As Digital Journal reported, Amazon is appearing to veer more towards physical stores in addition to its more familiar and established digital presence. This includes bookshops, convenience stores, general merchandise stores, and the Whole Foods outlets. The article also outlined how Amazon was planning to expand its physical presence.
Does this signal a future with physical stores? As well as this consideration, as physical stores attempt to reopen after the height of the pandemic, what should they do in terms of getting the consumer back into the store?
What does these factors signal for the future of retail? To understand this, Digital Journal caught up with John Kelly, CEO of walk-through marketing company Zenreach.
Digital Journal: What has been the economic impact of COVID-19 on retail?
John Kelly: Foot traffic to retail shops, restaurants, and offline venues across the country is down quite significantly. Our data shows that foot traffic dropped 60 percent in March as the stay-in-place orders started to roll out. As a country, we hit our low point in mid-April when in-store traffic was down 75 percent from the previous year. Obviously, that is a huge decline, and to my knowledge we have never seen such a precipitous drop in foot traffic.
From the period of mid-April through June, we saw a slow but steady increase in foot traffic, and we climbed back up to 50 percent of last year’s numbers. Now, that is still quite a bit down from normal, but the trends were looking encouraging. However, since July, we have seen a flattening of retail traffic, and we have remained around the 50% mark for the past three and a half months.
As we look toward the holiday season and Q4, and we consider the possibility of continued COVID-19 cases and the continuance (if not return) of some form of business restrictions, we do not see a return to pre-COVID levels of foot traffic any time this year.
DJ: How important was it to have a digital strategy?
Kelly: Navigating through these challenging Covid-19 waters without a digital strategy would be like sailing to the New World without a map: you might get there, but your journey will be longer and much more difficult. While offline traffic is down, online traffic and engagement are at record levels. Good marketing follows the users, and nowadays the users are online.
Because of the pandemic, many advertisers have pared back their online spend. The result is that the cost of online inventory is comparatively low. This combination of record-high online engagement along with lower Internet advertising costs has meant that we have seen some amazing performance numbers among our own clients. In fact, we have had a few campaigns with click-through rates as high as 2-3%—roughly 20-30x higher than pre-COVID averages.
While not everyone will be able to see such fantastic performance, we expect to see online advertising continue to perform well through the year. Having a sound digital strategy puts you in prime position to have excellent campaign performance.
DJ: What steps should brick-and-mortar stores adopt in terms of reopening?
Kelly: First, it is clear from the data that a big proportion of the population has concerns about offline shopping during this period. In that environment, it is critical that merchants take safety precautions to alleviate these concerns—doing things such as sanitizing areas, maintaining social distancing, implementing mask policies, etc. But simply taking these precautions is not enough. It is imperative that merchants let their consumers know about these actions. Retailers must get the word out to their consumers about their safety precautions and how they are open for business.
Second, now more than ever, it is vital that merchants are able to identify and connect with their most valuable consumers. If you have limited capacity in your store, you want to make sure that you focus on bringing in your loyal, high-value consumers, and not the low-ticket, one-and-done consumers. Because of our company’s ability to determine the most frequent and high-value consumers, we have been instrumental in aiding our merchant clients to bring those consumers back.
Third, as counterintuitive as it may seem, now is a great time to boost online advertising for new customers. Consumers are more likely to perceive brands who advertise during economic downturns as industry leaders who are more stable and reliable, which could translate to increased business both now and after the pandemic passes. And as I discussed previously, the combination of record-high online engagement rates and lower online advertising costs have created a perfect storm for marketers looking to capitalize on a large captive audience.
DJ: How can consumers be enticed back into physical stores?
Kelly: It stands to reason that brands that have been able to shift all or a majority of their offerings to ecommerce platforms are probably faring better during the pandemic than those who rely exclusively on in-store foot traffic.
Studies have consistently shown, however, that consumers still prefer to make most of their major purchases inside of a physical store. The tactile experience is still important. So while the pandemic has motivated shifts to online, it most certainly will not destroy the offline retail experience entirely.
Zenreach provides its clients with a software layer that sits on top of an existing WiFi network to enable an online guest experience for consumers and the collection of customer contact information for merchants. We then use this information to help our clients build customer profiles, track subsequent visits, and retarget customers via emails and ads to drive them back into their locations with measurable results. Basically, we close the loop of brick-and-mortar businesses’ online and offline marketing efforts.
One way our company has still been able to serve clients in the COVID era is by helping them identify who their best customers and prospects are. Having the ability to identify and market to those customers who come in frequently or are making bigger purchases is crucial in today’s retail climate.
Consumers are also more likely to perceive brands who advertise during economic downturns as industry leaders who are more stable and reliable, which could translate to increased business both now and after the pandemic passes. And with many competitors cutting back on ad spending, the cost of media has become quite inexpensive. At the same time, online interaction and engagement are at record levels. Consequently, we’re seeing unprecedented click-through rates on ads that we’ve served during this time.
The moral of the story: if you can maintain—or even boost—your marketing spend at this time, your share of voice increases and your messaging becomes more visible to customers old and new, and the more likely you are to be able to successfully drive customers into your business.
DJ: How important will marketing be for these firms?
Kelly: There have been many studies about the importance of marketing during crises. They all point to the same conclusion: in challenging times, those firms that can invest in marketing are usually the ones that fare better. We see that playing out during this crisis. We have seen some merchants cut their spend and see their in-store traffic levels stymie, whereas other merchants that have been able to lean in and invest in marketing have fared much better.
DJ: What marketing strategies might work best?
Kelly: Here’s a great story that encapsulates some of the recent successes we’ve been seeing among our own clients: a national retailer of women’s apparel and accessories was looking to increase their share-of-wallet in the ever-challenging brick-and-mortar environment. With more consumers shopping online than ever before, having the ability to drive new foot traffic into retail stores was the highest priority for this retailer which achieved over 85% of its sales through traditional in-store shopping.
Driving customers into the physical locations was just one problem they were attempting to address with Zenreach—the other was understanding the differences, if any, between the customers who made purchases on the client’s ecommerce site and those who bought inside of a brick-and-mortar store.
Using Zenreach to passively detect their in-store shoppers, the client then compared these customers to those in their active files and was able to deterministically prove that there was only a tiny amount of overlap—around 1 percent—among their online and offline customers. This level of insight was previously unavailable to the retailer. Together with Zenreach, the client could now retarget their existing in-store shoppers in the same exact way it was doing for its online customers.