The New New Normal
Sigh, the old days when your only problem was the retail apocalypse. The coronavirus will be far more challenging to retailers, at exponentially faster speed. If you’re like me, you’re probably sick of hearing about infection rates and mortality. Let’s focus on what comes next, and what I would do if I were in your shoes.
By way of background: I’m the founder of a retail data company that works with hundreds of retail brands to help them transition to an increasingly online customer. My business is about helping brands succeed online.
Until the virus stops replicating, your omnichannel is now a uni-channel. The nonessential grocery and pharmacy retailers are going to live or die based on whether they can cost effectively attract customers to their "Buy" buttons. You might be surprised to learn that it typically costs $45 to $50 in marketing to make a sale happen on a retail website. We refer to this as the cost of conversion. It’s the sum of marketing spending required to create a sale. If you sell $15 T-shirts, this online advertising reality will net you a $30 loss on each sale.
Is all hope lost? I wouldn’t go that far, although the next six months to 12 months are going to require a dramatic shift in your marketing approach. One of your challenges is that if you aren’t a digital-native brand like Allbirds and UNTUCKit, you have an urgent need for digital marketing skills and talents. You may have heard that Amazon.com is hiring 100,000 new employees during the crisis. You’re about to jump into the ring with a company that has buildings and campuses filled with digital marketing experts. Amazon has black belts in a domain that makes you and your ad agency look like newbies. I’m sure you have a digital marketing team, although they probably aren’t getting calls from Amazon’s experts-only recruiting staff. Amazon is playing for keeps.
During the old normal your No. 1 focus was location, location, location. In this new battle, it will be data, data, data. You’re going to need to earn an A in programmatic advertising, the arcane new world of online advertising.
Ads are no longer created and placed by human beings. Computers and algorithms are now in control of every online ad you see. The programmatic world involves millions of computations that execute in the milliseconds it takes for a web page to load into your browser. The ad system only earns revenue for the publisher if you click on an ad; thus, they’re willing to spend billions on the behind-the-scenes systems that personalize ads to generate revenue. To earn your A grade, you’ll have to understand that nearly all of your marketing spend will be flowing into this hard-to-understand ecosystem for the foreseeable future. Can you outsource this to your media agency? The last time I checked, agencies were incentivized to earn more commissions by getting you to spend more on advertising, rather than profitably clearing your warehouse. Point your experts at this problem today.
Next, I’d get serious about personalizing everything. I recently met with a former Macy’s executive who told me his most cost-effective channel was emailing his existing customer base. My next question was why every Macy’s customer receives the same email (which they currently do). Retailers are woeful at personalizing customer communications. My company recently helped a retailer personalize its customer confirmation emails, resulting in an increase in its conversion rates by more than 100 percent. We added data and algorithms to an old process. In this new world, you’ll need to treat people as known customers, which, ironically, is easier to do online than in-store.
Lastly, serve Red Bull at your team’s next war session. Velocity will be a key to your online success. Forbes recently reported that Gen Z consumers are willing to give an online retailer eight seconds to answer an online chat question, and 39 percent said their top wish for the retail future is just-walk-out stores like Amazon Go locations. Millennials and Gen Z, now more numerous than baby boomers, are the no-patience generation. In their world, things are measured in milliseconds. Zara, one of the top retailers serving millennials, has accelerated velocity in its catalog cycle to two weeks. If you’re operating under the 14-week catalog model, Zara is 600 percent faster than you.
The new new normal will be personalized, high-velocity, programmatically delivered e-commerce experiences. We’re at an inflection point, and I wouldn’t recommend waiting for the post-virus era. Major events create major changes, and I believe we’ll look back at the coronavirus as the knee in the curve when the transition to e-commerce accelerated. People will take fewer cruises, they’ll become experts at online meetings, and they’ll increasingly buy online.
Rob McGovern is CEO of PreciseTarget, a data company that profiles the retail buying taste of every U.S. consumer.
Related story: The Next Big Thing: Programmatic Retail