Do you get a buzz out of buying something? A little tingle of excitement. It feels good, doesn’t it? That’s your brain producing dopamine. During lockdown, people were increasingly forced to rely on the internet to get their retail dopamine hits. Over 4 trillion dollars were spent buying stuff online in 2020.
Almost a third more than the year before. shopping is going through a radical shift right now and the pandemic sped it up. Retailers have been forced to adapt and innovate. If you went shopping in the 16th century you’d get personalized service. So for example, if you wanted to buy your suit of armor, you would go to an armorer who would knock it up to your specifications but bespoke services came with a premium price tag. Then came the industrial revolution with its big factories assembly lines and automation.
Mass production made goods cheaper but a lot less. personalized and distribution was tricky. products had to be taken from factories to what was essentially a small warehouse near where the customers lived, basically a shop. The only way you could buy was through these shops and you had very little choice. You had very few shops near you and if you wanted something you had to go and your choice was between one of those shops. Fast forward to the advent of superstores and out-of-town malls, these choices grew but everything changed when the internet came along. Suddenly the shopper has more choice than ever and it’s really up to the producer and the retailer to offer the consumer what they want when they want it.
With more choice came more power for the consumer but the internet has put consumers in the driving seat calling the shots and what’s cool and what’s not through reviews on social media, posts, and influencers leading the way in this retail.
Revolution in China
It’s forecast that in 2021 half of everything bought in china will be bought online. Live streaming selling has helped to make china the world leader in e-commerce. Millennials and others prefer shopping online to going to a physical store because of a larger range of choices and lower price. The Chinese internet market is very highly developed. The scale of the market is over two trillion dollars, worth of consumption online. They have something called singles day where they do billions of dollars worth of transactions in an hour.
Huge companies dominate like Alibaba and Jd.com dominate which combined account for almost 80 percent of the market. The other thing about the Chinese market that’s very interesting is that whereas we have like google in search and we have Facebook in social media amazon in e-commerce and PayPal in payments they’ve put it all together in single organizations so they have entire ecosystems and many Chinese consumers live their entire lives in those ecosystems.
These super app ecosystems give the retailers intimate knowledge of exactly what their users like want and buy. Of course, all of this requires a huge amount of data, and the Chinese are much more willing at this point to allow data tracking of everything that they do than many people are in the west. With more direct insight into customer demands retailers can maximize their margins and cut waste.
Some Chinese tech firms are even using people’s digital footprint to influence the way goods are produced known as the consumer to manufacturer. That’s really cutting out even the brands from the purpose. So the factories then start dealing directly with consumers and of course, can be flexing their production capacity directly depending on the consumer demand.
The role consumer data played
Western retailers are playing catch-up for years. they rested on their laurels regarding the internet as secondary to the store. For example, America has 2.2 square meters of retail space for every single one of its inhabitants, six times the level of china but western retailers also missed a big trick, their customers’ big data.
Retailers historically had very little data about their customers. They used to have store credit cards, and that was about it but online companies had huge amounts collected, huge amounts of data about their customers. When you consider that against what the retailers had, the retailers and traditional brands were really flying blind and that is why the internet companies have beaten the incumbent retailers and brands.
For the most part over the last 20 years, the pandemic was a death knell for many brands but the companies that did harness the power of their consumers’ data are thriving. Amazon exceeded 100 billion dollars in quarterly sales for the first time ever. As they got bigger and bigger, they’ve got more data than anybody else with its established logistical system and smooth purchasing process.
Amazon may seem a useful online platform for brands to peddle their wares but though amazon passes on the sale to the brand it doesn’t pass on much of the customers’ data which means companies know very little about who is buying their products. So some brands are cutting the amazon cord to focus on what’s known as direct-to-consumer selling such as Nike.
It decided to sell only online via the Nike website and what it did then was, it developed ways of keeping much closer tabs on its customers. For example, a membership program, Nike’s loyalty scheme allows it to create customer profiles of its 250 million members. Nike’s apps offer the customer a personalized experience in return for a detailed insight into their behavior.
If you sign up to their app you’ll give them information about how much you run every day, what sports clubs you’re doing, how much yoga you’re doing all that sort of stuff and this helps inform Nike about what to produce. They’re able to see where you are and that also informs the way they think about and where to put their stores. Nike’s apps let users customize their own shoes and in doing so learn the customer’s favorite colors and designs by tracking how far they run can. It even let the customer know when it’s time to splash out on a new pair of shoes. What this does is you’re sharing your data and your intimacy with Nike.
It all basically creates a more intimate bond between Nike and its customers. As shopping shifted online the pandemic sparked a greater need for this type of direct-to-consumer selling. Shopify an e-commerce platform allows anyone to set up their own online store. The number of new stores set up in the first six weeks of the pandemic grew by more than sixty percent compared to the previous six weeks. We saw Heinz ketchup within a week or two setting up a store on Shopify to sell Heinz at home. In the UK we saw Lint chocolate go direct to consumers for the first time.
The Revolution driven by your data
Inspired by the Chinese model, Shopify aims to create an ecosystem that integrates e-commerce with social media. What they are trying to do is simplify all of it, making it to have one centralized inventory and figure out which product should get pushed where and if one is seeing traffic at their online store coming from Pinterest they are going to tell you to activate the Pinterest channel and push product directly to Pinterest to better engage with that audience.
I think we’re just at the early stages of social commerce and I think people are beginning to understand that there’s a real opportunity here not just to meet new brands, and connect with new brands but also to buy from those brands by being better connected to their customers. Brands can work out not just what they want to buy but where they want to shop.
Nike has adapted its stores to create a bespoke service for the customer, thanks to the information on their digital profile and the store presented yet another channel to capture their data amid the pandemic. it opened a huge store in Paris. you go in and immediately it offers you interactive experiences. It’s mingling both online and offline data and the whole point is to make the experience of shopping at Nike more intimate more direct and more kind of one-to-one.
In-store data can also help inform stock control ensuring less waste in the supply chain, and improving sustainability as well as profit margins. According to one recent estimate, the volume of data collected globally is expected to increase from 33 trillion gigabytes in 2018 to 175 trillion. this will be accompanied by rising concerns about privacy and exploitation of personal data.
It used to be the case that customers had to exhibit their loyalty to the store that they bought. These days it’s the retailer that has to prove their loyalty to the shopper and that loyalty really means looking after their data.
Retailers will know increasing amounts about customers’ behavior habits and preferences. this may sit uncomfortably with some but one thing is for sure the inevitability is that this retail revolution will be driven by your data.
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