Price Points by Omnia Retail

In Omnia's Pricing Blog, our pricing experts cover all the latest trends, Omnia pricing events, customer insights and pricing strategies.

02.03.2023

Amazon moves to cut distributors to improve profits

In a bid to increase annual profits, Amazon is actively severing its relationships with third-party sellers. From 15 January 2024, as an email from Amazon to third-party sellers suggests, the e-commerce authoritarian will be pursuing partnerships with brands directly, squeezing brand owners out of their relationship with distributors if they want to remain on the online marketplace. Source: Consulterce - LinkedIn Amazon has experienced a downturn in sales and ad revenue from merchants in 2022, compared to the pandemic years of 2020 and 2021. “Amazon is trying to increase profit margins in its retail division at all costs right now,” says Martin Heubal, a strategy consultant who used to work for the tech giant and who helps Amazon vendors achieve growth on the platform. Bloomberg News reports that the platform’s advertising sales growth was shaky all throughout 2022, which affected its profit margins. In addition, Amazon’s sales growth was at its slowest over this period, resulting in new strategies to increase profits. Other game plans to boost profits include the recent layoffs of 18,000 employees, which is the largest in the company’s history. In addition, it was announced in early January that three warehouses in the UK would be closed down as a part of their downsizing procedures. What’s the impact on brands and distributors? Amazon suggests this new procurement strategy is to cut out the middleman and lower costs for consumers, however, this strategy suggests a broadening of the monopoly they have within online retail to force brands to choose between growth and profit with the marketplace or moving with their distributor who is being cut out. In the US, 40% of all online shopping is done on Amazon, which means 40 cents of every dollar a consumer spends is shopped on Amazon. Many brands may find that because of this grasp on consumer spending power, they may have to choose to do business directly with them, leaving their partnerships with distributors null and void. To add salt to an open wound, their business models and distribution strategies will be turned on their heads, while third-party sellers struggle to stay buoyant. In the same email, Amazon said distributors can still sell these products directly to customers on Marketplace, however, this will require price changes that will affect both the distributor and the consumer. Typically, distributors sell in bulk at a lower price, which benefits all parties. By having to move from B2B to D2C, a distributor will have to factor in new costs and strategies. Talk to one of our consultants about dynamic pricing. Contact us As 15 January 2024 approaches, brands have tough decisions to make As we know, 1P (first-party) brands lose many commercial freedoms when selling on the marketplace such as price setting. As we have seen in the past, once Amazon gains market share within a vertical and control of the client, they can dictate a price. So, is this a good move, long-term, for consumers and brands? Alternatively, if brands have other D2C channels, are they enough to maintain the same profit margins? Omnia’s Founder and CEO, Sander Roose, shared that the larger problem is this decision by Amazon will create many complexities for brands. “All of a sudden, brands will have new things to learn and new decisions to make. For example, how will the working relationship play out with Amazon after years of having longstanding relationships with their distributors? Should they sell 1P or 3P? How, and to what extent, should they use Amazon ads to fuel sales? What will the process be when Amazon starts making changes or demands about prices or inventory? This, I believe, is the main setback for those brands.”

Amazon

22.12.2022

As we head into 2023, Omnia reflects on a successful year behind us

Like any good sports team, Omnia takes a look at its wins and losses that shaped the year. With the acquisition of Patagona in 2021, this year would be the first full year as a combined company, bringing challenges and triumphs. As the team enjoys the festive season and cooler weather, Omnia takes a look at some of the milestones and goals achieved that made 2022 a successful year. In addition, we’ll be sharing some of our best performing thought leadership articles that helped solidify our name as leaders in pricing and retail knowledge in Europe. Team and customer events furthered our vision to be market leaders in pricing solutions In March, the team met in Darmstadt to reveal the new logo to the entire company. The new logo, which is a combination of the previous Omnia Retail and Patagona logos, represents the symbolic union of the two teams after Omnia acquired the company in 2021. Thereafter, everyone enjoyed a team bonding exercise at Climbing Forest Darmstadt. Customer events were of utmost importance in 2022 to deepen our relationship with our current customers; to answer any questions they may have, and to establish new business contacts. This year’s e-commerce events included sharing our new logo and stand design with the public and getting to know some new international fairs too. In June, Omnia Retail was in London for Shoptalk Europe, followed by Webwinkel Vakdagen in Utrecht at the end of the month, as well as K5 Future Conference in Berlin. In September, there was DMEXCO, which is a digital marketing expo and conference in Cologne, followed by the huge Hardware Fair in Cologne, where we have been partof the tailored e-commerce expo for two days. The event highlight of the year for Omnia was when we hosted our very own event, Price Points Live, which saw the best minds in pricing, consumer psychology, e-commerce, inflation, and sustainability in e-commerce come together to share their knowledge for our customers. Taking place in Amsterdam in October, it was a chance to provide our customers with detailed and quality knowledge to improve their businesses and teams. It was also the first time that the Amsterdam and Darmstadt customers were interacting and mingling together under the Omnia name. In addition, the event put us in the category of thought leaders who drive success with data, support and insights for our customers. Review the full video of the event here. The team welcomed new faces from six new countries in 2022 One of our core values is “free to be you and me”, which promotes diversity, inclusion, understanding and acceptance of all people, with no judgment based on gender, race, nationality or any other factor, which is why having team members from various backgrounds has always been important. By the end of 2022, Omnia totalled employees from 26 countries around the world, up from 20 in 2021. Females in line management positions also increased, growing to 27% in 2022 from 9% in the previous year. In addition, women in leadership positions increased to 33%, up from 17%. Customer feedback showed a positive experience Omnia received 10 new reviews on G2, one of the world’s most well-known aggregators for software services, with an average score 8.3 out of 10. Reviewing Omnia’s best articles for 2022 Our content team spent many hours and minutes researching trends and topics that would be helpful to our customers, as well as other entrepreneurs, retail leaders and those keen on expanding their knowledge in pricing. Here are our top 10 articles for 2022: The Strategies Behind Amazon’s Success Price: The Most Important P in the Marketing Mix Understanding and Using Market Penetration Strategies How Odd Even Pricing Helps You Utilize The Power of Psychology What is Bundle Pricing? For the Bicycle Industry, 2022 Creates a Continued Supply Chain Crisis How Pricing Influences the Consumer Decision Making Process Adjusting your Pricing Strategy to the Product Life Cycle Stage How Does Amazon’s Search Algorithm Work? What is MAP Pricing?

About Omnia

27.10.2022

E-commerce and pricing take centre stage at Price Points Live

Europe’s greatest minds in e-commerce, pricing, retail, and consumer psychology converged on Saint Olof’s Chapel in Amsterdam on Thursday 13 October 2022 to share their knowledge in an exciting panel discussion event, hosted by Omnia Retail. As the leaders of pricing software across Europe, creating the annual event for Omnia’s clients allows a way for each client to remain on top of their pricing strategies, e-commerce trends, as well as the ability to meet consumer demands. Find the full event recording below. Event Recording The event included six keynote speakers from various sectors in retail who shared insights and valuable knowledge in economics, inflation, e-commerce, pricing and consumer psychology. The speakers included Professor Hermann Simon, the leading pricing consultant who founded Simon-Kucher & Partners, and the author of over 40 books on pricing and business. David Sloff, the Commercial Director of Northern Europe at Diageo; Dr Heleen Buldeo Rai, a researcher at the Université Gustave Eiffel in Paris; Patrick Fagan and Dan Thwaites, the founders of Capuchin Behavioural Science; and Aline Schuiling who is Senior Economist Eurozone at Group Economics of ABN AMRO Bank. The event was moderated by Suyin Aerts and Omnia Retail’s Founder and CEO Sander Roose took to the stage to welcome event attendees and also took part in the concluding roundtable discussion at the end of the event. Aline Schuiling discusses current and future inflation This year, inflation across Europe has been the top issue on the minds of ordinary citizens, making it an important topic to delve into when discussing pricing strategies. Schuiling, who, as mentioned above, specialises in economics, shared an eye-opening statistic: “In Europe, energy prices are 40% higher than they were a year ago.” However, European consumers have not been left alone to deal with price increases. ”The good news is that European governments are contributing to offset the cost of gas to protect households and businesses,” says Schuiling, with Germany in the lead contributing 6.5% of their GDP. “Earlier this year, France already capped the cost of electricity and gas, and although their inflation is not zero, this shows you how governments can help,” says Schuiling. Despite high inflation being the order of the day today, Schuiling and her team of economists have positive predictions for the next two years: “From now and until 2024, the European Central Bank aims to anchor inflation at 2%, which is a steady decline from 10.1% in 2022.” How retailers can use consumer psychology to increase sales Speaking on the intersection of data, consumer psychology and e-commerce, Dan Thwaites and Patrick Fagan, co-founders of Capuchin Behavioural Science, took the stage to share how they help clients achieve commercial goals by influencing the minds of consumers. To showcase how specific, data-driven and science-backed their work is, Patrick shared how people who have a shorter name or nickname are viewed as more cheerful and popular. Another study they shared on how you can manipulate perceptions of yourself is wearing glasses, as studies have shown that people who wear glasses are viewed as being smarter and more reliable. So, how do these behavioural effects result in increased profits for brands? “Guiness, the beer brand, saw an increase of sales by 25% just by creating the Guiness beer glass and having large cardboard signage in the aisles. These act as slight nudges to influence a consumer’s purchase behaviour,” says Patrick.”Even products that are the colour orange see an increase in sales around Halloween time, like Reese’s peanut butter cups, because people are seeing orange everywhere and this acts as a subtle nudge,” he continues. “A study was done to show the influence of incidental cues on our perceptions and behaviours when a bottle store played different kinds of music while a consumer looked for wine. The amount spent on wine was more than double when classical music was played versus pop music,” Patrick shared. Other tactics to increase sales is to add phrases like “special purchase” or “everyday low price” next to the price to insinuate that this is a good deal. Capuchin’s strategies are based upon proven studies that have shown how consumers can spend more or less under certain conditions. There is empirical evidence for an intertemporal substitution effect, where people spend more money today because they expect goods to be more expensive tomorrow. Another study was shared on the anchoring effect which shows how prices may look more attractive when placed to something more expensive. For example, a luxury car is seen as more affordable when placed next to a luxury yacht. Another study based on the decoy effect allows retailers to place a decoy product that’s expensive next to the product they actually want to sell. Suddenly, the price of that product doesn’t seem so high when compared to the decoy. Lastly, an interesting study on numerical cognition shows how consumers see prices with lots of zeros as being higher. So, retailers could price a product at €4,655.00 instead of €4,000.00 and the lower price with the zeros may be perceived as being higher. Can e-commerce become fully sustainable? Dr Heleen Buldeo Rai, a researcher at the Universite ́ Gustave Eiffel in Paris, is interested in sustainable e-commerce and urban logistics and how online retail can work toward a greener industry in the future. Her keynote included 10 insights that retailers and brands would find interesting. “By 2025, about 30-50% of everything we buy will be done online. And so, it is time for us to look at ways to organise the e-commerce supply chain in a more sustainable way,” says Dr Buldeo Rai. “Online shopping produces 4x less carbon dioxide emissions versus traditional store shopping,” says the researcher, but home delivery still remains the most impactful part of the e-commerce journey on the environment, meaning retailers should consider offering new delivery options like collection points to lower their environmental impact. Dr Rai and her team found through an experiment that 59% of online shoppers would opt for a slower delivery method if the website had a “did you know” information box sharing that if they are given more time to group parcels, the environmental impact of delivering this parcel will be lower. Brand and retailers share more than they think, and shouldn’t be arguing with one another, says David Sloff As the Commercial Director of Northern Europe at Diageo, David explored the different perspectives a brand and retailer can have on the term “price”. He opened up about the complexity of different definitions of pricing, depending on the lens you are using to look at pricing. In his role as a brand owner for various consumer brands at P&G, such as Ariel and Braun, he stresses that it’s important to distinguish which price we are taking and, secondly, what goals one has when setting prices. On the topic of how brands should approach the Goliath that is Amazon, David recommends that brands shouldn’t fight the “Amazon-machine”, but sit and write down a strategy on how to control variables and keep them all consistent and fair with other retailers. Lastly, when talking about the intersection between brands and retailers, David says it’s all about the question of “How much value do we share?” And now, more specifically, “How much of the inflation do we share? We see more fights between brands and retailers but it's so important not to forget the goal of serving consumers,” he says. More good advice from David included focusing on value creation thinking in the mid-to-long term. Prof Hermann Simon explains the importance of goal-setting and true profit The last keynote speaker to present was Professor Herman Simon who is the Founder of Simon-Kucher & Partners and is the leading pricing consultant. He began by posing the question, “What is true profit?” In addition to defining it as the money made after all overheads, debts and contractual obligations are paid, Prof Simon goes on to share what the true profits are of food retailers, e-commerce platforms like Amazon, and tech companies. True profit for food retailers remained between 2-3%, while tech companies like Apple had profits in the mid-20 percentages and up. The point, for Prof Simon, is that the gap between “winners and losers” is growing “as some companies are getting it right and some aren’t” when it comes to choosing the right goals. According to Prof Simon, “profit orientation is the only meaningful goal because it is the only one that observes both the market side and the cost side. Elimination of profit killers is the most effective way to profit improvement. This especially applies to price wars and overcapacities, since they are the most dangerous profit.” When a profit driver is improved by 1%, Prof Simon surmises that the result is that the profit multiplier of price is 10, the cost is 6, for volume is 4. On the topic of inflation, Prof Simon says that it is essentially the decreasing value of money and for companies to survive and grow, they need to “get the cash in as quickly as possible and then spend it as quickly as possible.” The event concluded with all speakers joining Suyin and Sander on stage for further discussion on some of the key points made. “We know that these are very challenging economic times, but the exciting thing is that we really believe that pricing matters more than ever and can really help you win in the market, and we’re happy that you’ve chosen Omnia as your partner to achieve that,” concludes Sander. Stay posted for more business and commerce content or follow us on our LinkedIn page!

About Omnia, Retail Trends & Research, Pricing, Consumer Behaviour, E-Commerce

25.10.2022

How inflation is affecting production and overconsumption

With falling profits, rising inflation and bloated overhead costs, the world of retail and eCommerce is experiencing one of its biggest challenges since the 2008 global recession. Wall Street reported that of the 79 large retailers that shared their financials during the period of 1 April - 23 May, 59% of them reported a decrease in consensus revenue for 2022 and 71% estimated a decrease in earnings for 2023. During the same period, the S&P Retail Composite Index fell 24.1%. Either directly or indirectly, inflation affects everyone and everything that involves monetary exchanges, but two of the most impacted arenas are production and consumption. How are retailers feeling the pinch? Are consumers taking on the costs of retail corporations’ slacking profits? How does inflation affect consumer behaviour? And, amongst the fog, is there an opportunity for retail to shine through these difficult times? We’re answering these questions as we look at the impact of inflation on production and overconsumption. The domino effect of increasing inflation The Belgian food retail company Colruyt Group, reported in September that their profits for the most recent financial year have experienced a significant decline due to rising inflation. However, in a move unique to most food retailers, the group’s CEO Jef Colruyt has promised that the decrease in profits as a result of high inflation will not be a burden passed onto consumers and that they will continue with their low-price strategy into the new financial year. To offset the financial cost, the group is considering selling a part of its wind energy company Parkwind. Other food retailers are experiencing empty shelves as relationships with manufacturers and farmers have soured due to tense conversations over energy, employee and transport costs. For Colruyt alone, these rising costs could amount to approximately €200 million. Luckily for loyal Colruyt buyers, their relationships with manufacturers and farmers remain steady, and food shortages are not expected to be an issue. On the apparel side of retail, Nike is expanding its relationship with online marketplaces like Zalando, however, not without a cost. Although sales rose by 4% in the last quarter, the increase in manufacturing costs caused a 20% drop in earnings per share. In addition, gross margins fell to 44.3% due to higher transport costs including freight and logistics. However, the new relationship with Zalando is expected to be a successful one for both brand and retailer, as more Europeans will be able to access premium Nike products through Zalando if they are a Nike club member. Returns is already a €111 billion issue for e-commerce players - and that’s just over the festive season. Couple that with 2022’s inflation shock-to-the-system, it is no wonder brands and retailers are reaching for ways to curb overhead costs. In an eyebrow-raising moment for most consumers, global clothing brands Zara and Boohoo have begun charging for returns for their online shopping customers due to rising delivery costs. Zara is charging €1.95 per return, or, a return is free if they drop it off at a branch. It is also a tactic to increase footfall and to lure in impulse shopping. However, the commute to a Zara branch still requires time and money from the consumer and may be considered an inconvenience for shoppers who choose online shopping for the reason of convenience. Talk to one of our consultants about dynamic pricing. Contact us From production to consumption, how are retailers and brands reacting? A 2022 report by Unicef concluded that if every person in the world consumed resources at the rate of people in the EU and the OECD (which includes the US, the UK, parts of South America, Australia, Turkey and many European countries), we would need 3.3 Earths to sustain the level of consumption. An even worse statistic showed that if everyone consumed the way people in Luxembourg, Canada and the US did, we would need 5 Earths. In the long run, operating a sustainable company - and a sustainable world - with eco-friendly supply chains, manufacturing and delivery processes will be the most effective solution to overconsumption. It is a mammoth task that requires a years-long commitment, but companies like Apple, Google, Patagonia, Beyond Meat, Who Gives A Crap and more have made major moves to be more sustainable, to promote lower consumption, and to reuse. After piloting a secondhand items program, luxury fashion brand Balenciaga is planning to implement it full time after it showed much support from Balenciaga customers wanting to sell their secondhand purchases as well as potential shoppers keen to have a piece of the brand at a more affordable price. The brand, owned by Kering, says the move is part of their goal to become “a fully sustainable company” with a focus on consuming less, recycling and reusing. Balenciaga has selected Reflaunt, an online service that sells second hand luxury items to “embrace circularity” as their chosen resale platform. In August, Michael Kors also launched its resale side of the business, saying the goal is to extend the life of MK products and to reduce waste. The very existence of any luxury brand goes against the ideals of minimalism and anti-materialism. In fact, a luxury brand generally embodies the opposite: Flashiness, opulence, excess. It will be interesting to see how well these resale strategies work in terms of interest, sales and impact on overconsumption. On the consumer end, can inflation cause a decrease in overconsumption? French economist Jean-Pierre Malrieu says that “in these times of overconsumption, inflation is a gift from heaven” and adds that high inflation tends to “restore balance” when it comes to materialism and over spending. Sharing in this trend are many US consumers who, as reported by the New York Times, are changing their consumption habits. Some families have stopped using a house cleaning service and have opted to clean their homes themselves. Others have stopped taking their pets to professional groomers. Holidays include camping at local spots instead of cross country trips. Audible and Kindle subscriptions are being cancelled and replaced by books, walking and board games. Others have grown a vegetable garden and have learnt to make treat meals like pizza so that they don’t have to spend money on takeout. Some are updating old clothes instead of throwing them out and replacing them. How can retailers offset the impact of inflation without layoffs or passing the cost down to the consumer? Focusing on affordability. In retail, there are always ways to cut costs. Looking for suppliers that are less expensive or materials that are cheaper is a good starting point. Introduce exciting incentives. It’s been proven that team morale and productivity can be ignited when incentives are introduced. Whether it is bonuses, extra paid leave, or half days on Fridays, employees react well to incentives, with organisations using incentive programs achieving 27% higher profits and 50% higher customer loyalty levels. Implementing robotics and AI technology into supply chains. A study by Berkshire Grey found that processing time could decrease by 25% and processing costs by 35% if automation and robots are used in manufacturing and distribution. Take a granulated approach to price increases. Instead of applying widespread, top-to-bottom price increases to every product to offset inflation that will likely infuriate customers and erode loyalty, segment the products into categories that can withstand a price increase based on a customer’s eagerness to pay. Only the robust survive We have seen, with concrete data, how retailers who have a quick and confident response to high inflation not only survive but thrive in the years to follow, in comparison to those who stumble around wondering what to do. “The most resilient retailers were able to drive 11% annual growth in total return to shareholders”, McKinsey reports, between the years of the Great Recession of 2007 - 2009. This number was five times higher than their peers through to 2018. It’s numbers like these that prove how much power a brand, retailer or marketplace may have in times when they think they are powerless. The current inflationary period is not expected to disappear any time soon, and it certainly won’t be the last time retail experiences increasing freight and logistics costs, high demand and fractured supply chains. As stressful and as slow-moving as it is to trudge through the mud of inflation, one could almost develop a copy-and-paste strategy to sail through these seas each time they come round again. It’s all about making bold, forward-thinking decisions to turn challenges into opportunities. FAQs: Which countries have the highest overconsumption levels? UNICEF concluded in a 2022 report that if every person in the world consumed resources at the rate of people in the EU and the OECD (which includes the US, the UK, parts of South America, Australia, Turkey and many European countries), we would need 3.3 Earths to sustain the level of consumption. An even worse statistic showed that if everyone consumed the way people in Luxembourg, Canada and the US did, we would need 5 Earths. Tips to save money at home Choose to clean your own home instead of a house cleaning service Skip taking their pets to professional groomers and bathe them at home. Vacation locally instead of cross country trips. Cancel streaming subscriptions or podcasts that aren’t being used. Grow a vegetable garden or learn to make your favourite meals so that you don't have to spend money on takeout. Tailor old clothes instead of replacing them.

Research, Retail Know-How

15.09.2022

The e-Commerce Consumer Journey

If the planners and strategists of successful brick-and-mortar stores from 30 years ago knew just how vital the consumer journey would become to the success of retailers, they’d give themselves an extra pat on the back. From walking through the fresh produce aisle in the 90’s to navigating the very wants and needs of a millennial searching for vegan moisturiser online, understanding the consumer journey has always been pertinent to retail. Decades ago, shop planners knew that placing toiletries next to dry food goods would not make sense to the shopper as they travel through each aisle. In the same way today, customer experience officers are essentially trying to do the same thing - except with the added chaos and stress of the world wide web. Harvard Business Review defines the customer journey as “the steps your customer goes through in engaging with your company and/or product or service.” This includes the independent, internal process a potential shopper goes through before landing on your web shop’s homepage. For example, a potential consumer may be thinking that they would like to get into running as a hobby and they are searching online for a simple training schedule. These initial internal thoughts and feelings of the consumer are an important part of the customer journey - and it begins before they’ve even discovered the retailer. What are the main drivers of a buying decision online and which categories of products do people most love to compare online? We’re answering these questions and more as we delve into the customer journey as it stands now. How retailers can begin to better understand their customers with customer psychology and personas Customer psychology is a field of focus that developed from retail leaders trying to understand and monetise consumer behaviour. "Looking at a shopper’s age, location, socio-economic background, profession, purchase and search history, and other data can help e-commerce owners understand their shoppers and retain their attention and loyalty." Delving into the psychology of customers is a time-consuming, lengthy process, albeit a worthwhile one. To start this journey, online retailers and marketplaces could begin by creating a buyer persona or a set of personas by using customer data from: Loyalty programs. These programs are a certified way of receiving information on what’s most important to your customers based on how, why and when they use it. Newsletters and mailers. By looking at what consumers click on in mailers, you can see what products they’re most interested in. You can also see what kind of sales language works best for them. Organised focus groups. Based on shopper data, a retailer can organise a formal focus group of recent shoppers to ask them questions about their shopping experience, what criteria helped them choose your website, the product, the delivery and/or returns process, the intent behind choosing this product and brand, and more. Based on the information received from all three avenues, as well as taking a deep dive into a web shop’s Google Analytics data, e-commerce stores can begin to create a customer journey map - from Google or Instagram to the checkout page. What are the main drivers of consumer buying decisions? If we’re truly trying to understand consumer behaviour and psychology, there’s one main question at the centre of attempting to understand the key drivers of buying decisions online: Why? The split second a consumer clicks “Pay”, a series of thoughts, emotions, and strategic comparisons have already taken place to bring the consumer to that moment. In an academic paper written by Ana Teresa Machado entitled “Drivers of shopping online: A literature review” and published in Open Edition Journals surmised that the main drivers for buying decisions are made up of: Perceived benefits of online shopping. These may include the ease of shopping from the home or office; saving on time spent at the mall; finding deals specific to online shopping vs offline; or being able to easily and quickly compare prices for similar products across multiple stores simultaneously. Perceived risks of online shopping. These may be finding out at checkout that there is a hefty delivery fee; not being home when the delivery arrives; having to deal with a confusing or disorganised returns system; having one’s credit card information stolen; not understanding how to navigate the online store. External factors, which are: Consumer traits. This may be personal brand preferences or individualistic ideas on how frugal or frivolous one should be when shopping. It includes their lifestyle, socioeconomic background, location and personal choices, for example, if a shopper is vegan and focused on sustainability. Situational factors. This includes shoppers finding themselves in a particular situation: Being in a rush and looking for one specific product; being restrained by budget; purchasing a gift for someone else; trying a new recipe for the first time, and so on. Product characteristics. This may be product size, taste, texture, quality, price, and availability. Previous online shopping experiences. The number one reason for cart abandonment is finding additional, unexpected costs from online stores who don’t communicate shipping and delivery fees effectively. If a shopper feels slighted by one negative online shopping experience, this will affect the next one. Price comparisons: Which are the best and most-loved categories to compare? Briefly mentioned above, being able to compare prices efficiently and easily is a top reason why consumers choose online shopping over offline. One could have multiple marketplaces, branded online stores and e-retailers all open in separate tabs on their laptop with the ability to compare and choose the best product for their needs and budget. For example, the same New Balance running shoe may be present across 10 different e-commerce stores, however, which one is going to offer the best price, delivery time and method, returns policy and a discount for their next purchase? The consumer holds the power in choosing which online store will be the right choice for them, whereas brick-and-mortar shopping often leaves consumers feeling like they have no choice but to make a purchase there and then if they want a specific product. Because shoppers of e-commerce can easily compare, they also have the ability to be more informed than ever before regarding a product - or even an entire product category. Google surmises that 59% of the online shopping population today are making far more informed purchasing decisions compared to a few years ago. This trend was perpetuated by the rise in mobile shopping as searches for the “best” product surged by 50% year-on-year in the categories of apparel, home and garden, beauty and personal care, and computers and electronics. There are some products that don’t receive a lot of comparison searches, like toothpaste, and there are some that receive a ton of online traffic. That’s because, thanks to consumer psychology, we understand that some consumers intrinsically know that some products (like toothpaste) all do the same job, pretty much. However, not all moisturizers or running shoes or wireless headphones do the same job. A growing culture of feedback Luckily for the e-commerce industry, shoppers are more interested than ever to give feedback and reviews regarding their experience with a brand or marketplace. Google finds that 88% of consumers say they trust online reviews just as much as personal recommendations. Shoppers are using the reviews, comments and photos of a product to help make their decision in real-time. In fact, this statement is so true that when beauty brand Sephora implemented this reality and actively prioritised reviews on their mobile app, sales increased 167% in-store. Shoppers are also more open to giving data if they are going to receive relevant deals and promotions. Using both the data and the feedback, retailers can understand the customer journey now more than ever. Retailers and marketplaces can find pain points and common issues experienced among shoppers and actively target them to be remedied. It is up to retailers and brands to make good use of what the customer has to say and share to improve the consumer journey and to maximise sales.

Retail Trends & Research, eCommerce, Online Marketing

15.09.2022

Complete Guide to Selling on Amazon in 2022

With a massive reach (to the tune of 47% market share in the US and UK and 31% market share in Germany), it’s an incredible outlet to showcase products, earn more sales, and build brand awareness. But Amazon is also an overwhelming online platform for Sellers and consumers alike. With so many options for how to shop, sell, advertise, and win on Amazon, it’s no wonder there are lots of questions. In this guide we’ll answer some of the top questions we hear about Amazon and give helpful hints on how to succeed on the platform.

Amazon, Research

01.09.2022

How important is UI/UX in the online shopping journey?

Anyone working in the digital space in the early 2000’s can remember the experience of visiting a website: Blurry images, large bodies of text, broken links, slow page speed, empty categories and many more, as the world grappled with web development in its infancy. Needless to say, the user’s experience was static, disjointed, and enjoyable to say the least. Over the last two decades, web development has seen the growth of an entire sector called User Interface and User Experience - often abbreviated to UI/UX - which focuses entirely on the design and quality of experience while using a product or online service. While UI prioritises the look-and-feel of a website, UX focuses on the conceptualisation, implementation and delivery. From online stores to marketplaces to delivery tracking to getting a quote for travel insurance, any brand with a successful digital strategy includes UI/UX. Nevertheless, when it comes to shopping online, how important is UI/UX? Could a potential shopper abandon their cart early because of poor UI/UX? What are the trends today and beyond in UI/UX? We’re answering these questions and more as we delve into the online shopping journey. A superior user interface and experience leads to higher conversions Organising the flow within an online store is not dissimilar to how a supermarket organises their produce. Just how it wouldn't make sense to put toilet paper and cucumbers next to one another, UI/UX designers have the important job of creating seamless usability for shoppers, no matter what they’re looking for. Just like Amazon’s revolutionary recommendations feature that pushes sales and revenue, supermarket planners - and e-commerce designers alike - have to build a space that creates easy and helpful navigation as well as keeping profit top-of-mind. The UI/UX department is customer-centric, meaning it is built around earning and retaining consumer loyalty. If an online store or marketplace has an excellent user interface, they can expect positive outcomes: Increased screen time An intelligent, clutter-free and user-friendly UI/UX strategy will increase a shopper’s screen time. More screen time results in more sales and higher ROI (return on investment). A Forrester study revealed that good UI can improve a website’s conversions by 200% and good UX can increase conversions by 400%. Improved SEO If shoppers are spending more time on your online store, this will inadvertently improve your SEO (search engine optimisation). In addition, the way in which an online store is built goes a long way in Google prioritising your website. If your store is reminiscent of the early 2000’s websites mentioned above, Google is going to push your store back to pages 2, 3 and 4 in preference for more contemporary, shopper-optimised web stores. Increased streams of revenue from mobile and social commerce Revenue doesn’t just have to come from desktop customers. If you have a successful UI/UX strategy, your online store is mobile and tablet friendly, also called responsive,and connected to Instagram Shop’s marketplace, ensuring multiple channels of website visitors and sales from various types of consumers. Social commerce is expected to grow faster than e-commerce to €1.1 trillion by 2025, showing just how versatile and mobile-friendly an online store needs to be. Talk to one of our consultants about dynamic pricing. Contact us UI/UX trends for e-commerce in 2023 Dark Mode Apple introduced Dark Mode in 2018 on their iPhones and iPads, which uses darker colours on the display at night time or on a set schedule. Dark Mode not only lessens the harsh brightness of one’s screen on the eyes, but adds a level of sophistication too. It also reduces blue light and battery drainage on mobile devices. Some users opt for Dark Mode as a permanent setting. Instagram, Wikipedia, Amazon and Google have already started offering Dark Mode as an option. For desktop web stores and mobile apps, consumers will start seeing this feature more often. Voice search capabilities By 2026, the global voice recognition market will be valued at €25.9 billion and, currently, 71% of shoppers prefer to use voice search instead of typing, according to a PwC study. With the number of voice recognition speakers increasing in US and EU homes, being voice-search-responsive is vital to a retailer’s UI/UX strategy. Voice search and commerce embody the epitome of convenient and easy shopping, making it part of the next retail revolution. In addition, being voice-search-friendly lends a hand to improved accessibility and usability for consumers with disabilities. Video reviews When searching for and researching a product, it is always helpful to have shopper reviews on the same page as the product with a star rating and a short blurb, but e-commerce consumers today treat this as an expected feature that goes without saying. Considering that 80% of shoppers say that video reviews give them more confidence when buying an item, and an additional 50% of shoppers worry that a clothing or apparel item will look different in person, we should be seeing more e-commerce stores offering video reviews. Detailed and intuitive descriptions When shopping for shoes, a bikini or a new moisturising cream, a detailed description of the fit, feel, ingredients or incentivising characteristics goes a long way in providing important information as well as motivating the consumer to purchase. Coreelle, a South Korean online marketplace for high-end skincare, provides detailed descriptions using graphics and keywords in an interesting way. For example, a shopper can learn about this product in an innovative way by looking at the various images, key features like how it is vegan and cruelty-free in nature, and can learn how to use it by tapping the “how to use” tab. UI/UX is part of a brand’s identity and success 67% of website users are likely to make a purchase and 74% of users will return to a website if it has good UI/UX. However, the percentages are just as high for consumers who have waited longer than five seconds for a website to load or if they had a negative user interface experience. In fact, a website’s bounce rate increases by 35% if it doesn’t load within five seconds. E-commerce brands and retailers must ensure that they are aware of what consumers want along the shopping journey and how they can consistently improve and stay ahead of competitors.

Retail Trends & Research, eCommerce, Online Marketing

16.08.2022

E-commerce giants are using consolidation to gain market share

Mergers, acquisitions and consolidation: Three words the average consumer would expect to only hear in the sky-high buildings of the Central Business District (CBD). However, these strategic processes are more a part of the everyday consumer’s life than they think. By simply opening their Zalando or Amazon app to browse anything from electronics to swimwear to makeup, shoppers in the digital age and their money are at the very core of e-commerce consolidation - a trend that’s seen exponential growth in the last few years. What are some of the motives and developments behind consolidation? How are payment apps and systems becoming part of the big consolidation? And, is Amazon Marketplace a good choice for smaller businesses? We take a look at answering these questions as consolidation climbs the ranks at e-commerce’s biggest move in 2022 and beyond. eWallets: A consolidation trend that’s an end-to-end strategy The world of retail is always changing, and with the Covid-19 pandemic slowing down, it is astounding to look back at the development of e-commerce, marketplaces, mobile commerce and social commerce that’s taken place in the last two years alone. As we know, consolidation is not a new trend within business as a whole, however, we are seeing it move more and more in the online space with the acquisition and/or rise of eWallets and e-commerce-owned payment systems. By 2031, the mobile wallet market size will be worth $16.2 trillion, according to a Bloomberg report. This is a growth rate of 22% between 2022 - 2031. When thinking of mobile wallets, one may think of traditional banks offering an online or mobile solution, however, mobile wallets have become a hot development for e-commerce retailers and marketplaces. According to Transparent Market Research, the company that provided the statistics to Bloomberg, the key players in this growing field are Apple, PayPal, Amazon, Google, Samsung, and MoneyGram. An early instance of e-commerce marketplaces jumping on the eWallet train was in 2002 when eBay acquired PayPal, only four years after it was founded. However, PayPal still owned the payments portion of eBay’s e-commerce experience. In 2022, eBay no longer offers PayPal to its sellers, who now have to opt for their in-house payments system Adyen, meaning eBay now denies sellers access to PayPal. Payments are now transferred directly from eBay to the sellers account. But, why the change? Consolidating payments gives eBay more access to customer data, they can change any part of the system at any time to benefit themselves or their customers, and they can incorporate local payment methods. The change for eBay only officially started in June 2021, so time will only tell how this affects revenue, market share and customer relations. From the US to China, Alibaba, which ranks at number one in its homeland, is arguably the world’s second largest e-commerce marketplace. Alibaba is so large - and so entrenched - it holds 51% of China’s retail e-commerce market share. JD.com, which takes second place, came in at 20%. Similarly to the eBay-PayPal relationship mentioned above, Alibaba has its own payments system, AliPay. Amazon has Amazon Pay, Apple has the same, and Google too. Tencent, an e-commerce marketplace in China has WeChat Pay and even Facebook, originally a platform created to connect friends and family, has developed Meta Pay this year. This fact alone should tell a consumer that tech and retail e-commerce giants are consolidating the entire shopping process, end-to-end. These e-commerce Goliaths have created an ecosystem for the consumer to exist in and to keep rotating between, as if there are no other options available. Using just one company and one platform to search, shop and pay also provides them with more customer data, thus fine tuning their understanding of customer behaviour and expectations. The consumer continues to turn in a revolving door fashion within the same company - and that’s the power of consolidation. How Amazon Marketplace leads consolidation, but suppresses competition Amazon aggregators, which are larger businesses operating specifically to seek out and acquire smaller businesses on Amazon Marketplace, will experience a boom in size and profitability in the coming five years, after it already achieved $300 billion in sales in 2021. Currently, there are 99 active Amazon aggregators. These larger companies, such as Perch, RazorGroup and Heyday, have been seeing the value of smaller businesses selling their goods on Amazon, even if they aren’t even close to being a household name. Why? Due to the power, influence and market value a brand can build on Amazon Marketplace. Amazon Marketplace’s authority in owning the consumer is so large, it dominates their searches on the world wide web. Of all US adults, 53% of them start their search online for products on Amazon - not a search engine. Globally, search engines are in first place at 40%, however, Amazon is in second, only trailing by a 2% difference at 38%. Only 16% of searches included a consumer going directly to a brand’s online store. In addition, Amazon reported that independent businesses selling goods on Marketplace in the holiday season of 2021 sold approximately 1 billion items, which saw a 50% increase in sales from 2019. Lastly, a New York Times report found that all the sales on Amazon Marketplace were almost double that of Amazon Web Services (AWS) in 2021. It is no wonder, then, why businesses in the business of consolidation are after the success and profits of small-to-medium-sized enterprises (SMEs) on Amazon Marketplace. Although the sound of almost instant success as a seller on Amazon Marketplace sounds enticing, competitors in the industry, as a whole, suffer the most and are being quashed. A small business with a product on Amazon and Walmart, with the latter platform having a slightly cheaper price, will see a decline in digital real estate when Amazon implements its buybox suppression strategy. The seller is then forced to raise their price on Walmart, which isn’t ideal for both the consumer and the seller. Furthermore, Marketplace sellers may enjoy the consistently high revenue and the ease of Amazon managing its shipping, but they basically have no rights as sellers over their own product. As a Marketplace seller, they also can’t sue Amazon for anything. More dominance and less transparency means Amazon is able to control the seller, own the consumer and unfairly dictate to the market. Talk to one of our consultants about dynamic pricing. Contact us What are the main motives for consolidation? Avoiding the domestic growth slump One of the ways e-commerce retailers are attempting to avoid reaching their growth limit within their home country is to expand globally. Because competition is stiff; the market is saturated, and consumers have the pick of the litter, retailers are finding that going global can avoid a domestic growth slump. Forbes reported that 76% of online shoppers have made a purchase from an online store outside of their home country. Going global is no easy feat, and even some of the more successful retailers consolidate smaller retailers in new markets to make gains in market share and to increase revenue for further internationalization. Becoming a one-stop-shop Before e-commerce exploded, brick-and-mortar retailers consolidated by adding shops within a shop. For example, you’d be able to go to a hypermarket and purchase items from food to portable speakers to pharmaceutical medication to camping gear. Today, online stores are wanting to increase their value to consumers by becoming a one-stop-shop. eBay and Amazon began this trend more than a decade ago, however, new players like Etsy, Zalando, Cdiscount, and Allegro, are disrupting Amazon and eBay’s market. Understanding, then shaping consumer behaviour By attracting and working to retain new customers, retailers can understand the needs, wants and desires of shoppers from various age groups and socio-economic backgrounds. They can collect this data and in turn use it to better tailor their product offers to consumer behaviour, for example, through intelligent pricing strategies also in combination with inventory, marketing campaigns and of course promotions. The more retailers “own” data and the better they understand their customers, the more they can curate their products and online platform to make profit. A tough decision for smaller players Consolidation after fast digitalisation is taking place at an alarmingly speedy rate, turning online stores into marketplaces into e-commerce conglomerates. There are many benefits to consolidation for big players, however, smaller businesses will need to seriously weigh out the pros and cons in the face of the company’s ethos, mission statement and long-term goals.

Retail Trends & Research

04.08.2022

The Future of Marketplaces

Of the $5 trillion global digital commerce market, $3 trillion comes from marketplaces alone. As a niche of the e-commerce industry, that’s quite an achievement, considering how many more individual online stores there are in comparison to marketplaces. Some of the most well-known online marketplaces are Amazon, eBay, Alibaba, Etsy and Walmart. Instagram and TikTok: From scrolling to buying In Europe, these are all available, however, online marketplaces specific to the EU are Cdiscount, Real.de, Otto, Bol.com, Zalando, Beslist.nl and many more. Although Amazon is an American company, they are still the number one online marketplace in Europe, with approximately 1.6 billion visits per month. Another American company, eBay, stands as the EU’s second largest marketplace, however, with only 37% of Amazon’s European traffic. Nonetheless, what does this all mean for the future of retail and e-commerce? How will the landscape of marketplaces change over the coming years? Which sectors and departments of retail are leading the way in the marketplace space? As we look to the future of marketplaces. Social media and search platforms When search platforms like Bing, Yahoo and Google first came onto the scene in the late 1990’s and early 2000’s, the wonder and awe of having the world’s knowledge at your fingertips was life-changing, and this is before the addition of advertising and shopping features that followed later on. Users of the internet would never have guessed that a search engine like Google would become, in essence, a marketplace on its own. The same can be said for social media platforms like Facebook, TikTok and Instagram which started out as spaces to share photos, videos and to connect with friends and family. Looking back at their original states, it is astounding to see the growth and evolution of social media platforms and search engines. In 2016, Facebook created Marketplace, a section of the platform that provided locals in a city to buy from and sell things to one another. Instagram tested out shopping features through Instagram Stories in 2018, but by 2021, the feature was so successful that the platform created an entire tab dedicated to shopping. From clothing to swimwear, jewellery to furniture, the tab curates posts and ads from brands and retailers selling their products. The feature has become so advanced, users don’t even have to leave the Instagram app to complete a purchase. In 2022, 44% of Instagram users shopped weekly on the app and 50% of Instagrammers use the app to find new brands. According to Facebook’s own data, 1 in 3 users in the US will use Marketplace to purchase something, keeping in mind it is the 5th most popular marketplace in the country. Social commerce, as it has come to be known, is only going to get larger, with sales expected to reach $600 billion by 2027. It is safe to say that social platforms have moved from content sharing to content marketing to multi-brand, retail-driven platforms. Search engines have had a similar meteoric evolution. Google offers a “Shopping” tab, similar to their other offerings like Maps, Images, News, Calendar and more. Bing and South Korea’s Naver also offer a Shop-like section. Google’s search technology allows it to be the leading search engine marketplace as they incorporate shopping options into organic searches, including voice search. For example, if someone Googled “red triangle bikini” or “dairy-free baby food”, search results would be an intricate and deliberate blend of content and digital commerce including products from brands and retailers. The marketplace business model has come a long way since the Bazaar of Tabriz in the 16th century. Talk to one of our consultants about dynamic pricing. Contact us Second-hand apparel: A growing marketplace Shopping for vintage clothing and buying from second hand clothing stores is not new, but it is, in itself, revolutionising. Covid-19 had an impact on resale marketplaces, as families and individuals looked for ways to make money or ways to scale down on consumption and expenses during lockdowns, job losses and furloughs. By selling and monetizing fashion, instead of adding to global waste, consumers were able to maximise the circle of fashion - and ultimately drive the growth of resale marketplaces around the world. Buying clothes previously owned by others is not only becoming a multi-million Euro industry, but it is firmly finding its place on its own as an online marketplace. Also known as a resale platform, the second hand apparel market is expected to be valued at $218 billion by 2026, doubling in size from 2021 to 2025. The likes of Vinted, a resale platform in Europe, the UK and the US founded by Thomas Plantenga, allows users to buy and sell used clothing and other items through its app and desktop option. Over 65 million people around the world use the service without having to pay selling fees - a feature quite unique to most marketplaces and resale platforms. On the other end of the resale platform market is Dubai’s The Luxury Closet (TLC), which acts as an exclusive, premium resale platform in the Middle East. You can buy second hand luxury items from Louis Vuitton, Hermes, Dior, Rolex and more. TLC’s success and popularity has grown so large, it has opened up in the UK market in July. Later on in 2022, it plans to extend to Europe. Resale platforms like TLC have tapped into a new arena of the second hand market, offering consumers the chance to own designer items at lower prices than what one would pay if it were new. What makes a resale marketplace unique to shopping at a second hand store is, firstly, the experience and, secondly, the fact that major resale platforms include the products from smaller second hand apparel businesses, making it a marketplace and a retailer simultaneously. Resale platforms have a business-to-business (B2B), a business-to-consumer (B2C) and a consumer-to-consumer (C2C) business model all running concurrently. The UK’s resale platforms market already includes Mr Porter Resell, Reflaunt and Lampoo which are also available in France, Germany and the Netherlands. Vestiaire Collective is Europe’s largest resale platform, of which The Luxury Closet will have to contend with. Vestiaire Collective’s CEO Maximilian Bittner believes that the growing focus on sustainability will further drive the success of resale marketplaces. “Fashion fuels some of the world’s biggest problems: Overconsumption, overproduction, climate change, and work ethics,” he said in an interview with McKinsey & Company. He admitted that he was surprised at how much of the sustainability aspect pushed the success of Vestiaire Collective specifically: “The investors who reached out to me at the time looked at this very much as a second hand, luxury fashion business. I don’t think people were yet seeing how big the sustainable opportunity could be. And I really have to admit, I didn’t see it either. But the speed at which it came now absolutely surprised me.” Another resale marketplace that’s focused on sustainability is Depop, which encourages engagement between sellers and buyers as a part of the second hand and thrifting community. The sellers are new-age brands and the buyers are consumers mostly from the Gen Z population - approximately 90%. Depop has had $1.6 billion in purchases to date; showing just how steadfast resale marketplaces are becoming as they disrupt Google Shopping and traditional wholesale retailers like Walmart. How are traditional brick-and-mortar brands making a change? Despite experiencing store closures amid lockdowns in China 2020 and again in 2022, with a third of their stores in the country remaining closed, luxury brand Chanel is doing well globally with a double-digit improvement in sales. Global sales increased by $15.6 billion in 2021 - a 49% increase from the previous year. However, the company’s CFO Philippe Blondiaux shared in June that despite the boom in sales, Chanel has new plans to further increase profits, with some of those plans seeing major changes in how the consumer will experience shopping at Chanel. For one, the brand may begin limiting availability of certain products to instigate soaring demand, which is something they have already started doing with their Classic Flap bag. Blondiaux shares that one customer can only buy two of these bags per year, which cost $10,000 each. This will increase exclusivity of owning a Chanel item and will also curb the bulk buying that often takes place within the resale and grey market. Chanel has already seen how effective this strategy is in South Korea, where customers have lined up outside a Chanel store in the capital of Seoul to take part in what’s called an “open run” - a sprint to get one’s hands on high-demand items. Another strategy used by Chanel will be a greater move to direct-to-consumer (D2C) within the next few years, which is something we’ve seen retailers and brands do on a heightened scale since 2020. Blondiaux shares that their magnificence and perfume enterprise, which is their department for makeup, perfume and other beauty products, will mostly exist online as they prioritise e-commerce. This department has largely always relied on wholesale or brick-and-mortar stores to succeed, however, since e-commerce sales jumped 32% for the magnificence and perfume department, it will soon become the channel of priority for Chanel. Other wholesalers, like makeup retailer Sephora and high-end perfume and cosmetics retailer Marionnaud, have both seen their wholesale orders drop drastically in the US market, which can be attributed to the growth of e-commerce and a decline in American malls. Department stores are taking tips from online marketplaces Concept stores Successful online marketplaces focus heavily on the actual experience of shopping online, using beautiful imagery, video content, seamless payment processes, intuitive “you may also like” suggestions, dedicated brand pages and more. When a consumer shops on an online marketplace that focuses on the entire shopping journey, they can feel the difference from walking into a department store that’s wall-to-floor merchandise. Nowadays, we are seeing international brands take a hard look at their stores to see how they can evolve and remain interesting and relevant. The idea of the “concept store” takes the very senses and experiences you would want in a marketplace and brings it to life in physical form. Walking into an Adidas or Nike store to buy a pair of sneakers or visiting Yves Saint Laurent to purchase a coat is no longer just about the product - it’s about the lifestyle of the brand. In fact, concept stores have very little product in them, as a way to maximise exclusivity whilst providing a visual experience. Nike has created a “House of Innovation” that combines sports luxe, technology and sustainability as an experience. Each store is solar powered and made from sustainable materials, while digital technologies are used to show off the athletic capabilities of each product. Inspired by fragrance bottles, Hedi Slimane, the creative director for Celine turned their Parisian store into a luxury fashion experience. “Fragrance precedes the fashion I create,” says Slimane. The store combines Celine’s 11 new fragrances, high-end leather goods and haute couture items. Store-in-store Although the store-in-store concept is not new to retail, it has seen an increase in popularity as retailers consolidate smaller brands and businesses, and brick-and-mortar retail contends with e-commerce. Some brands have also merged, combining their products, employees, logistics and resources to stay in business. An example we all may be familiar with is a branded coffee shop like Starbucks within a clothing or food store like Macy’s; or a beauty retailer such as Sephora having an in-store kiosk for JCPenney. According to a Mastercard study, “to increase offerings to customers” came in as the top reason for stores joining forces at 33%. To consolidate resources and to increase foot traffic came in second at 25%. Marketplaces are the new ground zero Department stores used to be the original playground for consumers to search for new brands; to compare products and to enjoy the endless amounts of choice. However, an online marketplace could be compared to an entire mall with all the options of various stores and categories. Although department stores and wholesale retailers still hold a significant place in retail, the changing face of marketplaces is evolving rapidly. In 2020, 63% of all global online spending occurred via online marketplaces; a figure that increased by 29% from the previous year. With a growth rate like that, it is easy to predict that online marketplaces will be the new go-to choice for consumers around the globe. Going forward, retail leaders will need to reconsider their approach if they are yet to enter the online marketplace arena in order to further monetise their current commercial strategies, increase their relevance, as well as their global or domestic footprint.

Retail Trends & Research

02.08.2022

Are we seeing the rise of social commerce?

“Where did you buy those jeans from?” someone may ask. “On Instagram,” another may say. Ten years ago, that answer would’ve received a confused, eyebrow-raising expression. Today, it is met with someone picking up their phone and logging into Instagram to get shopping. How has social media become one of our top destinations for browsing, searching for new brands and tapping “Place Order”? In fact, Forbes predicts that social commerce is set to grow faster than e-commerce to $1.2 trillion by 2025. Over the last few years, we predict that three major factors have contributed to this shift: The expansion of brands and products; the increase and ubiquity of digital marketing; and the growth of social media apps. Is social commerce proliferating to the point of taking over traditional e-commerce? And with brick-and-mortar shopping still very much holding a presence in retail, how are brands and retailers dealing with the rise of social commerce? Instagram and TikTok: From scrolling to buying The app that has led the way in social commerce up until now is Instagram. Its parent company, Meta, added some shopping features in 2016 like product tags, however, the shopping section of the app only truly flourished from 2019-2021 when features like a dedicated “Shop” tab was created with Instagram checkout; categories for various items for easier browsing; shopping stickers on Stories; and ads so that users can discover new brands. Each month, 130 million users tap on the Instagram Shop tab and engage with Instagram Checkout, showing just how valuable the platform can be to brands and retailers. What’s also interesting about the Instagram Shop tab is how its algorithm connects consumers with products. According to a Hootsuite study, 2 in 3 people say the network helps foster meaningful engagement and connections with brands. Another platform that is claiming its stake among social media sites as an e-commerce powerhouse is TikTok. Although Instagram is still the bigger platform in terms of monthly users, TikTok dominated the amount of app downloads for the first quarter of 2022, achieving 175 million downloads; totalling over 3.5 billion. The last time an app had this much global reach was in 2018 when WhatsApp achieved 250 million downloads within one quarter. Another statistic that should prick the ears of retail and business leaders is the fact that the average TikTok user spends approximately 29 hours per month on the app while the average Instagram user spends only 8 hours per month. If a potential shopper is spending this much time directly engaging with content on a platform, who’s to say that this time isn’t being converted into sales and profit for brands and retailers? These numbers have - or should have - implications for a brand’s marketing and commercial strategies. According to a Shopify survey, 21% of consumers who use social media to shop use TikTok “all of the time”, making it the platform most used for shopping. YouTube came in second at 17%, and Instagram at 16.4%. Furthermore, 67% of TikTok users say they feel inspired to shop even when they weren’t planning on doing so. What makes TikTok such a successful shopping platform is its unique algorithms, dedicated shopping features, and its focus on sharing instead of liking, which spurs the virality of a product. In addition, unlike Instagram where users primarily follow creators and see their content, TikTok users are used to receiving suggestions from the app in their stream, regardless of which creator it comes from, as long as it aligns with the kind of content they’ve already shown to like. It is therefore easier for brands, retailers and advertisers to place ads here and get into the user stream. What are traditional wholesalers doing to combat social commerce? If you can’t beat ‘em, join ‘em. Well, that’s the philosophy at least adopted by some traditional wholesale retailers like Target and BigBuy who are riding the wave of social commerce to increase sales and relevance - instead of standing idly by on the sidelines. As we’ve said before, if brick-and-mortar retail wants to remain significant to consumers, they need to adopt digital commerce strategies, and that’s exactly what we’re seeing develop. Scrolling through social media, you can now access high-traffic wholesale retailers like Target, who have their own dedicated Instagram Shop and Checkout - and they’re not the only ones. Walmart, Saks Fifth Avenue and the Net-a-Porter Group all have Instagram Shops that users can shop from directly. According to a Huge Inc study, 74% of shoppers say they are now more incentivised to shop on social media than before the Covid-19 pandemic, making the convergence a necessary strategy for wholesale retailers. However, some brands are still committing to brick-and-mortar expansion, like Spanish clothing brand MANGO who is planning to open 30 new stores in the US in the coming years. A blended network For consumers, shopping can be accessed at their fingertips, while they work, while they look for travel inspiration on TikTok, or while they lie in bed listening to a podcast. In other words, it’s more accessible than ever. For brands and retailers, keeping up with the multiple ports of shopping demanded by consumers is a must for survival. With wholesale retailers turning to social commerce, and photo-sharing platforms becoming digital marketplaces, the retail landscape is blending, blurring and converging. It is becoming a space where traditional labels and rules don’t apply in the hunt for consumer attention and loyalty.

Retail Trends & Research

15.07.2022

A Guide to Amazon Marketing

One of the best ways to use the full power of Amazon is to tap into its advertising capabilities. With such a huge reach into consumer markets, it’s a unique channel for advertising specific products, building your brand awareness, and more. Amazon Marketing Amazon is an incredible platform on all fronts. With an massive reach (to the tune of 47% market share in the US and UK and 31% market share in Germany), it’s an incredible outlet to showcase products, earn more sales, and build brand awareness. Amazon marketing strategy Amazon uses the high runner strategy to market its products. This strategy uses data to uncover which products are in the highest demand in every category. Amazon's pricing algorithm then prices those products competitively and bids heavily on advertisements to pull people to these products. Once a consumer is on the Amazon site, they’re likely to buy accessory products at full price. Check out Omnia's Amazon Repricing Software for free Request a demo How to target Amazon sellers on Facebook Search Facebook groups for Amazon Sellers and see if there are any interesting groups to join. You can even try localization efforts and look for Amazon seller groups in your area. Note that many of these groups are intended for Sellers to form a community; as a result, many don’t tolerate any “selling” within the group. Regardless, connecting with others in this community is a great way to get in touch with potential customers and learn more about your target market. You can use this information to run better targeted campaigns on Facebook. You can discover who big names are in the Amazon Seller community, then run ads based on the audiences that like that public figure’s Facebook page. You could even reach out to the public figure and see if they would be interested in marketing your product directly to their audience. What is Amazon’s marketing service? Amazon Marketing Service was Amazon’s first portal for product advertising. It has since been retired and replaced with Amazon Advertising. This new portal is a simplified way for Sellers to control all their media, marketing, and advertising under one unified umbrella. Amazon Advertising is where you’ll find all advertising options available to you. There are currently three different types of paid ads that you can buy. Below is a great 3-minute video about Amazon Marketing Service and how it works. How Amazon uses big data to boost its performance Before getting into the logistics of Amazon’s advertising program, it’s important to understand what makes the platform different from other marketplaces: data. Consumer data may be Amazon’s most valuable asset. And Amazon has a lot of it. As Neel Mehta, Parth Detroja, and Aditya Agashe wrote for Business Insider, [Amazon has] 1.5 billion items listed for sale and 200 million users. Amazon has one billion gigabytes of data on their items and users. If you put all that data on 500-gigabyte hard drives and stacked them up, the pile of hard drives would be over eight times as tall as Mount Everest. Now that's some big data. Amazon’s goal is to learn as much about consumer shopping habits to deliver better experiences to customers. Amazon knows which products are popular, when they purchase it, how much they pay, and more. Amazon uses data to boost its performance through three main measures. First and foremost, it uses data to adjust prices and capture more margin via a high-runner strategy. Second, Amazon uses consumer data to power its advertising business. In 2018, Amazon made $10 billion USD in revenue from advertising alone. This made Amazon the third-largest advertising business that year. For comparison, Facebook made $16 billion on advertising in 2018 and Google sold $135 billion worth of ad space. This is a powerful number, and it makes Amazon nearly impossible to ignore as an advertising space in its operating markets. How does Amazon promote its products? Amazon may also use this consumer data to develop its own brands. The AmazonBasics label has been around since 2012, but in the last few years the label has exploded. Rachel Kraus reported in an October 2019 Mashable article: Amazon launched AmazonBasics, a line of everyday products like batteries and cookware, in 2009. It has been growing its private labels ever since, constructing more than 100 fashion, home, and electronics brands in the last 10 years. In 2017, private label brands accounted for $450 million in sales. And in July 2018, analysts estimated that private labels would account for $7.5 billion in sales in 2018. (Amazon has not yet released its 2018 annual report.) Amazon sells its private label products in its Marketplace, right alongside nearly identical products from independent sellers. Amazon Advertising Advertising on Amazon involves coming up with a strategy, paying for ads, and creating great product pages that drive sales. How do I advertise on Amazon? Setting up an advertisement on Amazon is easy. Just log into your Seller Central account and navigate to the “Advertising” tab. From there you can pick the products you want to promote, set up a strategy with keywords and bids, then launch your first campaign. Amazon advertising in the UK, Netherlands and USA One of the best perks of advertising on Amazon is the ability to reach a global audience. Certain Professional Sellers have the option to display their advertising listings across different marketplaces around the world. The best part? No translations. Amazon will help you get your advertisements in front of the right audiences internationally by targeting relevant customer searches. It also gives you data on these search terms so you can learn more about your audience in the country (and make more sales). To get started with international advertising, log into your Seller Central account, find eligible international marketplaces, and create a campaign for your products in that marketplace. Amazon advertising on my website Marketing your Amazon products doesn’t begin and end on the Amazon platform. You can also connect with Influencers to get your products in front of engaged audiences via the Amazon Affiliate Program. In the Affiliate program, Influencers generate unique links to your Amazon product listings. They can then place these links across all their channels, whether that’s a blog, a Youtube channel, or even Pinterest. While Influencers can pick and choose which items they want to advertise on their channels, it may be worth it to reach out to them directly and offer a partnership: you can provide free product, and the Influencer can promote your products with an affiliate link. Influencers can earn up to 10% of the profits when someone purchases through their Amazon Affiliate link. If the Influencer has a large enough audience, this can easily be a great source of (recurring) revenue for your Amazon products. Amazon a+ page examples Amazon has a premium program called A+ Content that helps you build product pages that are inspiring, informative, and conversion-focused. The program is only available to professional sellers who have been approved as brand owners. A+ Content lets you put more multimedia content on your page through the form of several different types of widgets. You can add rich text, additional images, videos, and more through A+ Content. TheraBreath is a great example of a stellar A+ Amazon page. It includes the standard of four images, a video, and five compelling bullet points. If you scroll further down the page though, you’ll see the A+ Content, pictured below. It includes a table comparing different products to each other, a note about the creator, and some unique graphics that reinforce the benefits of the product. Another nifty feature is that when you click on one of the ASIN products featured in the table, you’ll be automatically redirected to that specific product page. If your product category is especially competitive, A+ Content might be a worthy investment. It can help make your product stand out and can improve sales conversions and increase your visibility in Amazon's search algorithm. How much does Amazon advertising cost? The average cost per click on Amazon is $0.97, but advertising costs depend on a number of factors, including how many competitors are also bidding on that keyword. Amazon cost per click advertising: how much does Amazon charge per click? Amazon ads are auction-based, meaning that you pay 0.01 cent more than the next highest bid, regardless of how high your bid was. For example, if your bid was $5, and the next highest bid was $3, you’ll win the auction and only pay $3.01. What is Amazon DSP? Amazon Demand Side Platform (DSP) is a platform that enables you to programatically buy display and video ads. Launched as a competitor to Google Display Ads, DSP allows you to create advertisements quickly and drive traffic directly to an Amazon listing. Where Google ads send traffic to a website, DSP ads link directly to Amazon. Sellers can place these ads on Amazon, but also on third-party websites. Amazon launched this service to help bring more shoppers directly to the site. As the number of Sellers exploded on Amazon, the company needed a way for Sellers to pull in more shoppers as well. There are four different types of ads that Sellers can purchase through Amazon DSP: Desktop ads: display on a user’s desktop browser Mobile banners: display in a shopper’s mobile browser Mobile interstitial ads: display across mobile and desktop browsers In-stream video ads: run video ads on Amazon’s websites, mobile apps, and the Kindle Fire wake screen Why use Amazon DSP The biggest benefit of Amazon DSP is to get access to Amazon’s exclusive market data. As the world’s largest e-commerce platform, Amazon has incredible amounts of data on consumers. Buying into the DSP platform gives you access to this consumer data and lets you create tailor-made advertisements that match different audiences and different buying intentions. You can not only learn more about the people who are already buying your products, but also learn more about new audiences whose interests overlap with your existing audience. If you give Amazon a sample of your existing audience, it can automatically generate a “lookalike” audience that is similar to yours. Amazon DSP also makes it easy to reach these people. The program automatically generates advertisements based on your audience and its insights and will automatically test the performance of these ads. Learn more about what Amazon DSP can do in the Youtube video below. When to use Amazon DSP Amazon DSP is a sophisticated marketing system that can help you drive more sales, but it’s not the starting point for any Seller on Amazon. Before diving into DSP, make sure the rest of your marketing on the platform runs smoothly. This includes your PPC campaigns, but also your organic efforts through Amazon’s search algorithm. Final thoughts When it comes to marketing on Amazon, it’s really no different than marketing on any other channel. Be interesting, provide value, and think strategically, test consistently, and you’ll be able to see some results.

Retail Trends & Research, Amazon, Featured

13.07.2022

How does Amazing Pricing work? A Guide for Retailers & Brands

It’s no secret that pricing on Amazon is complex, and Sellers get lost quickly in the world of Amazon pricing. To help, we created a short guide that has all the essential information about pricing on Amazon. In this post, we’ll explain how pricing on Amazon works and give some tips on how to get the most out of the platform. How does Amazon pricing work? Amazon pricing is tricky on all fronts, from how it charges Sellers to how product pricing works on the platform. Amazon Seller pricing There is an Amazon pricing structure for any Seller, regardless of how many products you have in your shop. Whether big or small, you can find an affordable way to sell items through the marketplace. Amazon pricing structure There are two ways to sell on Amazon: as a Professional or as an Individual. The Professional plan lets you sell an unlimited number of products for a $39.99 monthly fee. Individuals can sell on Amazon for $0.99 per item sold. If you plan to sell more than 40 items each month, it makes more sense to purchase the Professional Seller plan. The Professional plan also makes sense if your items have low price points; $1 per product sold is an outrageous fee if you sell a product for $3. The Professional plan also unlocks new categories for sales and has additional features that help you sell more products. Amazon seller fees If you think the costs of different selling plans on Amazon sound inexpensive, you’re not alone. Unfortunately, besides a monthly payment for your store (or payment per product for Individual Sellers), Amazon charges fees per product sold. There are several fees that individuals and professionals must pay per item sold. These include: Referral fees on each item sold: a percentage of the final price of a product sold Shipping fees (which apply regardless of fulfillment method) Closing fees Amazon’s fee structure can get complicated, so it’s worth examining the Selling on Amazon Fee Schedule. If you are an FBA Seller, Amazon will charge you additional storage and fulfillment fees. Amazon also has a calculator that can help you estimate your revenue, even with fees. Just enter the product name, UPC, ASIN, ISBN, or ASIN number and product details and you’ll get an estimate of how much revenue you can expect to earn. Amazon price changes Besides having a complicated pricing structure, Amazon also has a complicated pricing model. The company is a pioneer in dynamic pricing and makes over 250 million price changes every day. The average product’s price will change once every 10 minutes, making it difficult for Sellers and consumers to keep up. Amazon price match Amazon doesn’t have any price-match guarantee. If consumers find a product they’ve bought for a cheaper price online, there’s no way for them to ask Amazon to pay the difference in price. This is mostly for practical reasons. Amazon used to have a policy like this, but as the market became more fluid, the policy became impossible to honor. Amazon recognized that a dynamic market meant price match policies would become obsolete. With this knowledge, the company eliminated the policy in 2016. Amazon price protection 2020 Amazon also doesn’t have any price protection policy. Consumers just have to trust that the company offers the lowest price on the market. Amazon’s reputation for offering lowest prices isn’t unfounded though, and a 2018 study by Profitero found that Amazon was 13% cheaper than other major online retailers in the US. So even without this policy, consumers likely do receive some of the best deals on the platform. Amazon Repricing Software Regardless of whether you’re a Seller or a consumer, Amazon becomes overwhelming fast. Luckily, technology can help both Sellers and consumers get a better understanding of Amazon and reap the best benefits of the marketplace. Whether you want to find the best deals or prices, or understand the landscape of Amazon, there’s a tool out there for you. Amazon best Seller tools If you’re a Professional Seller on Amazon, there are several types of tools that will make your job easier. In this section we’ll cover a few of the more important tools to have. Amazon Repricer Tools Repricing tools are for Amazon Sellers who want their products’ selling prices to update with the flow of the market. In other words, repricer tools are dynamic pricing tools built specifically for Amazon. Request a free demo for our Amazon Repricing Software here. Since Amazon updates prices so frequently, this tool helps Sellers keep products relevant. A repricer will also help keep products in the Buy Box — the coveted space on any Amazon product listing page that’s responsible for an estimated 82% of Amazon sales. Increase your revenues with Amazon Repricer Software Read more Amazon's Free Repricer tool - the Pros and Cons Amazon doesn’t change prices for third-party sellers, but it has a free proprietary repricer that can adjust prices for you. This tool is called “Automate Pricing.” You can find it under the Pricing tab in your Seller Central account. Automate Pricing is easy to set up in just four steps. All you need to do is define the parameters of a rule, choose the SKUs where the rule applies, set minimum and maximum prices, then start repricing. Amazon’s repricer has both pros and cons. Some pros include: Free as long as you’re a professional seller Helps increase sales (but at the expense of profits) Does a great job of lowering prices, but not the best job at raising prices Easy to use and set up The cons of the repricer far outweigh the benefits, though. According to users, Amazon’s repricer tool is frustrating to use and limited in its capabilities. Some major cons are: Only allows you to set up repricing rules on active SKUs Limited customization on rules Doesn’t account for fees and doesn’t help you calculate for fees Doesn’t increase your price Once you get the Buy Box, it stops repricing The Automate Pricing tool of Amazon is notoriously fickle. The video below is an honest review of Automate Pricing, and the overall sentiment is that Automate Pricing is more trouble than it’s worth. Considering a stable and revenue-boosting Repricer Tool? Request a free demo for our Amazon Repricing Software here. Amazon competitive intelligence tools: How to find price drops on Amazon Competitive intelligence is the backbone of any repricing tool because without intelligence your prices have no basis on the market. Competitive intelligence tools gather the prices of your competitors on Amazon, showing you where there are dramatic price drops in the market. It should then deliver this information directly to you. With this information, you can make more thoughtful, data-driven decisions when you choose prices for your products in the store. How to hack Amazon pricing For Sellers, creating an Amazon pricing strategy and hacking your way into the Buy Box is no easy feat. But with hard work and effort, you can get your product into the Buy Box and keep it there. There are tons of different strategies you can adopt to reprice on Amazon. One popular one is the high runner strategy, and it’s the approach that Amazon uses itself. In this strategy, you focus your efforts on the products that drive the most traffic (which are usually highly elastic), and offer a competitive price on those items to pull people to your page. Once a consumer is on your product listing, as long as the product is legitimate and matches their need, they will probably purchase it. Additionally, once someone arrives on your listing, you can engage another pricing hack: bundling. Bundling helps increase the perceived value of your products, makes consumers more likely to purchase them, and helps move items through your store faster. If you’re just starting as a Seller though and want to get into the Buy Box, the best strategy is to start small and slowly raise your prices by small increments. The goal is to attract buyers to your listing through a competitive price, earn reviews and good credit in the eyes of Amazon, then raise your price. This is a key part of the pricing-marketing mix. Amazon repricing strategy Developing a strategy comes down to your company goals and the following steps: Define your commercial objective Build a pricing strategy Choose your pricing method Establish pricing rules with Amazon Pricing Sofware Implement, test, and evaluate the strategy Besides thinking of your own store’s strategy, consider Amazon’s strategy. The company strives to be the world’s most customer-centric company, and this philosophy dictates every strategic move the marketplace makes. If you factor this philosophy into your overall Amazon strategy, it will pay off. So in addition to offering a competitive price, you should also work for quality products, fast shipment, and excellent customer service. You should also build a marketing strategy that sets you up for success and optimize your listing for Amazon's search algorithm. Final thoughts Pricing on Amazon is important, but it’s not the end-all-be-all. Prices on Amazon constantly change, and it’s better to think of a product’s price as temporary rather than a fixed feature. For Sellers, this means price is an important part of your overall strategy. It’s not the only thing Amazon considers when determining the winner of the Buy Box, but it’s a good way to tip the scales in your favor.

Technology, Retail Trends & Research, Amazon

06.07.2022

The growing volume of voice search for retail purchases

Voice commerce is impacting retail and e-commerce When the phrase “Hey, Siri” was first announced with Apple’s launch of its virtual assistant in 2011, not even the most forward-thinking of retail experts could have predicted how the virtual assistant known for answering trivia questions and setting an alarm clock would impact e-commerce later on. Since Siri’s advent, she’s been joined by Amazon’s Alexa, Samsung’s Bixby, Microsoft’s Cortana and Google Assistant, and as a group, the global voice recognition market is estimated to be valued at €25.9 billion by 2026. According to a study by Price Waterhouse Coopers (PwC) and Statista that asked about preferences on search and shopping behavior, it was found that 71% of people would prefer voice search over traditional search by typing in the search term and 32% of US consumers own at least one voice-activated speaker. It is fair to say, then, that this growing trend of how consumers shop in the digital age is something that brands and retailers should be learning more of so that they can cater to the evolving methods of the modern-day shopper. We take a look at voice search and how it has begun to impact not only the world, but the industry of retail. Who and what is driving voice search? PwC conducted a survey looking at the impact of voice assistants on consumer behaviour and found that specific age groups and devices are leading the way in voice search. The 18-24 and the 25 - 49 age groups show the highest usage in voice search, agreeing that they use it at least a few times a month. As these age groups - better known as Generation Z and Millenials - grow into their consumer roles, they’re also inadvertently showing retailers what they should be focusing on in terms of future shopping methods and habits. They are not only aware of voice search; they are driving its growth and usage. In addition, smartphones are on the top of the list of devices used to activate voice search. Finding your voice in the online shopping journey Although statistics are showing impressive numbers that are growing daily, voice search is still an evolving trend that includes AI and machine learning (ML) to improve usability and searchability. As it currently stands, voice search is mostly used for queries, checking the time or weather, or Googling a general knowledge fact. However, using voice search for the purpose of shopping is surging, with Amazon Pay listing “faster way to shop” and “able to purchase in the moment” as the second and fifth most common reasons people use voice search respectively. Statista forecasts that by 2023, the global voice assistant e-commerce transaction value will be at €18.3 billion and due to Covid-19 lockdowns, voice commerce in the US surged by 72%. Other activities surrounding voice commerce that are becoming common include setting purchase reminders, browsing for new products and creating shopping digital shopping lists. Amazon Echo, the smart speaker from e-commerce giant Amazon, is the leader in voice speaker commerce, but despite their massive hold within the market, there are still some challenges with voice commerce: Understanding voice searches and properly storing card information and processing payments. A quarter of online shoppers in the US select these two recurring problems as concerns over voice shopping. Although the technology is always improving, it will take time for voice search to become a trusted, mainstream method of shopping. Take note that the same was said for online shopping less than a decade ago, in fact, the technology is developing so fast that voice assistants are in most European cars today and are becoming more integrated with our smart home devices than ever before. In a world becoming touchless, voice will become the control centre - it's the most natural evolution. Talk to one of our consultants about dynamic pricing. Contact us Optimising omnichannel and online stores for voice search With the simple fact that the average person can speak approximately 150 words per minute, but can only type 40, it begs the question of if the speed in which people can voice search and shop can impact an e-commerce sales boom. By simply telling your virtual assistant to search for “black gym shorts”, you’re presented with a number of online retailers within a few split seconds. Voice assistant technology is able to combine your keywords, your location and your past searches to offer a number of options, and this presents a huge opportunity for brands and retailers, if they can first establish brand or product loyalty. However, this doesn’t mean online stores shouldn’t or wouldn’t have to do the work of optimising their websites for voice search. In 2019, 42% of the global online population made at least one purchase per month using voice search, and that number has surely grown since the technology used to power voice search keeps improving. Online stores need to gear their website’s content to fit what people may search - this, online retailers have always known. But how does a brand optimise their online store for voice search? It’s easier than it sounds: A brand’s SEO strategy should include long-tail keywords. The average voice search is between three and five words, but traditional, written searches are shorter than that. When people search by speaking, they generally give more detail, so think of it as if you were asking a store salesperson back in the 90’s. Use question-and-answer formatting. Research shows that people often phrase things in a question when using voice-activated speakers or virtual assistants. To provide key information about their products, online stores can use this format to improve their Google ranking and ultimately their website traffic. For example, a shopper could voice search, “Hey Siri, what sizes do Under Armour have in black gym shorts?” Use conversational language. This will require retailers to do some research and to find a tone that fits in with their brand, but shoppers using voice search will likely talk in an informal, relaxed manner: “Hey Google, I'm looking for an electric toothbrush; one recommended by dentists.” Make your website mobile-responsive. At a majority of 55%, internet traffic is mostly coming from mobile phones and, as mentioned previously, 57% of Gen Z and Millenials are using their smartphones to activate voice search over any other device. Be detailed with your geographical location and information. For omnichannel local businesses, voice search could be a game-changer for website traffic. In the US, 58% of people who use voice search are looking for a local business. Attract repeat customers. If a retailer’s shopping app is voice-search optimised, a customer could set up a weekly or monthly shopping list of staple items and simply say, “Hey Siri, place order and pay for my shopping list in my Amazon basket.” The ease of this saves customers time and effort - which has fast become the main reason why people shop on an app. Ready, set, go... Generally speaking, most online stores could be doing more to ensure their website is optimised towards voice commerce. However, retailers and brands are not in the dark regarding what consumers expect from them when they do a voice search. According to a Google study of voice-activated speaker owners, 52% of them want deals, sales and promotions; 48% want personalised tips and information; 42% want information on upcoming events and activities; 39% want easy access to business information like trading hours and phone numbers; and 38% want access to customer support. This possibly serves as a helpful starting point for how online stores can enter the market of voice commerce without feeling like they need to re-develop and re-code their entire website. While for now it won’t replace any direct method of purchase it certainly is becoming a part of the shopper marketing journey, retailers should be enthusiastic about the development of voice commerce as another venue of revenue. In fact, just ask Alexa if it's a good idea.

Retail Trends & Research

14.06.2022

How robotics and AI are improving supply chains

If only Henry Ford, the founder of Ford Motors who invented the assembly line that revolutionised how cars are made, could see how corporations have advanced the logistics of supply chains in 2022. Approximately 109 years later, modern supply chains are including engineering and scientific developments like never before, seeing robotics and artificial intelligence (AI) brought to the forefront to increase productivity, decrease overheads, and improve the customer’s experience. With the rapid development of e-commerce and the changing landscape of consumer spending habits, it has become vital for retailers and brands in many industries to rethink and modernise how they bring a product through the process of production, manufacturing, shipment and delivery to the consumer. We have taken a look at how robotics and AI are affecting and improving global supply chains, the companies that run them and their employees. Robotics in retail and e-commerce One of the biggest issues within retail and e-commerce is delivery - and fast delivery at that. Using robotics, AI and automation (RAIA) has shown to significantly improve delivery schedules and times. According to a 2021 McKinsey & Company survey, 75% of retail supply chain leaders have made 2-day delivery a priority and 42% are aiming for same-day delivery in 2022. Alongside these consumer demands, 64% of retailers cited digitalisation and automation investments as being critical. A key area in speeding up deliveries and creating seamless supply chains is warehouse automation, and one such retailer that’s taken on the challenge is Ochama in the Netherlands. The Chinese e-commerce giant JD.com launched robotic grocery stores in four Dutch cities, namely Leiden, Amsterdam, Utrecht and Rotterdam. Groceries and non-food items are collected throughout the store by mobile robots, packaged and presented to shoppers. Customers can order their parcels via the Ochama app and then collect it at the store by scanning a barcode that specifies your order, after which a conveyor belt and robotic arms hand-deliver the order. This is only one part of the machine that has utilised robotics: A warehouse of 20,000-square metres is equipped with automated systems that can process up to 15,000 parcels a day. Because of the technological advancements used in the supply chain, Ochama has brought down the overall costs of food and non-food items by 10%, making the omni-channel retailer one of the first to be able to reduce some of the consumer living costs using robotics and AI. From groceries to clothing, AI is showing its exponential value. Finesse, a US clothing company, is using AI to determine future fashion trends for potential markets and moving away from fast fashion. When you visit their website, the clothing doesn’t actually exist yet. What you see is 3D-rendered items of clothing where shoppers can vote for an item they’d like to buy. The items with the most votes get made, resulting in reduced overstocking and lower production costs. In this case, we see AI being used as an integral part of the business model instead of being a background assistant to supply chain problems. AI has shown to be helpful with returns This particular business model, where votes determine production, doesn’t mean returns and refunds aren’t still an option - or a problem, depending which side of the e-commerce street you’re sitting on. Nonetheless, AI has also shown to be helpful with e-commerce’s biggest headache: Returns. Global e-commerce’s returns problem is estimated to cost €111 billion just over the festive season after December. Approximately 30% of all online orders are returned by customers, making it a very large and expensive problem. In fact, although a customer may experience the ease of “free and easy returns”, a typical return actually costs a retailer between €19 - €41 each time when they factor in transport, processing (receiving, inspecting, then sorting), and reselling efforts. Berkshire Grey found that processing time could be reduced by 25% and processing costs by 35% if employees could make use of automation and robots. How may employees view the incorporation of robotics and AI? A 2021 study published in the Journal of Technology in Behavioural Science conducted multiple interviews with employees of different seniority levels across multiple industries to quantify their understanding and perception of RAIA in the workplace. Firstly, the study found that employees feel that “human touch” and “soft skills” could never be replaced or replicated; secondly, it found that employees should view RAIA as an opportunity and not a threat; thirdly, employees may experience a job satisfaction dilemma; and lastly, employees feel that companies should be extremely prepared before and after RAIA is implemented for whatever the impact may be. There is no doubt that jobs, workplaces, employee-to-customer or employee-to-employee relationships will change, but it is important for companies and team members alike to start viewing RAIA as a way to upskill, revolutionise and grow. There seems to be a common misunderstanding that by including robotics and AI into the workplace it will automatically result in retrenchments, firings and an exodus of employees. Although we can’t speak for the intentions of all companies, robotics has shown in many cases to improve the work environment for employees. If employees have been spending valuable time on mundane or time-consuming tasks that are part of their job, they can now spend that time on strategy; the very thing that results in better productivity and more profit. With our fully or partially automated dynamic pricing software solutions, Omnia takes a similar stance. Users require less time on repetitive, high-volume tasks and have more time planning and managing the strategic direction of prices. Looking toward the future Warehousing, final assembly and production are three main areas where autonomous robots will be the most beneficial. Deloitte predicts that including robotics in these areas can increase productivity; improve the collection of data; and decrease the risk of hazardous tasks while working alongside humans for improved efficiency and safer work environments. McKinsey & Company conducted a study that surmised that 20-30% of the time can be freed up for other important tasks if repetitive tasks are automated or robotised. Deloitte suggests that using autonomous robots within the supply chain will dramatically increase over the next five years and the more companies start to incorporate robotics into their processes, the more fluid and seamless supply chains will become.

Technology

04.05.2022

Omnia appoints a new CFO, supporting its vision and leadership

As Omnia Retail moves into the next phase of growth, a new member of its leadership team is set to assist in driving forward the company’s multinational strategy: Hande Erdogan, Omnia Retail’s new Chief Financial Officer, who joined the team in April at the company’s Amsterdam offices. Hande brings a world full of knowledge and experience to the table, honing in on her skills within the financial services industry. Hailing from Turkey originally, Hande attended Boğaziçi University in Istanbul, achieving a degree in international trade and then completing her Masters in finance and economics at the London School of Economics and Political Science. Hande has a strong foundation in investment banking, having worked at Citi for 14 years and then made the transition in a CFO role for a tech scale-up. “For the last 5 years I was the CFO of a start-up which grew to become a scale-up, with offices in Istanbul, Berlin and London, so I have both worked with big, international corporates as well as start-ups across their growth journey,” says Hande. Hande’s goals for Omnia align with our plan to become an undeniable global force in pricing software as the only solution to retailers and brands. She will be focused on ensuring financially healthy organic growth, coupled with inorganic growth via value-creating acquisitions. “My primary target is to channel all my knowledge and experience to support Omnia’s goal to expand its coverage and strengthen its leadership position. I will mostly focus on adapting the finance function to support a scalable organization and arrange necessary internal and external funding to fuel its growth,” says Hande. Although Hande has worked in the financial sector for most of her career, it is Omnia’s dynamic pricing software and customer success division that drew her to the role, setting Omnia apart from other SaaS companies. Hande explains it is the “how” that elevates Omnia above the fray: “Omnia’s level of sophistication both at product and team level is quite unparalleled.” It is no coincidence then that one of Hande’s business philosophies aligns so well with one of Omnia’s core values of striving for perfection. Hande believes in working with dedication and a passion for excellence. CEO Sander Roose couldn’t agree more that Hande is the right person for the job. “Hande is precisely the right CFO for this next phase of the business and a great addition to the leadership team, we are proud to have Hande onboard.”

About Omnia

14.04.2022

The new era of the retail consumer

Not even the Wall Street crash of 2008 saw the retail world having to relearn the wants and needs of the modern consumer as much as the last two years of the coronavirus pandemic. As 2022 enters its second quarter, lockdowns have largely been lifted and the closest thing to normal life is resuming. However, one thing that won’t be returning to “normal” are the hows, whys and whats of purchasing decisions. Consumers are forever changed, and that means retailers and brands are going to need to learn quickly or sink fast. How have consumers changed and where are they spending their money and their time? Are pre-pandemic buying methods and spending habits going to make a return? How can retailers and brands retain customer loyalty? We have highlighted some key trends to shed light on the answers to these questions. Reflective or intuitive: How consumers make decisions If retailers and brands are going to survive and keep up with the post-pandemic consumer, one of the things they may have to do is understand how people make choices. In a nutshell, the psychology of decision-making is split between two systems or types: Type 1 is intuitive and Type 2 is reflective thinking. Brands often rely on a person’s intuitive thinking because it hinges on a shopper’s loyalty to them and higher purchase intent, especially when there are promotional deals on offer. For example, if a person has been buying the same baby diapers from the same brand for years, it is cognitively based on a sense of loyalty to the brand. However, the last two years have forced us to change our daily behaviours and this has affected how we see and reflect upon income, job security and our overall outlook on life. For the foreseeable future, reflective thinking (type 2) is something that brands should spend more time understanding and paying attention to. Reflective thinking is based on a feeling of “rightness”, according to Kantar, a data science company. That initial feeling of rightness, however, can be affected by a person’s situational, cognitive or motivational factors. In other words, the subconscious voice inside your head that says, “This is the brand of running shoe like and I’m choosing to buy it” can be affected by the aforementioned factors. Reflective thinkers (vs. intuitive) are more likely to let these external factors affect their decision and decrease their purchase intent, which is a theory supported by an academic paper by Joyce van Uden who attended Tilburg University in the Netherlands. In today’s world, those external factors may include the health and financial upsets of the last two years. In 2019, before a whisper of Covid-19 was even mentioned, nobody could’ve predicted that the brands and retailers they’d been shopping from would be affected by second-guessing on such a mammoth scale. Now, years later, situational, cognitive or motivational influences are certainly at play when consumers shop. Key trends and changes among consumers Online grocers have seen continued growth During global lockdowns in 2020 and 2021 that saw consumers having to stay at home, it was obvious that an increase in online shopping for groceries would naturally occur. However, this trend has continued post-pandemic. Globally, from 2020 to 2022, shoppers who bought groceries online increased by 19%. The main reason for this used to be safety related to Covid-19. Now, it’s for convenience. However, online grocers should not sit back and relax, assuming to pour all their resources and time into e-commerce. Grocers need to present a strong omnichannel retail experience for the consumer who wants options (and that’s pretty much all of them). Although shopping for meat and fresh produce is still largely done in-store, consumers like the service of home delivery or click-and-collect. It adds a level of comfort and accessibility to a service. A new trend called “top up shops”, in which a consumer will purchase staples like bread and milk online in addition to weekly or monthly in-store shops, shows just how common it has become for consumers to shop online and offline for food even within just a few days of one another. Created by JD Worldwide, a new food grocer in the Netherlands by the name of Ochama has blended omnichannel shopping, logistics technologies and robotics to offer shoppers cheaper groceries without cutting on efficiency and quality. Ochama is able to offer food and non-food items that are 10% cheaper while utilising robotics technology to gather parcels for customers who’ve ordered online or on the Ochama app. Customers can choose to pick up their parcel at the store or wait for home delivery the following day. Moreover, Ochama is only available to consumers who become members, instilling a sense of immediate exclusivity and brand loyalty. From e-commerce to m-commerce A boom in e-commerce during 2020 and 2021 was inevitable, however, what’s been interesting to note is how even within e-commerce’s growth, sub-trends are emerging. The mobile shopping experience for consumers has become easier, faster, more professional and more intuitive to the shopper’s needs. By the end of 2021, 54% of global e-commerce sales were from mobile, totaling €3.1 trillion, showing that the majority of e-commerce sales came from apps on a phone or tablet. In addition, this number was up by 22% from 2020, showing that more and more consumers are trusting and enjoying the mobile shopping experience. Globally, e-commerce app installs increased by 10% from 2020 to 2021, however some areas beat out this world average such as EMEA (Europe, the Middle East and Africa) at 15%. Less thinking and more doing in personal innovation Through an extensive survey done by market researchers at GWI, it has found that “seismic changes in the collective mindset” of consumers is taking place. From job resignations to how people have changed their spending habits, a common theme has emerged: Caution, delaying and overthinking are more and more being thrown to the wind. From the second financial quarter of 2020 (roughly April) to the second quarter of 2021, GWI notes that US consumers showed a “diminished need to be careful and responsible, especially with finances''. Upon looking at the research more in-depth, consumers also said that “treating oneself and indulging” became one of their top three priorities in the last year. This type of response was especially high in France and Italy, signalling a shift in Europe regarding consumer behaviour. In terms of pricing strategies, this could present an opportunity for direct-to-consumer (D2C) businesses to make their prices more competitive or marketers to be more suggestive in their communication. Brand loyalty has taken a knock Attracting and retaining brand loyalty is anything but easy and on the flip side for consumers, finding a brand you trust and consider the go-to for a particular product is just as difficult. Going forward, the traditional ways retailers and brands attract and retain customer loyalty have been turned on their head. McKinsey & Company reports that in the US, 75% of consumers tried new shopping behaviours and brands, pointing to convenience, availability and value-for-money as their reasons. Of the aforementioned 75%, 80% tried a new digital shopping method and 25% tried a private label or store brand, which are generally known to be less expensive. Retailers and brands should not discount on finding and keeping a customer’s loyalty, as a study by Bain & Company found that a 5% increase in customer retention can increase profitability by 75%. If a brand or retailer is noticing a shift in purchasing patterns such as consumers choosing other brands for specific products, this may prompt them to want to relook at their pricing or promotional strategies to regain the attention and loyalty of customers whose eyes are starting to wander. McKinsey also suggests that retailers should focus on “strong availability” and to also “convey value” to retain customers. The homebody economy is set to continue growing Because consumers were forced to stay home under strict lockdown laws, finding ways to entertain oneself became imperative. As a result, sales in the home entertainment, gaming, home fitness and electronics sectors sky-rocketed. Looking at Google search volumes in the first and third weeks of March 2020 when global lockdowns first began, “home fitness” as a topic went from level 22 - which is below average popularity for a search term - to level 100, which is the highest level of popularity for a term. What’s interesting to note is that, even after lockdowns have been lifted, consumers are choosing to spend more time at home and are cooking more at home rather than eating out. McKinsey asked consumers the following question: “Over the next two weeks, how much time do you expect to spend on activities compared to how much you normally spend?” The answers most selected were cooking, home improvement and exercise. Of these, cooking was said to increase by 39%; home improvement by 31% and exercise by 27%. While the home economy continues growing, e-commerce retailers could - or should - capitalise on how the consumer is choosing to spend their time. If a retailer that sells fitness equipment is smart, they will take this data and promote their home fitness equipment and apparel over items one may use in the gym or in the outdoors. Retailers selling items for construction should promote and prioritise DIY products. Retailers selling homeware should prioritise home cooking, kitchen equipment for families or singletons, and even recipe books for home use. Which segments of society are actually adopting these habits and trends? Not every change in consumer behaviour applies like a one-size-fits-all blanket. Depending on the socio-economic status of a consumer, reactions to spending in the post-pandemic world are different. According to the same aforementioned McKinsey study, the group most likely to adopt the majority of these behavioural changes are those who have had their finances and health affected by the pandemic in some way. And, most opposingly, the group that is considered the most affluent and secure is also likely to adopt the majority of these behaviours. This group is made up of 60% men who make more than $100,000 per year and have greater job security. The group that is least likely to adopt any of these behaviours at all is retirees above the age of 65. When it comes to strategy, does social media have the same impact it used to on consumers? A more blatant question is, “After the world has gone through an unprecedented health scare that’s torn through economies, homes, and entire families, is the vapid and materialistic nature of social media as effective as a strategy to lure in customers?” Yes and no. Before the coronavirus pandemic began, a large effect on the spending habits of the 16 - 64 year age group was influencer marketing on social media. In 2019 - and the five years before it - social media feeds were dominated by perfectly curated faces, bodies, and wardrobes as D2C brands and retailers used the power of influence to sway spending habits and profit their way. Today, seeing manicured lives that seem to be out of touch with reality has become less and less appealing. The loss of life, business foreclosures, global recessions and civil conflict on such a grand scale have left consumers looking for genuineness, choosing brands who want to connect in an authentic way. According to a GWI Zeitgeist survey of over 9,200 social media users aged 16 - 64, the thing they want the most from brands is authenticity: While the kind of content consumers want to see on Instagram and other social media platforms may be changing, these platforms have also been advancing their shopping features. Instagram, Facebook, TikTok, SnapChat and Twitter have developed content-driven strategies to get consumers to make direct purchases. As of January 2022, 44% of Instagram users worldwide shop weekly on the platform and 1 in 2 people use Instagram to discover new brands. In 2016, Instagram released product tags but their place in the Instagram shopping machine was only fully realised in 2021 which started allowing people to shop products from a web store and learn information about it without ever leaving the app. This firmly places Instagram in the centre of the m-commerce hurricane. From swimwear to electronics to jewellery, what originally was a photo sharing app has become a global m-commerce giant. TikTok uses short videos created by users to begin the path to purchase which, as described by TikTok itself, isn’t a linear start-to-end process: It’s an infinite loop. “Today’s consumers enter, exit, and re-enter at different stages of the purchase journey based on their needs and wants.” This “infinite loop” seems to be working - TikTok users are 1.5x more likely than other platform users to immediately purchase something they’ve discovered on the app. Looking to 2023 and beyond What’s that saying about change being the only constant? If you had to ask a person what spending or shopping habits they’re going to take on in one year from now, or even two or three, they will likely say they’ll be doing the same thing that they’re doing now. However, studies show that consumers - and people in general - are not aware of how much they change over time. In other words, we can’t forecast our own behaviour, according to a study conducted at the University of Sheffield in the UK. However, if retailers and brands are smart, they will do the work to satisfy these five factors that consumers need fulfilled when deciding to adopt a new behaviour (such as choosing to shop on a store’s new mobile app vs in-store): Cost-effectiveness, time-saving, convenience, enjoyment, personal reward. Shopping online and on e-commerce apps should be incentivised more A report created by Bond, a firm that studies customer loyalty, trends and behaviours found that 79% of customers stick with a brand if they offer loyalty programs. Loyalty programs are just one example of the many types of incentives retailers can use to attract new or retain existing customers. A key takeaway is that incentives should be personalised to the shopper to truly succeed. Adidas’ Creators Club is a successful example showing how to target new or existing customers. Through an individualised profile that one logs into, you can receive exclusive information on new products, club-only offers, invitations to events, and early access for purchasing new items. Disney partnered up with Visa to offer fans a credit card that allows them to save up for their dream Disney holiday. The card gives them discounts, accelerated earnings, and credit for flights. Card holders can also choose a card that has their favourite Disney character on it. It requires little effort, then, to see the value in incentivising consumers to shop on mobile and e-commerce platforms. The very reason incentives like commission, promotions and other job perks work so well for employees in competitive fields is the same reason consumers choose one brand who has incentivised them over the other who hasn’t: Human beings want more for what they’re willing to give (whether that’s hard work or money). An evolving lesson An academic paper written by Prof. John Hauser (MIT), Prof. Min Ding (PSU) and Dr Songting Dong (UNSW) provides evidence that “the accurate measurement of consumer preferences reduces development costs and leads to successful products” for retailers and brands, showing just how imperative it is to understand intuitive and reflective thinking in the context of a post-pandemic world. This ultimately provides retailers with an opportunity to reinvent themselves within their current market and position themselves to attract new consumers from competitors who fail to see the emerging trends within the market.

About Omnia

12.04.2022

Omnia Retail celebrates 10 years as Europe’s leader in pricing software

Celebrating an important milestone for a company that largely founded and revolutionised pricing software solutions across Europe a decade ago, Omnia Retail celebrated its 10th birthday last week with a team event at their Darmstadt office in Germany. "What a ride"!" Sander Roose, the company’s founder and CEO, shared at the event that, “It’s amazing to see how much Omnia has grown and gone through completely different phases and developed her own personality.” Omnia’s CCO Maximilian Bank, who founded Patagona, a pricing software company that was acquired by Omnia in 2021, reflected on the journey as well: “From the humble beginnings, to the ever-changing challenges, to today's position as the European market leader for retail pricing software: What a ride!” Head of Product Berend van Niekerk shares Max's thoughts. “We are still just at the beginning of something way bigger and better and the best is still to come.” Alongside the Head of Marketing, Leon Curling-Hope noted that “We’re not slowing down, as there is a lot of untapped opportunity within the market with exciting things to come.” Pioneering an industry before its time Because pricing software was a fairly new product when Omnia started, Sander explains that the early days were not easy. Dynamic pricing was a subject and concept very few knew much about, leaving Sander and the team having to explain what it is to clients. “Nowadays, that has completely changed and every retailer and brand needs to have pricing software in order to compete in the market and they are fully aware of that.” “However, I do believe that those years helped us to get a head-start on international competition in building our product and sharpening our thinking about the topic,” says Sander. In servicing clients, Max and Sander believe it is not just about offering the best pricing software solutions, but aiding in building customer pricing expertise. Omnia invests heavily in customer success teams, and provides retail and pricing insights to its clients and via industry commentary on the Price Points blog. For Max, one of the best things Omnia provides its clients other than its products is customer closeness. “We are not an anonymous software provider - you can talk to us. We learn from our customers every day, and they, in return, benefit from our pricing and e-commerce know-how.” Creating core values: What makes Omnia different? When asked about Omnia’s three core values, Sander says they were developed out ofhis single most important lesson as an entrepreneur: Developing company culture. Company culture is made of the values and personalities of a company’s founders and early team members, says Sander. Omnia’s three core values are: Never stop learning; obsession with excellence; free to be you and me. “They’re at the core of everything we do. From evaluating job candidates to providing feedback and making decisions on promotions and career planning,” explains Sander. Chief Operations Officer Vanessa Verlaan, the steward behind Omnia’s company culture, echos Sander’s standpoint. “You need to prioritise company culture throughout your entire organisation and live up to it everyday.” Looking forward to the next decade Sander and Max have big goals for the next decade. By 2032, Omnia plans to not only be Europe’s leader in pricing software solutions but the global leader. “The way things are going at the moment, I have no doubt that we will achieve this goal,” says Max. “However, one of our top priorities will always be to make sure that we stay close to our customers: That's what made us what we are today. We should always remember that!” Talk to one of our consultants about dynamic pricing. Contact us

About Omnia

15.03.2022

Optimise product and pricing now, as inflation in the EU hits 5.8%

Across the market, consumers are paying noticeably higher prices for purchases online as a result of inflation. January marked 20 consecutive months of year-over-year online inflation. So, while consumers watch prices continue to climb, online retailers are watching consumers. With the continuing war between Russia and Ukraine, it has further exacerbated inflation across much of the world, with Europe reaching a high of 5.8% at the end of February. This has caused a ripple effect on food, utilities, energy prices, and the manufacturing of goods around the world. Energy prices in the EU rose a staggering 31.7% in February, while the prices of fresh produce rose 6.1%. Inflation is expected to continue to move beyond 6% throughout the month of March as the Euro continues to weaken against the US dollar, falling to its lowest value in almost two years. The sharp increase in inflation surpassed the predictions of economists at Reuters, who originally predicted that inflation would rise to 5.4%, 0.4% less than the end result. The European Central Bank (ECB), whose inflation targets were at a safe 2%, was also in shock over how high inflation rose. Growth vs stability Beyond the shock of the Russia-Ukraine conflict, a growing stressor for the ECB is how the war and the subsequent inflation will affect monetary and fiscal policy. Council members of the ECB are torn between whether to implement the EU’s “budget rules” in 2023, which essentially force governments from across Europe to work together when putting together their spending plans. They also limit how much debt a country can get into for the fiscal year. While some ECB members and finance ministers suggest such rules should be implemented to offset the damage of the Russia-Ukraine war, others feel monetary policies shouldn’t be tightened while the situation is ever-changing and volatile. If EU’s budget rules are implemented, this could also slow down the continent’s post-covid recovery, which was just starting to gain momentum. An additional spanner in the works is the fact that Germany and France, Europe’s two biggest economies, are on opposing ends of the argument to impose budget rules. Germany’s finance minister Christian Lindner says he is in favour of limiting a country’s debt and reminded the EU in talks that “fiscal rules are crucial to maintaining the credibility of governments.” France, on the other hand, believes growth is more important than stability. “It must be a growth pact first. Growth comes before stability,” said finance minister Bruno Le Maire. As continued sanctions on Russia cause an impact on gas and oil prices in Europe, which is the continent’s top foreign gas supplier, EU leaders are expected to meet in March to decide whether budget rules will be implemented or not. The impact on e-commerce and retail markets To avoid the rising costs, suppliers of raw materials raise their prices to the manufacturers; manufacturers raise their prices to the retailer, and so on. Prices in e-commerce over recent years have actually been trending down (deflation), as proven by the below graph. So, with few historical models to look toward for reference, especially in a post-pandemic world that is now conflict-ridden, what are retailers to do? In the past, the key principle was to maintain a safety stock, or at least healthy inventory levels, and drive bundling or percentage-based pricing on existing dated stock while holding out until your competition is sold out of more up-to-date products; then gently increase pricing. However, with tight inventories and a global lack of stock, this means that retailers will have to look for alternative solutions. Whether retailers like it or not, they will either have to absorb the added costs, reduce profit margins or raise prices. A positive is that there’s a good chance that your competitor is thinking about the same thing. Possible shopping trends in the face of high prices and inflation An increase in cart abandonment Higher prices across fuel, food, medication, electricity, rent and more will likely impact shoppers’ behaviors and as prices rise and deals and discounts disappear, online retailers may notice higher cart abandonment with the cost of shipping as a leading factor in cart abandonment. According to The Checkout Benchmark report, checkout completion rates average 56% on desktop and 45% on mobile devices when shipping is free. Cart abandonment increases when consumers are asked to pay more for shipping. A 10% increase in the cost of shipping results in checkout completion rates decreasing 6% on desktop and nearly 4% on mobile. Decreased willingness to spend more to meet discounted thresholds Oftentimes shoppers will spend more money - adding items to their online cart - so they can meet the threshold for free or reduced shipping. In short, they’ll buy more to save on shipping. However, that could change if shoppers stick to purchasing only the items they need. Shoppers choose slower, less expensive shipping options. Whether shoppers value cost or speed of delivery most is a long-standing debate. In reality, Amazon conditioned consumers to expect shipping that is both fast and free. But as consumers are burdened with inflation and look for ways to cut costs, some may choose to wait longer for deliveries so they can save money. Brands can offer options to help ease inflation’s strain Retailers can offer customers some relief, and help their own cause, by optimizing shipping experiences. In the current environment, offering shoppers a variety of affordable shipping options at checkout is a smart first step. And it can help satisfy the wants of consumers with a range of cost and speed preferences. Online retailers with brick-and-mortar locations can offer BOPIS (buy online, pick up in-store). These are significantly cheaper fulfillment options than residential shipping. Another option is to offer BOPA (buy online, pickup anywhere), which is also cheaper and can be used by e-commerce brands that don’t have physical stores. BOPA enables shipping to commercial locations such as pharmacies and grocery stores. Consumers select the location where they want to pick up their order making BOPA not only a cost-saving option, but also one that is convenient. In most cases, BOPA is around 30% cheaper than traditional delivery. Keeping the consumer in mind Inflation is becoming a bigger concern for online shoppers, and in some cases a barrier to purchase. When customers click the checkout button, it is important that they see at least one delivery option at a price point that is attractive to them. Giving customers options helps them feel more comfortable with shipping costs and confident enough to complete their purchases. In uncertain times when politics, warfare and pandemics affect inflation and pricing on a daily basis, it is important for the retail market to consider the consumers and to offer ways to incentivise shopping.

Retail Trends & Research, Research

02.03.2022

Is this the end for e-commerce merchants as brands take the lead?

“Are retailers and brands like Decathlon, Nike and others changing the current narrative to better suit the needs of customers and their profit margins, blurring the lines between brand and retailer?” As we enter the third year of the pandemic, many brands and retailers around the world have been making the move to sell direct-to-consumer in an effort to not only stay in business but to possibly enter new markets. Simultaneously, because of the rise in direct-to-consumer sales for brands, we have seen the rise of private labels within retailers. The waters between brands like Nike and retailers like Decathlon are potentially blending. In the last six months, these two global sporting goods companies have contended well with a fast-changing industry and many may look to follow. As global industries continue to try to keep up with the growth of e-commerce, consumer demands and behaviour, technological advancements, and more recently the pandemic, we have taken a look at how these companies and others are adjusting and performing. A tested relationship In the fight to catch the consumer’s attention, retailers and brands are climbing to new heights to not only increase profits, but to stand out in the minds of consumers enough to earn their loyalty over the long term. Traditionally, an online retailer would stock a brand’s items which would then be sold to a customer who visited their store. However, the rise of e-commerce and direct-to-consumer shopping channels is making the relationship between the two, at times, a tense one. Not only is the relationship becoming fraught, consumers are starting to see brands and retailers as one in the same. This is because both of them are going the distance to offer a unique shopping experience, and both of them are offering similar - if not identical - shopping methods. If a consumer shops on ASOS.com and buys a River Island jersey, it is safe to say the customer likes and trusts both the retailer (ASOS) and the brand (River Island). But, what happens when River Island opens up their own online store? The customer can now go directly to them. In reverse, what if the customer is already aware of River Island’s online store but prefers the shopping experience on ASOS.com? Perhaps they have faster shipping or nicer packaging. At its essence, this all comes down to one question: Who owns the consumer? Now more than ever, it is easier for brands to sell directly to consumers and, although they see the value of large retailers selling their products, most brands would ideally prefer to have the attention of the customer to themselves. Theoretically, if a brand truly wanted to start selling online overnight, they could launch a Shopify or Magento site paired with an Instagram shop and a couple of Google ads for marketing. But, like we said, this is theoretical and brands should not rush to launch a direct-to-consumer online channel without a clear retail strategy. The shift towards D2C Approximately 5 months ago, DSW, one of the largest shoe retailers in the US, received their last-ever shoe shipment from Nike. This is because Nike is shifting its focus and its products away from third-party retailers to their own online website, mobile app, and their brand concept stores. If you want to wear Nike, you’re going to have to shop from Nike, and this is by no accident: The sporting goods giant has been implementing this strategy since 2017 and, bit by bit, their shoes and apparel are getting harder to find in external sporting retailers around the world. So far, Nike’s Head of Finance Matthew Friend says that they have “exited 50%” of their retail partners. Aside from wanting to increase profits and connect with markets via e-commerce, Nike’s then-president Trevor Edwards stated that is about removing themselves from “mediocre retail”. From 30,000 retail partners, Nike’s plan has been to cut down those partnerships to an exclusive 40. By doing this, Nike is able to control the shopper experience, gain new customers, cut out the costs and admin associated with the traditional B2B chain of custody, and position themselves as an exclusive brand. As a retailer, Decathlon is developing an omnichannel purchasing experience for consumers as they focus on online sales across both direct-to-consumer and via third party online channels. In China in March 2021, they joined JD.com with their own flagship store, an e-commerce giant, which was a smart move considering online sales for all retail in China surpassed brick-and-mortar sales, accounting for 52.1% - a world first. In Switzerland, Decathlon is strategically planning to benefit from a shop-in-shop concept without the costs associated with their own department store as they shift more focus to online sales through a partnership with the Manor Group, a retail conglomerate that generates a revenue of €1.6 billion. The benefits of the shop-in-shop concept are obvious, but more importantly will retain some brand awareness and exposure. Despite the line between retailers and brands becoming thinner and weaker, retailers are not going down without a fight. To contend with brands becoming more autonomous, retailers are launching their own in-house private label products, essentially becoming a brand in itself. From clothing to sporting goods; from shoes to electronics; retailers are creating high-quality private labels which is increasing customer loyalty. According to a McKinsey & Company study, during the Covid-19 crisis, 38% of consumers tried a new private label brand and the most common reasons were affordability and availability. In addition, 40% of the same tested group said they’d continue with a private label after the pandemic subdues for the same reasons. In 2017, Decathlon began making plans to have their entire product range owned and manufactured by them by 2020, however, with the surprise of the Covid-19 crisis, this plan has slowed. Former spokeswoman for Decathlon Germany Genevieve Mulack said that “we will develop all our products ourselves in the future.” Today, Decathlon owns close to 70 brands stocked in their stores, ranging from cricket to mountaineering to basketball to yoga and everything in between. How would this move affect their pricing and overall performance? It may be too soon to tell, however if we look at Decathlon’s sales in China from 2013 - 2020, a period in which a direct-to-consumer online presence certainly increased for many global brands, we may be able to make a fair prediction that Decathlon’s sales should not be affected as long as distribution and manufacturing can keep up with global demand. In 2013, Decathlon in China made €7.4 billion, which rose to €12.4 billion at the end of 2019 (2020 saw Chinese sales drop to €11.4 billion because of the pandemic). As for Nike, after they started opening Nike-owned retail stores and their own online store, direct-to-consumer sales and revenue have consistently increased from €2.2 billion in 2010 to €12.8 billion in 2021. As a part of their direct-to-consumer push, Nike also aimed to have 30% digital penetration by 2023, meaning that 30% of their total direct-to-consumer sales would be from e-commerce, however, they’ve already flown past that goal. By the end of 2022, digital penetration was at 39%. With Decathlon and Nike owning and controlling their brand, this eliminates some of the competitive antics involved in pricing strategies with product resellers, allowing them to control their retail prices more competitively. The current market conditions are possibly accelerating the direct-to-consumer “D2C” move By the end of 2020, global e-commerce spend increased from 4 to 18% since 2010, totalling €3.7 trillion. Moreover, if we take a look at the last decade of retail, we can see a number of advances that have caused a ripple effect over the years: Online shopping stores became more user-friendly with advancements in UX and UI; transactions became safer and more trustworthy while more payment options also became available. The ability to shop on your mobile phone via an app developed by the retailer increased. By the end of 2021, 47% of all leading web shops in Europe had an app version for mobile shoppers. As of October 2021, 80% of smartphone owners in the US bought something from their phone in the last 6 months. Online marketing through social media platforms like Instagram and Facebook further developed. With 1.4 billion users on Instagram alone and with Europeans spending an average of 1 hour and 15 minutes on the app every day, there has never been a more direct way to reach consumers. Shipping became faster and more reliable, with Amazon setting an establishment for two-day delivery. Soon after, next-day and same-day delivery became industry-standard. Omnichannel selling became more of a necessity, instead of relying on the physical presence of a department store. Tracking customers by location, organic searches and their previous online purchasing history was developed and has largely become standard practice. Retargeting existing customers via email and social media marketing were also developed. Dynamic pricing; a focus on seasonality, price elasticity and high runner strategies are now at the forefront of pricing methodologies, let alone the adoption of newly developed machine learning algorithms and automation. E-commerce became essential as of 2020 due to the pandemic. Consumers became more price sensitive as the economy slowed. An ever-changing landscape In an ever-changing industry, an omnichannel or direct-to-consumer business model for brands is proving to be a good move. Other than the above-listed reasons, why else should brands consider moving to a direct digital channel? Another reason for developing one's own e-commerce platform or app is to become more pricing-focused, thus increasing your profit. Another reason is creating a brand narrative which can be done more effectively than ever before - and that is just the start. In 2021, the global consumer electronics industry generated €655 million in revenue, which is expected to grow to €839 million by 2025, depending on the supply-and-demand on semiconductors. That’s an annual growth rate of 7.2%. In India, the rise of D2C consumer electronics brands in the face of global giants like Apple, Samsung and Xiaomi has not whimpered. Brands like BoAt, Portronics, LoopAudio and Noise manufacturer, market and sell their products, which include headphones, Bluetooth earphones, smartphone covers, portable speakers, travel chargers and more. Similarly to Decathlon and Nike, BoAt has a hybrid D2C/B2B business model with shopping experiences available through their own web store, brick-and-mortar retail brand stores, Amazon and Flipkart. Out of all the above-mentioned sales made in the consumer electronics segment in 2021, 43% were completed online, which is up from 37% in 2019. US bike manufacturer Specialized recently made strategic changes to its business model. From February 2022, shoppers can order their pre-assembled bike on their website and have it delivered directly to their homes. Up until now, however, local bike dealers played the middleman by assembling the bike for the customer and delivering it to their home or, if the customer lived close by, they would collect it. By offering this service to Specialized, these bike dealers received a cut of the profit from each sale. Now that customers have the option of ordering pre-assembled bikes for home delivery, local bike shops will be receiving up to 50% less of their usual margin, and in some cases, not at all if customers continue to choose the pre-assembled home delivery option. Before officially announcing this change, founder Mike Sinyard said in April 2020 already that changes to Specialized’s business model were going to drastically change due to evolving consumer buying habits: “There is no escaping the reality that these changes will be disruptive for a while.” However, this was not Sinyard’s original sentiment roughly a decade ago when he boldly stated at a bike dealer event that Specialized would never sell bikes over the internet, in a bid to show loyalty to the bike retailer community the company has built since its 1974 inception. Fast forward back to April 2020, Sinyard said “Click-and-collect is a game-changer now. We see that as the best model working forward with our retailers.” This just shows the mental and physical shift companies have had to make in just a matter of years. In addition, now that Specialized has a stronger D2C element, they are reserving 15% of their stock just for D2C sales, thus making themselves a direct competitor to the very bike retailers they’ve been working with for years. What is the future for retailers and brands? Whether businesses like it or not, e-commerce is changing the retail landscape. In fact, the 2021 report by E-Commerce Europe stated that 73% of all citizens living in the EU-27 group shopped online in 2021 - that’s three-quarters of an entire continent. In addition, this number was up from 68% in 2019, showing a growing trend in shopping online. When online stores for brands were first emerging a decade or so ago, it was primarily used as a supportive entity to the primary department store, typically in a mall. Now, online stores and social media stores are built, managed, marketed and treated as individualistic, important parts of the selling machine - as they should be. With online sales being made more of a priority for companies, there are many opportunities to see businesses flourish and to connect with consumers in a more authentic way. Barclay’s estimates that the UK could make an additional €15.9 billion in revenue over a 5-year period using more direct-to-consumer strategies, and this could result in over 31,000 new jobs being created. Omnia certainly expects a trend in the coming years where more and more originally-focused B2B and online-oriented brands will enter the direct-to-consumer arena with some introducing flagship, shop-in-shop, concept brick-and-mortar stores or brand-owned online stores. We know that establishing a presence online seems on the outset to be an easy task at first glance, and it certainly has become more accessible to do so, but we also understand how competitive the market is in terms of advertising, dynamic pricing and logistics. Ultimately, this is where technology will eventually decide who remains on top and who flounders.

Direct to Consumer

18.01.2022

Meet the Team: Leon

Name: Leon Curling-Hope Company Role: Head of Marketing --- What is something people in your industry have to deal with that you want to fix? To simply connect people and companies with the right product or service in the most effortless way possible. I think we all can complicate things at times, especially marketers. Yet if you can merely deliver your' elevator pitch' succinctly and memorably, demonstrating your value and promise, you are almost there. What is your past experience, for working in your position? I hold a Bachelor of Arts in Marketing and a number of other qualifications from various universities and business schools, currently I am working towards my MBA at the University of Amsterdam. Looking back at my career and experiences, I have gained from both sides of the table, be it from the advertising agency or the brand itself. From start-up, scale-up to large global conglomerates. From building marketing campaigns with little to no budget, to shooting million-dollar global ad campaigns with pyrotechnics, puppies and supermodels to boot. I believe I bring not only a sense of range, but the ability to innovate, drawing from past experiences in marketing everything from complex SaaS services, financial instruments and luxury goods to toothpaste, soda and stuffed fluffy toys. In the end, it comes down to finding resonance, a truth or a desire for every brand, product or service - also known as the Why, How, What factor that Simon Sinek coined. What do you like about working at Omnia Retail so far? The culture. They say that the environment is what makes a job great, and in my opinion, is mostly driven from the top. And I'm sure we all have been there at some point of our career, being pitched a view or vision of a company's culture that usually does not materialize. I can say without a doubt that much effort is put into driving the culture here at Omnia Retail, and it shows the moment you walk through the door. What are the values that drive you? Honesty, perseverance and consistency. I believe that if you are continuously consistent at anything you're doing, and you continue to push and drive at it, not giving up at the very first sign of uncertainty. There is a huge chance you will become successful and achieve. What are your top-3 favorite books or podcasts? Top 3 books would have to be: Principles - Ray Dalio The Alchemist - Paulo Coelho Count of Monte Cristo - Alexandre Dumas What do you enjoy doing in your free time? I enjoy spending time on the road, be it cycling or running. I feel it keeps you honest, as whatever you put in, you will get out. Other than that, I am also an admitted foodie, so often entertaining at home, making something in the kitchen for friends with a glass of red wine, of course. Let’s end with your favorite quote! “You have 3 options in life; Pivot Persist or Surrender”―Matthew McConaughey

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