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Digital Data in a Millennial’s Market: Here’s Why it Matters

For apparel retailers, customer acquisition and retention is a fast-paced challenge––but digital data offers a glimpse into successful strategy

Relevance, demand, and consumer tastes that are changing more quickly than ever: These are the challenges many apparel retailers are struggling to resolve as they remain determined to gain the loyalty of millennials, the largest consumer group in the United States.

For apparel retailers, the fall season is a particularly competitive and promotional period that sees the bulk of its revenue during the back-to-school cycle (typically July through September), and then also closer to Thanksgiving, when deals and promotions are heavy.

Bargains or no bargains, millennial-generated dollars are not always easy to come by. According to a recent study by America’s Research Group, nearly 60 percent of parents of millennials interviewed said they’d spend money more judiciously during the back-to-school season, and they’d perhaps consider spending more when holiday sales begin popping up.

So, how should an apparel retailer expect to secure a competitive advantage? One word: data. By analyzing facts about their target consumer base, retailers are poised to make smarter decisions. Data is derived from a variety of sources, from website traffic and social media to mobile devices and a consumer’s past spending habits and patterns.

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In 2013, just over 20% of the information in the digital space was available for analysis, according to a report by analyst firm IDC. However, that figure could jump to more than 35% by 2020, IDC says, making it increasingly viable for retailers to achieve meaningful insight.

What exactly can digital data help retailers learn? For one thing, it can offer some understanding around trends––design, colors, materials, cuts and more. This helps retailers forecast when a certain trend is picking up steam or, conversely, when an older trend is dying out. (Teen apparel retailer Abercrombie & Fitch recently did away with $27 million worth of old inventory to increase their relevance in the market.)

Digital data can also help retailers act smarter about managing inventory. Millennials typically won’t wait for a great clothing item to be re-stocked in their size or the color they want––they buy something similar elsewhere. Digital information can help retailers pinpoint what to stock, and perhaps more importantly, where to stock it, thus enriching a regional (and even sub-regional) strategy.

Perhaps one of the biggest lessons to be learned from obtaining digital data lies in the questions retail decision-makers are asking––questions that center on enticing millennials, learning more about where they come from, increasing customer loyalty, and personalizing marketing strategies.

Of course, several of these considerations are seasonal in nature, and data can help predict the cyclical patterns of shifting dollars from one particular marketing channel to a different one. This helps retailers become more flexible with where, how and exactly when any particular merchandise is given the limelight. In the end, the goal is an equilibrium of meaningful data, long-term goals, short-term expectations, support from key decision-makers, and the greater ability to adapt to an ever-changing market.

 

4 Key Trends in Digital Retail

The challenges for online merchants largely remain the same, but new trends are constantly changing the way retailers react 

The more things change, the more they stay the same. This is one takeaway from a recent study that suggests they key issues for digital retail is largely what they were 10 years ago. The report––co-conducted by Forrester, Shop.org and Bizrate Insights––found that enticing new visitors, turning them into customers, retaining their loyalty, and maximizing and customizing technology are among the challenges online retailers continue to scrutinize.

However, how different retailers address these objectives certainly isn’t a “one size fits all” approach, and the larger issues shift and undulate as new technology comes into play. Mobile, for example, has introduced a new layer of complexity to the digital market landscape, and its applications are widespread––from Facebook and display advertising to tracking consumers’ online behavior. Even for smaller retailers, the online marketplace is growing.

According to a recent report titled “The State of Retailing Online 2015,” a few broad trends have surfaced that summarize how a range of digital retailers––from small to large and fresh to seasoned––are competing in the marketplace.

Increased Spending  
While the average budget for online marketing is roughly 6 percent of revenue, medium-sized digital retailers (with a marketing budget of approximately $5.9 million) spend about 9 percent of revenue. Retailers between four and 10 years old, along with branded manufacturers, spend about 8 percent of revenue.

Large-scale retailers––with a marketing budget of roughly $127 million––spend the smallest amount, around 3 percent of revenue. This suggests that while they see some gains in customer acquisition from an online presence, they might be wiser to invest it in other initiatives, such as free shipping. Smaller retailers, though, need the online strategies to promote growth and secure consumer familiarity.

For all retailers, most of the revenue being spent is going toward search and email marketing, largely because of the comparatively low cost per order: $15 and $6, respectively. Those two tools garner approximately half of the marketing budget, and they’re also widely considered to be the most effective. Search engine marketing and search engine optimization are also where revenue dollars are being spent––58 percent and 55 percent, respectively.

Improving natural search and organic traffic has helped online retailers carve their places in the competitive online environment. Paid search is also a key component, and the winning combination for most retailers is an amalgamation of both.

The Power of Social Media
Marketing via social media channels is unquestionably gaining traction. Although SEM and SEO are considered the most effective tools for online marketing, almost 60 percent of retailers surveyed said the goal was to spend more on social media in 2015 than they did in 2014, surpassing the SEO budget. SEM, however, continues to take first place––about 63 percent of retailers said they planned to invest more on both mobile and desktop SEM.

Social media marketing is generally more costly, about $28 per order. The impact it has is undeniable, though, especially for smaller retailers––who account for just under 20 percent of marketing budgets spent on social.

Perhaps predictably, the social giant Facebook sees the largest share of these marketing dollars, ranking seventh on the list of customer acquisition techniques that have proven to be most effective.

The benefit of social marketing is more readily seen in driving customers to retailers’ websites rather than strictly driving sales. Approximately 45 percent of retailers surveyed said Facebook is increasing site visits, compared to just over 30 percent who reported more sales. Pinterest, Instagram, Twitter, YouTube and Snapchat also had more impact on traffic than conversion, the retailers said.

A Little Bit of Risk
The ever-evolving and fluid nature of the digital world means new trends are always breaking through, which leaves retailers in a constant game of catchup. However, this creates room for creativity and experimenting, and it doesn’t have to mean sacrificing budget. Most retailers interviewed said they’d rather finesse existing marketing strategies than create entirely new programs. Those who were willing to experiment were trying out advertising on podcasts, geofencing around physical stores, and placing ads on Amazon.

The Importance of Mobile and Site Merchandising
On average, about one-third of all site traffic comes from consumer smartphones. Those averages are considerably higher for large-scale retailers, store-based retailers, and brand manufacturers. It naturally follows that retailers are investing more in mobile strategies, with nearly 60 percent reporting that they’ll spend more in 2015 than 2014 in this area. The majority of that budget (52 percent) is intended to drive mobile shopping, while mobile email optimization accounted for 46 percent, and paid search to drive in-store shopping came in at 37 percent.

With all the focus on retailers’ sites, site merchandising is getting attention as well, with site redesign being the primary focus. Several merchants surveyed said they felt their sites were dated or that they wanted to develop a smoother, more cohesive experience between desktop and mobile shopping.

About 63 percent said they’ll increase site budget in 2015, and almost 50 percent said they’ll increase site staff. Product pages will be a main focus, as well as the checkout journey, content, and video on the site.

Offline Retail in an Online World: How Tradition Met Evolution

Once upon a time, brick-and-mortar retail found itself threatened by the digital explosion––before finding its way

In 2005, traditional brick-and-mortar retailers with little to no online presence were all but handed a warning: online retail is taking over, and you’d better be prepared. Despite its relative youth, e-commerce has undeniable advantages, after all: lower pricing structures, flexible inventory management, and perhaps most of all, the convenience of being able to shop at home or on the go, no matter the time.
It seemed as though offline retail was facing an imminent demise as traditional retailers––even large-scale powerhouses––found themselves at the mercy of the innovative technology and unconventional marketing online retailers capitalized on. Stores big and small shuttered due to loss of profit.

Ten years later, though, it’s a different story, and offline retail is finding its foothold in the new, digital world. The reason for this, experts say, is actually quite simple: the process of evolution. Given the choice to die out or progress to a more complex form, traditional retail took a good, long look in the mirror––weaknesses and all––and slowly discovered how to catch up and compete with the new way of doing business.

A prime example lies in perhaps the most obvious benefit of online shopping: the ability to browse 24/7, and anywhere. Compared to offline retail, the convenience that online shopping offers seemed like a no-brainer to many consumers. And the merchandise competed, too. Online retail made highly respected brands available more quickly, and in some cases, for much less than at brick-and-mortars, whose typical promotions and sales were limited in consumer-facing visibility.

It was obvious that offline retailers desperately needed the help of an online presence––and digital retail aggregators were just the ticket. Using the widespread consumer reach that aggregators enjoyed, traditional retailers were able to connect with consumers in their geographic area and communicate current deals, inventory and flash sales. One immediate benefit of this relationship was that consumers could physically see and inspect a product prior to purchase (which is one advantage online retail certainly has over its counterpart).

There’s also a certain “trust factor” that physical stores offer consumers: a real place to walk into and create a human connection around the product. The purchase is not faceless, and there’s a sharper sense of being part of a greater environment while closing a sale.

Through re-invention and a clarified sense of purpose, traditional retail has found its place and secured a foothold in the online market. It’s filled in the gaps that the digital space suffers from, and it’s found fresh ways to stay relevant in a new retail landscape. Offline retail is no longer subject to a death sentence––it’s now very much alive.

Facebook Reaches More Millennials and Hispanics Than TV, Nielsen Study Suggests

But a combination of both is most effective in influencing the two most sought-after demographics

It’s no secret that millennials and Hispanics are commonly regarded as the most highly coveted segment when it comes to marketing, and Facebook has been doggedly pursuing marketers’ TV dollars to reach these two groups. While the results have been mixed, the social behemoth is now presenting statistics from Nielsen that suggest Facebook is a more effective way to influence them than TV.

The report, conducted using Nielsen’s Homescan group of consumers and audience-measurement devices, concludes that buying only Facebook ads results in a wider reach to each subset than purchasing ads on the top 10 TV networks combined. However, the study shows that a mix of Facebook ads and TV spots reaches more people in both segments. Facebook shared these findings with marketers in September during Advertising Week presentations.

The reasons for brands going hard after both millennials and Hispanics vary. For one thing, they’re two of the fastest-growing demographics. They’re also often comprised of households with children, which makes them prime targets for brands that sell packaged goods to stock everything from the medicine cabinet to the pantry. These segments are also closely connected to their devices and, in turn, social media.

Additionally, millennials and Hispanics are more brand-conscious than other segments of the population. They’re also more willing to change brands more often, with 57 percent of millennials stating they like browsing new stores and products, and 44 percent of Hispanics reporting they enjoy the variety that comes with switching brands.

These demographics also report interest in trying new or different types of cuisines. They’re more likely than other segments to buy online, and they also spend more time researching products online before they purchase. Half of millennials surveyed said they find out about new products from channels outside the actual store.

Using TV only (and considering the top 10 most-watched networks only), the study found that in a typical month, 16.3 percent of Hispanics in the United States are reached, compared to the 17.5 percent who are reached using only Facebook. Comparably, 12.2 percent of millennials are reached using only TV, compared to 14.2 percent who are reached using only Facebook.

A much larger percentage of millennials and Hispanics––69.3 and 61.2, respectively––can be reached using both TV and Facebook, the report said. The audience who sees only Facebook ads accounted for $2.6 billion of millennials’ spending on packaged goods, and $3.9 billion of Hispanics’ spending on packaged goods in the first half of 2015.

Users generally spend under five hours a week looking at Facebook. While they spend almost 28 hours watching TV, that figure is a sharp reduction from baby boomers, who watch TV for 47 hours per week, says Nielsen.