the rise of the "needy consumer".

"Customers will follow the path of least resistance," he explains. He points to the success of Uber, saying there is less resistance if you order a taxi "to your feet", as opposed to wandering the streets trying to hail a cab without any cash on you. Consumers now expect that same experience across other sectors, he says.

The expectation of immediacy has caused particular disruption elsewhere in retail. In an interview with Time magazine, fashion designer (and film-maker) Tom Ford described his ilk as "dictators". That attitude was once a strength of luxury brands, allowing them to subvert the usual rules of marketing and tell customers what to think and wear.

Fall of the dictatorships

The internet is anathema to dictatorships, however. Luxury brands can no longer broadcast a vision of fashion to consumers. Prospective customers can take that vision, remix it, and fire it back through channels such as Instagram or a street-style blog.

Not everyone has embraced this though. After Milan Fashion Week, Vogue was in hot water after some of its editors described style bloggers as "ridiculous" and "posing".

Nonetheless, luxury brands, under greater pressure than ever, are stepping down from their perches. Burberry, often a first-mover in digital, launched its crowdsourcing "Art of the Trench" campaign as far back as 2009. This invited fans to post pictures of themselves wearing the brand’s famous trench coats. Fast-forward to 2016, when both Burberry and Tom Ford announced that they would be adopting a "see now, buy now" model.

Marking a radical change to the luxury paradigm, this meant consumers watching fashion shows on their phones could buy items immediately. "The current way of showing a collection four months before it is available to customers is an antiquated idea and one that no longer makes sense," Ford said at the time.

Tommy Hilfiger and Ralph Lauren swiftly followed suit. Some smaller designers are also experimenting with social shopping. Vero, a subscription-based social-media network, partnered agency Fearlessly Frank and fashion brands Alice Temperley and Oliver Spencer to make clothing available to consumers directly after their London Fashion Week shows.

Vero’s back-end technology enables a shopper who spots an item they like, such as a dress or tote bag, to buy it via Apple Pay just by using a fingerprint. This is, perhaps, fashion’s Dash-button moment. Social shopping has remained a niche habit up until now, not least because mobile commerce is only just past the tipping point.

According to global figures from the IAB, a third of monthly purchases are made on mobile devices. Most shopping is still done in person or on desktop computers. Separate figures from Criteo show that, in the UK at least, fashion and luxury are at the vanguard of mobile retail; 55% of all transactions take place on mobile.

Vero’s co-founder, Ayman Hariri, predicts social shopping will take off when brands learn to use it as a "catalogue". "If a merchant looks to social to replace or plug into their ecommerce platform, where every single [product variation] can be purchased through social, that’s a ‘lose’ scenario," he warns.

Instead, brands should pick and choose items that help sell a lifestyle, inspiring and enabling users to make immediate purchases. "You wouldn’t put 1,000 products on Instagram; you pick and editorialise," Hariri says. For the doubters, he points to Vero’s partnership with classic-car auctioneer Coys, which sold a 1964 Aston Martin for £825,000 via the platform.

The thinking is spreading to mainstream social networks. Instagram has announced that it will make it easier for users to buy products tagged in its photos. Pinterest also began rolling out "buy buttons" in 2015, to help users purchase items they see on the visual platform.

Online impulse buying and regret

One way the high street has adapted to the needy consumer is click-and-collect services. For Oliver, this gives retailers a serious edge over Amazon.

"You can compete by having a store network, which creates an element of convenience that Amazon is trying to replicate," he says. "Amazon struggles to offer the same proposition that Waitrose and John Lewis can with click and collect."

At John Lewis, click and collect accounts for more than half its online orders. Elsewhere, the service has proved so popular for Tesco that it has raised the minimum spend for consumers.

Amazon struggles to offer the proposition Waitrose and John Lewis can with click and collect.

However, the convenience of the service and introduction of seamless payments can mean that consumers buy before they have thought it through, notes Catherine Cottney, trends manager for Europe at Mintel. "We will see regret and returns; that will harm brands," she says. "There are negatives to this behaviour."

According to research by Shutl and Retail Gazette, 20% of online shoppers end up asking for a refund rather than collecting their items in-store. To that end, River Island launched a "Click and don’t collect" service, which will deliver items in 90 minutes or at a chosen time for £4.95.

Sellers points to Asos’ returns policy. "A purchase isn’t concluded until people try it on; the product-trial stage is still really important," he says. "It will be interesting to see how retailers deal with the sense that consumers want to try on stuff."

Looking to China

Flag of ChinaHaving bypassed PCs and gone straight to mobile, China is considered indicative of future retail trends. Where China leads, the rest of the world’s consumers follow. According to PwC’s "Total Retail" report for 2016, the proportion of Chinese shoppers using their phone to pay for a purchase rose by 18 percentage points year on year from 2015, to 43% . "If online shoppers around the world follow Chinese consumers again in the next year, we’ll see a major boom in the use of mobile payments globally," says the report.
Perhaps worryingly for FMCG brands and supermarkets, Chinese consumers are also "more selective" about their spending, according to McKinsey. More than half plan to spend more money on leisure and entertainment, while spend on food and drink for home consumption is on the wane.
Lastly, Chinese consumers still visit physical stores because they’re good entertainment. Two-thirds say shopping is a good way to spend time with family, with malls benefiting most from this trend.