Breaking Through the Noise — How to Come Out on Top in a Saturated Market
The November partnership between Target and Ulta Beauty exemplifies how retail disruption in 2020 forced brands, particularly brands in niche segments, to rethink go-to-market strategies in the wake of fewer in-store visits, declining sales, and consumers’ increasing preferences for contactless interactions.
Like many retailers, Ulta was hit with store closures, experiencing a 27 percent year-over-year drop in sales for the second quarter of 2020. By partnering with a successful retailer in Target, Ulta overcomes several pandemic-related challenges. First, it immediately exposes its products to a much larger in-store audience (Target, deemed an essential retailer, has kept its nearly 1,900 stores open throughout the pandemic). Similarly, it reaches a larger audience by piggybacking on Target’s formidable online resources, which include a virtual try-on tool and other digital personalization tools. Finally, the partnership immediately connects Ulta to Target’s established buy online, pick up in-store (BOPIS) service, which many consumers turned to in 2020 as a safe alternative to an in-store visit.
In a McKinsey survey about consumer behavior post-pandemic, 73 percent of U.S. consumers said that they tried a new shopping behavior since COVID-19, with roughly 80 percent saying that they intend to continue the new behavior into the future. BOPIS accounts for much of the changing behavior. Additionally, there was at least a 50 percent growth in the number of consumers saying they will now shop exclusively online for groceries, household supplies and medicine. (Makeup products accounted for a 30 percent to 49 percent growth).
It’s All About the Data
The Target-Ulta partnership is one of many examples of retailers taking active measures to mitigate pandemic-related disruption to traditional in-store-first business models. Digging deeper into the motive behind an attachment to a larger brand — in addition to adding a ready-made audience — data plays a big role. The connections provide both large and small retailers an instant trove of first-party customer data.
For niche brands, leaning on its partner’s resources helps bring the customer data to life, creating a rich, full unified customer profile. Absent partnerships with larger retailers, niche brands generally have a limited view of their customers, centering mostly on a transactional basis. A partnership adds layers of context: What else is a customer interested in besides the niche brand’s product? What does their typical online shopping cart look like? What are their preferred channels of engagement? Partnering with larger brands provide a smaller-footprint brand with a more enriched single customer view, giving marketers valuable insight into a customer’s motivations. By knowing everything there is to know about a customer’s behaviors and preferences, a retailer can begin to market to a customer as a segment of one, providing a more personalized experience throughout an omnichannel customer journey.
From a resources standpoint, data is also the lifeblood that enables niche brands to jump the line, if you will, for taking advantage of best-in-class digital services — particularly for personalizing key experience touchpoints like BOPIS, virtual try-ons, and shopping cart abandonment, to name a few. The personalization required to make these experiences drive significant revenue growth needs a wealth of first-party customer data to pull off successfully.
A top-flight BOPIS service, for example, must recognize the recent digital journey with any one customer, provide relevant and timely SMS or email notifications with that customer, and ensure the real-time customer data is coordinated with real-time inventory status, logistics, etc. A personalized virtual try-on service at the very least should know everything there is to know about the customer’s color, size and style preferences, purchase history, etc. If a customer is virtually trying on a wool coat, for instance, a brand able to offer a complementary item (e.g., leather gloves) in real time will capture more upsell opportunities. But this is easier said than done. Did the customer recently buy leather gloves? Would the customer be more interested in brown or black? Would a hat or scarf be a better offer?
A seamless, personalized experience is a proven generator of new revenue. In a Harris Poll sponsored by Redpoint, 63 percent of consumers surveyed said that personalization is now a standard service they expect, with 37 percent of consumers saying they will not do business with any company that fails to offer a personalized experience. Partnering with a large, successful retailer is one way for niche brands to quickly get into the personalization game without devoting excessive time or resources to changing a business model. Even for brands that do go it alone, the path toward a digital-first approach begins with data.
John Nash is the chief marketing and strategy officer at Redpoint Global, a customer data platform and engagement hub.