Retail Disrupted: Episode 4
The fourth in a series of podcast episodes accompanying Bigeye’s study, Retail Disrupted: What Shoppers Want From Brands Today. Based on a national survey of over 1,500 US shoppers, it’s clear that consumers are demanding more from retail experiences – in-store and online – than ever before. In this podcast, we discuss how retail is evolving in 2022, explore key data points from the report, and consider what the findings mean for retail, brand, and direct-to-consumer marketers.
Adrian Tennant: Welcome to the fourth in a special series of podcasts, accompanying Bigeye’s national study, Retail Disrupted: What Shoppers Want From Brands Today.
Paige Garrett: When it comes to this crazy time that we’re all coming out of, social media is a way to connect.
Brandon Frank: We follow the sustainable packaging guidelines. And we really say that if you’re going to use plastic, use the highest percentage of PCR that you can.
Olivia Canlas: I was a subscription box customer before I thought of the idea of Meowbox.
Doug Stephens: Everyone sort of agrees that the metaverse is a logical sort of evolution of our relationship with online technology.
Adrian Tennant: You’re listening to a special episode of IN CLEAR FOCUS, fresh perspectives on the business of advertising produced weekly by Bigeye. Hello. I’m your host, Adrian Tennant, VP of insights at Bigeye – a strategy-led, full-service creative agency, growing brands for clients globally. Thank you for joining us. Bigeye’s national study, Retail Disrupted: What Shoppers Want From Brands Today, reflects the results of an online survey we fielded in August of 2021 with data collected from over 1,500 US shoppers aged from 18 to 55. Today, we’re going to recap some of the key results and consider how retail is already evolving in 2022 and what lies ahead. In the first section of Retail Disrupted, we look at which retail channels shoppers prefer based on the category they’re shopping for and the impact of social media on shopping behaviors.
Adrian Tennant: In spite of changed consumer behaviors as a result of COVID, people express a preference for shopping in-store: 44%. Around one-third are equally happy to shop in-store or online: 34%. And one-fifth say they prefer to shop exclusively online. Among respondents who shop for these categories, the most popular preferences are to shop in-store for food and drink at 61%, followed by furniture and homewares at 51%, and clothing, shoes, and accessories at 45%. We were curious to learn which factors in a physical store add value to their experience compared to buying online. Almost nine-in-every-10 shoppers say that their ability to see, touch, feel, smell, hear, or try on the product in a store adds value to their experience to some or a great extent. Four-in-every-five shoppers indicate a preference for shopping in-store to access better prices or value of products suggesting that consumers perceive the prices of some goods to be higher online, perhaps due to shipping costs. I asked retail futurist Doug Stephens, the CEO of Retail Prophet, why he thinks respondents indicated a preference for shopping in-store for food and drink in particular.
Doug Stephens: The truth of the matter is shopping, especially as it applies to food, is an incredibly entrenched behavior. I think the average is in the United States, for example, about 2.2 visits per week to the grocery store. And so, this is something that we probably shop more frequently for than anything else in our life. So it’s not surprising that this sort of heavily entrenched habit would take some time to modify. But the flip side is we have to appreciate that change doesn’t need to be absolute in order to be significant. We have a tendency to always focus on the bigger number, right? So we’ll say, you know, “only 15% of the retail economy in the United States is e-commerce. Everything else, you know, 88% is purchased in-store.” And that may give a lot of retailers a sense of consolation. But the fact of the matter is it wasn’t that long ago that that number was one percent. And today it’s 15%. And we know that e-commerce is growing exponentially faster on a percentage basis than physical retail is. And so it’s quite likely that at least our projection is by as early as 2033, we may find that 52 or more percent of our consumption on a daily or weekly basis is being performed online and, or by subscription. Why do I say this? Well, it’s not just pulling a number out of thin air. We know that in 2002, 2003, the Chinese economy had virtually no e-commerce as a component in the retail sector, and through the pandemic, they crossed the 50% mark. So we’re talking about a couple of decades, for an entire nation to buy most of its consumption online. So, on the one hand, I’m not surprised of course consumers, we’ll say that they enjoy going to the grocery store. And frankly, grocers haven’t provided them with any sort of incentive, not to, by virtue of a great online experience. But I think what we have to focus on is the potential for that number to increase significantly. And it will.
Adrian Tennant: Influencer marketing is an important part of the social media ecosystem, representing an estimated $3.7 billion in 2021, marking an increase of 33% compared to 2020. More than one-half of all the consumers who responded to our survey follow social media influencers. Those most likely to do so belong to Gen Z, among whom over three quarters follow at least one influencer at 76%. Gen Y respondents are less likely to at 58%. And among Gen X, just under one-third do, making them the least likely to do so at 30%. Respondents identifying as Hispanic, Latino, or Latin X or of Spanish origin are significantly more likely to follow influencers with three quarters doing so compared to 47% among non-Hispanic respondents. That’s a 28 point difference. Social media expert Paige Garrett, who’s Assistant Vice President of Marketing at RVD Communications in New York, explained what she thinks lies behind Hispanic followers’ greater engagement with influencers.
Paige Garrett: Hispanic social media users are looking to just connect. I think that you know, like anyone, obviously, they are empowered consumers and also influential creators in their own right. But I do think that when it comes to this crazy time that we’re all coming out of, social media is a way to connect. It’s a way to stay up to date with our friends, our family, what’s going on in each other’s lives. It’s a way to stay in tune with what’s happening in a specific industry that you follow, news, celebrity entertainment, and it’s just a way to stay hyper-connected. And I do think that when it comes to influencers’ recommendations and the way that you as a consumer feel connected to that influencer, it’s very similar to getting a recommendation from a family member or a friend, but you might not be in as close touch with your family members or friends as you are now with these influencers, who you follow every single day and every minute of the day. And there was actually a quote, that came to mind from, Marie Cabo, who is a Fortune 500 multicultural strategist and consultant, she essentially said that the Hispanic community, in particular, they have that sense of established trust when it comes to these micro-influencers that they follow in the same way that they would their families. So it’s very similar to, again, just that person that you trust, who is telling you, you need to buy something, that coupled with, whether it’s a discount early access or a VIP experience that you might not get otherwise it’s that established trust and credibility coupled with the fact that you feel as if you really know this person. And also you might, you know, I think influencers are really engaging with their communities in a way that they are actually in touch with them and actually friends. And if you ask an influencer a question, they’re more likely now to respond than I think they would have a few years ago. So, all of that just works towards greater engagement with influencers in particular. And it makes sense again, from more of just like a human connection, perspective for the Hispanic community as well.
Adrian Tennant: It’s also clear that influencers impact consumers’ purchasing decisions. In the six months ending August 2021, 90% of respondents who follow social media influences had bought a product after seeing it used, reviewed, or recommended. And over one-half of those followers report buying two to five times. 91% of Gen Z that follow influencers have bought something based on a recommendation in those six months with approaching one-fifth of them buying six to 10 times. Gen X respondents are less engaged overall, but just under one-half of them report buying two to five times. Respondents who identify as Hispanic are more likely to have bought six to 10 times in the last six months, 21%, compared to non-Hispanics, 13%. Over three-quarters of our survey respondents who had purchased something based on an influencer, say they’re extremely or somewhat likely to share information about their purchase with people in their social network.
Adrian Tennant: Approaching two-thirds of all respondents own a smart speaker or a smart display. Smart speakers and displays are most popular with Gen Z among whom 79% report owning at least one. Among Gen Y, ownership is at 68% while just over one-half of Gen X reports owning a smart device. Among those who own smart devices, Amazon is the leading brand with 56% of the market. Google and Apple both trail behind at 29% and 21% respectively. Respondents identifying as Hispanic are 19 percentage points more likely to own an Apple product, 29%, than non-Hispanics, 10%, and 15 points, more likely to own a Facebook portal, 24%, than non-Hispanics at 9%. Three-quarters of all respondents who own smart speakers and displays use them for shopping. The most popular uses are to find information about products at 28%, get shipping and delivery notifications at 27%, and to check the status of an existing order at 26%. Gen Z respondents are slightly more likely than others to use that device to manage a personal shopping list or wishlist at 24%, while Gen Y are slightly more likely to manage a family or household shopping list at 26%. The most popular location for smart speakers and displays is a living room at 53% followed by a bedroom at 46% and one-third report having a device in their kitchen.
Adrian Tennant: Direct-to-consumer brands have enjoyed a decade of steady growth, reflecting the widespread consumer adoption of social media. The network effect amplifies social media’s popularity and effectiveness as a source for brand and product discovery. In the third section of Retail Disrupted, we look at how many consumers are buying DTC brands, the categories that are most popular, and quantify the number of consumers who are enrolled in product subscriptions. Gen Z is the most likely to have purchased from a direct-to-consumer brand in the past six months. Approaching two-thirds of this group report doing so at 63%, compared to just under half of Gen Y and just over one-third of Gen X. Almost one-half of respondents identifying as male report purchasing from a DTC brand in the past six months, compared to 45% of those identifying as female. And approaching three-quarters of Hispanic consumers report purchasing from a DTC brand in the past six months: 72%. Compared to two-fifths of non-Hispanics: 42%. Clothing shoes and accessories is the most popular category across all Generations of respondents. Of those who purchased from a DTC brand in the past six months, 53% of Gen Z and X report doing so in this category. In the next most popular category overall, electronics and accessories, 40% of Gen Y and Gen X report purchasing direct-to-consumer in the past six months. But what compels shoppers to buy from direct-to-consumer brands rather than traditional retail channels? Among those who indicated they’d purchased from a DTC brand within the last six months, over one-third are motivated by the availability of fast or free shipping, 35%. Among Gen X consumers, this number is 43%. 29% of respondents perceive that DTC brands represent cheaper costs than traditional retail. But again, this is most prevalent among Gen X at 35%. 29% of Gen Z and Gen Y respondents are motivated by reading positive reviews. 30% of Gen Y and Gen X are motivated to buy DTC due to the uniqueness of the product, or because it’s not available elsewhere, compared with 23% of Gen Z. Among all consumers who subscribed to a direct-to-consumer brand, one-quarter do so for pet care. Olivia Canlis is the CEO of Meowbox, a founder-led DTC brand. She talked to us about her paid subscription service.
Olivia Canlas: So I like to think of Meowbox as monthly deliveries of cat happiness. So it is a box full of themed cat toys and treats that we choose exclusively for our subscribers. And we deliver that monthly or bi-monthly in the subscription model.
Adrian Tennant: Back in 2013, when Meowbox launched, direct to consumer wasn’t nearly as well established as a business model as it is today. I asked Olivia what inspired her to start a subscription box for cat owners.
Olivia Canlas: I was a subscription box customer, maybe two or three years before I thought of the idea of Meowbox. I was a subscriber to cosmetics. So I knew that that was something that appealed to me, to my friends, people in a similar demographic as I was. And so I was aware of the concept of subscription boxes, but specifically, like the moment where I thought, “you know what? There needs to be a meowbox in this world!” was when I started getting targeted on my Facebook for a dog subscription box. And Instead of just ignoring it, thinking, well, that doesn’t apply to me, I don’t have a dog, I wondered because I’m more of a cat person, I wonder if there was a box for cats. And upon my initial research, there wasn’t a box that was dedicated just to cat parents.
Adrian Tennant: Let’s take a short break. We’ll be right back after these messages.
Adrian Tennant: Today’s shoppers are more informed, connected, and demanding than ever before. To examine how the rise of e-commerce during the pandemic has disrupted the retail industry, Bigeye recently conducted a national study with over 1500 consumers. Our exclusive report, Retail Disrupted: what shoppers want from brands today reveals that while people enjoy the convenience of online ordering and home delivery, many still prefer to shop in physical stores. But their expectations of merchandise selections, in-store technology, and customer service are all heightened. To understand consumers’ new shopping behaviors, and mindsets – and what they mean for retailers, direct-to-consumer marketers, and traditional brands – download the full, complimentary report available now at Bigeye.agency/retail. Retail Disrupted: What Shoppers Want From Brands Today.
Adrian Tennant: Each month, in partnership with our friends at Kogan Page, the Bigeye Book Club features interviews with authors who are experts in specific areas of marketing. February’s featured book is Brand Storytelling: Put Customers At The Heart Of Your Brand Story by Miri Rodriguez. IN CLEAR FOCUS listeners can save 20 percent on a print or electronic version of the book with exclusive promo code BIGEYE20. This code is valid for all products and pre-orders and applies to Kogan Page’s free e-book offer. To order your copy of Brand Storytelling, go to KoganPage.com.
Adrian Tennant: Welcome back. You’re listening to Retail Disrupted: What Shoppers Want From Brands Today. 2020 saw a surge of activism among Americans looking for ways to advocate for the issues that matter most to them. Socially conscious consumers buy from companies that donate a portion of their proceeds towards a certain cause or whose business practices support a particular group or value. In the fourth section of Retail Disrupted, we look at some of the differences that exist between Generations of consumers and whether they really affect how they shop. Which issues are most likely to impact personal brand choices? Well, for almost 9-in-every 10 respondents, the most important factor is the visual appeal of the product. 89% say this is extremely, very, or somewhat important to them. Four in every five shoppers say that a brand’s policies and stances related to the environment and sustainability are important. With similar percentages citing whether a brand is based in or manufactures its products in the USA, and whether a brand is local to their community or a small business. Eco-conscious behaviors are reflected in these results too, with over one-quarter of Gen Z respondents wanting stores to make it easier to refill reusable containers, 26%. This is Gen Z respondents’ most important consideration, five points higher than Gen Y and eight points more than Gen X. Gen Z are also more likely than other Generations to want the ability to drop off recyclable waste so it can be upcycled into new products at 25%, and for stores to offer carefully selected collections of direct to consumer brands, 22%. I recently spoke with Brandon Frank, the CEO of Pacific Packaging Components, and an expert on sustainability, clean beauty, and recycling. I asked Brandon how brands have been responding to these changing consumer attitudes.
Brandon Frank: The selection of glass and aluminum has continued to be popular and when plastic needs to be used, the most sustainable option and that most people are going toward is to use the highest percentage of post-consumer recycled resin as possible. We know that there are a lot of bio-based resins and other, biodegradable additives and things like that. But we follow the sustainable packaging guidelines. And we really say that you know, if you’re going to use plastic, use the highest percentage of PCR that you can. There’s a lot of supply chain issues with that right now, because the largest companies in the world are buying up most of the highest quality PCR, which leaves a lot of large middle and small brands struggling to be able to meet MOQs and price points, but the industry is responding.
Adrian Tennant: If you’re a regular listener to IN CLEAR FOCUS, you know that the future of retail is a popular and enduring topic of our discussions. So naturally, we wondered what consumers think shopping would look like by the year 2030. Over one-half of respondents believe that by the end of this decade, most retail stores will be fully automated with robots and involve little human interaction. Just under one-half of all respondents believe that most deliveries in cities and suburban areas will be made by robots, autonomous vehicles, or drones instead of humans. And 46% believe that most food for consumption at home will be bought online and delivered from local distribution centers rather than bought in-person at supermarkets. Those most likely to do so are respondents identifying as Hispanic at 53%. Since we published the report in October of 2021, a lot has happened in the world of retailing. In the introduction to the report, we noted that by the end of 2021 digital grocery buyers were estimated to surpass 142 million, amounting to more than half of the US population. Kroger is just one of many retailers benefiting from the surge in online grocery sales. The Cincinnati, Ohio-based company covers around 60% of the US with its supermarkets, which in addition to the Kroger brand, include Fred Meyer, Harris Teeter, Payless, and Ralphs. In 2020 alone, Kroger’s online grocery sales grew by 116%, surpassing $10 billion. Kroger now ranks among the top 10 e-commerce retailers in the United States. The company has invested heavily in its digital strategy in recent years, as well as supply chain innovations that deliver fresh foods to its stores within 24 hours of harvesting, picking, or slaughter. But perhaps Kroger’s most interesting strategic initiative in 2021 was its entry into a market where it has no physical stores: Bigeye’s home state of Florida. Kroger generates brand awareness through advertising on TV, digital, and out of home, and its visually distinctive fleet of delivery vehicles is increasingly seen across Central Florida. Kroger’s Florida operations are facilitated by a 375,000 square foot automated warehouse located in Groveland. Its customer fulfillment center leverages proprietary technology, including artificial intelligence and advanced robotics. Customers order online and Kroger delivery covers up to 90 miles from the hub location and will cover even more territory when spoke locations such as Tampa and Jacksonville are fully integrated. Well, it must be working because since we first reported on Kroger’s strategy, the company has announced its delivery service is expanding into South Florida. And Kroger delivery fulfillment centers are also slated to open in Texas, Georgia, Maryland, Arizona, Wisconsin, Michigan, and other sites in the South, West, and Pacific Northwest. Kroger’s strategy reflects the disruption that many in the retail industry are experiencing. Corporations like Kroger, Walmart, Target, and Amazon with finely tuned e-commerce platforms and logistics operations have all done well during the pandemic.In Retail Disrupted, we discussed Amazon’s rumored plans to open physical department stores first leaked by the Wall Street Journal. Then last month, Amazon announced the opening of a bricks-and-mortar apparel store in Los Angeles to be known as Amazon Style. Joining its cashier-less convenience locations, grocery, and bookstores, this is the online retailers’ first foray into the sale of fashion through physical stores. Amazon has said that customers will be able to use innovative technology to browse, try on, and buy clothes or shoes, including the use of algorithmic recommendations. So this sounds a bit like Stitchfix applied to physical stores. Shoppers will be able to use the Amazon app to view different sizes and colors for items of clothing. And not to be outdone, Walmart is expanding its fulfillment service that promises to deliver customers’ groceries directly to their refrigerators. First launched in the fall of 2019, Walmart’s InHome delivery service allows customers to place grocery orders online, then receive their deliveries by having a Walmart associate enter their home by way of a smart lock. The service was initially tested in a handful of markets and is now available to around 6 million households across the U S. Last month. Walmart announced that it plans to expand InHome delivery with the goal of reaching 30 million US homes by the end of this year. Walmart is innovating its in-store experiences too, with an interactive approach that it’s calling “Time Well Spent”. It’s actually the second phase of a store redesign project aimed at re-imagining ways to create seamless omnichannel shopping experiences. According to the company, Walmart visual merchandising experts have created engaging experiences that bring to life the human element with QR codes and screens also creating opportunities for digital exploration. And we can’t ignore the robots. If you’ve already downloaded the Retail Disrupted report, you’ll know that our creative team had a lot of fun with the visual layout, which features original illustrations by Bigeye’s Art Director, Rhett Withey. After we published the report, Amazon announced that it has a new robot intended for home use to be known as Astro. Costing $1,000, Astro’s promotional video shows it roaming around customers’ homes on three wheels and being used to move items from room to room, video chat, play music, and act as a mobile security device. But in retail stores, robots are already widely used to clean, take inventory, and help employees restock shelves. And robots designed for use in grocery stores don’t necessarily require large capital outlays: some manufacturers offer a robotics-as-a-service or RaaS model.
Adrian Tennant: Just a few days after the publication of Retail Disrupted last October, Facebook announced its change of corporate name to Meta, reflecting its ambition to shape the metaverse. Since then, we’ve seen extensive media coverage of blockchain, cryptocurrencies, non-fungible tokens, and web 3.0, as well as other metaverse-adjacent topics. Retailing in the metaverse emerged as one of the central themes of the National Retail Federation’s annual convention in New York last month. Whatever you think about Facebook’s decision to rename its corporate entity, there’s no doubt that it thrust the idea of the metaverse into the mainstream. We’ll be exploring what web 3.0 means for retailers in an upcoming special event hosted by Bigeye. Envision 2022 will be a virtual round table featuring some of the brightest minds in retailing today, including Doug Stevens, CEO of Retail Prophet. Here’s a preview of our conversation.
Doug Stephens: Everyone agrees that the metaverse is a logical sort of evolution of our relationship with online technology. You know, today we’re able to interact, but we’re not able to do so in a very real feeling way, in a very connected way. We’re certainly able to shop online, but again, we have this barrier, where we can’t really experience things or interact with things before we buy them. And so I think there’s wide agreement that this is a logical evolution.
Adrian Tennant: So what does Retail Disrupted tell us about today’s shoppers? Well, it’s clear that we’re now in a new era of retailing characterized by heightened expectations of seamless integration between online and in-store shopping. Even though we’ve all been shopping online more during the pandemic, shoppers still express a preference for in-store shopping. For traditional consumer packaged goods brands, many have already started to experiment with the direct-to-consumer model, enabling them to capture first-party data and develop products that serve niche audiences. We’ve also seen the shift away from conspicuous consumption toward more thoughtful, socially conscious consumerism. More consumers today are considering the environmental impact of the production processes and sources of materials that make products. Looking at the scenarios for retail in 2030, to borrow a line from American speculative fiction author William Gibson: “The future is already here. It’s just unevenly distributed.” You’ve been listening to the fourth episode of Retail Disrupted: What Shoppers Want From Brands Today. My thanks to all the contributors to this podcast: Doug Stephens, Paige Garrett, Olivia Canlas, and Brandon Frank. To download the full report on which this podcast is based, go to bigeye.agency/retail where you can also watch an on-demand webinar. I’ve been your host, Adrian Tennant, VP of Insights at Bigeye. Thank you for listening, and until next time, goodbye.