December 5, 2012

Q&A, Bryan Gildenberg, chief knowledge officer, Kantar Retail

Posted by: in North America

Each Wednesday for the next few months, we will post an edited Q&A with one of the many experts and influencers we interviewed while researching our just-released 10 Trends for 2013 report. We talked to Bryan Gildenberg, a member of Kantar Retail’s leadership team, in regard to our trend Everything Is Retail. He discussed how marketing will have to change now that consumers can shop almost anywhere and shoppers can be in two retail environments simultaneously; how Millennials will force retailers to provide very different shopping experiences; and why retailers will need to reinvent some of the key ways in which they operate.

What are your general thoughts on our retail trend for 2013, which is the idea that shopping is shifting from an activity that takes place either in physical stores or online to a value exchange that can play out in multiple new and novel ways? Since almost anything can be a retail channel, we argue that brands must get more creative in where and how they sell their goods.

Two different but important aspects of that: the first of which is that people can quite literally shop almost anywhere. I think that’s got an enormous impact, particularly for marketers around this whole idea of the classic path to purchase where your above-the-line work was very much aimed at stimulating demand, and then everything you’re doing below the line was all about following the purchase funnel or whatever it is. In above-the-line work we did one thing, because it reached people in certain places, and below-the-line work, it reached people in other places to do different things.

The challenge with anything being a shopping environment is that I can move from being stimulated to purchase almost instantaneously. Sometimes I’m being stimulated in an environment which historically would have been a classic consumer branding environment but today can be a purchase environment, because I’m watching TV on my laptop, and my laptop is both a place where I’m entertained and a place where I could shop. That’s really different. The fundamental challenge that presents is the need to bring together historically quite disparate functions within the marketing group that are responsible for both influencing attitudes but also influencing purchase behavior. That work has to be done a lot more holistically if people can consume media and shop in the same place.

The second impact to retail is, because I can shop anywhere, that means if I’m in a physical store—if I ever go to one again—I can be in another physical store at the same time. That’s the piece which has the most enormous impact on retailers. You could comparison-shop to your heart’s content. Today anyone can do that, or anybody with a smartphone. So an increasing percentage of global purchasing power is in the hands of people that can occupy two different shopping environments simultaneously. That’s got enormous ramifications for how retailers need to communicate with their shoppers and how the brands themselves, through retailers, need to do that too.

To your first point, do you see any marketers that are currently doing a good job of bringing those disparate functions together?

It’s an interesting question, because I think the people that sell through retail have to get good at this too. And the implications for them are probably more significant. Retail has spent relatively small amounts on above-the-line advertising. There are some, like Target, that spend a lot, but they spend probably a quarter of what P&G and other [similarly sized] companies spend. So the retailers themselves, historically, have always seen above-the-line as part of a broader strategy that was, initially, anchored around the physical store.

For the manufacturers that sell through retailers, it’s a little trickier. They’ve got to have a much more siloed approach to this problem. P&G forever has done a very good job of articulating the importance of the store as part of a marketing campaign, and that’s the whole classic Procter & Gamble “first moment of truth” idea, or what P&G calls FMOT: We’re going to be deeply focused on that moment of purchase, and we’re going to aim a lot of our marketing at influencing the behavior at that point of purchase, because we know it’s critical—the first of two big moments of truth for consumers. The second has been the use of the product.

The interesting piece today is that a company is out there popularizing this idea of the “zero moment of truth,” which is, before a person gets anywhere near a shelf and decides what brand they’re going to buy, they’re doing a lot of what I would classically call shopper-related research. The funny thing is, the company that’s started to own the phrase isn’t P&G, it isn’t Unilever, it isn’t Clorox, and it isn’t Nestlé. It’s Google. Of all of the marketers in the world that understand how fluid the relationship is between stimulus and purchase, I think Google has done more good, constructive thinking about this than anybody.

The companies that are quite good at integrating [functions], they tend to be smaller. They don’t have years of historic silos built up to create all this infrastructure and all these departments that are responsible for this stuff. Second, they’re brands that are just, for lack of a better term, a little goofy. So if you think about a brand that’s done a marvelous job of creating a terrific in-store experience based on its marketing presence, the brand that’s probably done a better job than anybody is Duck Tape, which is owned by ShurTech, an industrial adhesives company.

What Duck Tape has done a brilliant job of is, through Facebook, creating all sorts of alternative personas and uses and visual imagery around Duck Tape. And then they’ve done a brilliant job of replicating a lot of that in-store. So whereas 10 years ago if you went into Walmart, the amount of space that Duck Tape commanded was one peg with one roll of Duck Tape on it, today there are four-foot endcaps dedicated to people taping their chairs up in college football-themed Duck Tape to go watch their college football game. Teenagers today will make wallets out of Duck Tape. They even have contests for kids to make their prom dresses out of Duck Tape.

But I don’t think today there’s any company that’s a large-scale, conventional marketer that’s done a brilliant job of tying together conventional above-the-line, digital above-the-line, however digital is going to work in below-the-line and conventional below-the-line into a really well-orchestrated, holistic approach to attacking a problem. The closest campaign I’ve probably seen do it is some of the stuff that Kimberly-Clark’s done with Kotex. That campaign and that redesign of the category, and the packaging and the messaging and the in-store presence is a really good example of a company architecting a fairly holistic solution that involved understanding that the consumer can access the brand anywhere and that the purchase experience needs to change to reflect on that.

I don’t think anybody’s done a brilliant job of understanding what it means when a consumer can be in an immediate consumption environment and move straight to purchase without moving. That’s a piece today that a lot of companies are still grappling with. You’re starting to see companies that are a lot more creative about how they promote their brand on Amazon and that shopping experience, knowing that often the consumer is browsing the Web about a particular brand or item and that it is very easy, given Amazon’s dominance of Google’s search engine, to end up on Amazon learning about the product without almost even realizing you’re on Amazon. And then all of a sudden, you’re in an environment where you can buy, and if I can get the right trigger point in there, I can create a purchase occasion.

What do you think about the potential for social media as a retail channel, like Facebook?

I’m not entirely sure why it’s important that people be able to buy things on Facebook. I just don’t know how that really helps anybody. Facebook is good at what it’s good at. … Facebook is like a hangout, right? The only people that have ever really succeeded at selling things to people when they’re hanging out is Tupperware. And I don’t know that a virtual Tupperware party on Facebook is going to get anybody going. It would surprise me if Facebook turned into a massive retail platform.

What do you think about the potential for shoppable walls or billboards where consumers buy with their mobile phones?

I think you’re going to find that those things can play an enormously useful role if you think about where to put them in the right place. I don’t know that for most shoppers that’s going to be a big part of how they’re going to want to buy things when they’re not in a physical store—but it’s got interesting potential. It’ll work well particularly with shoppers who have already learned to shop a physical store. My suspicion is that for younger Gen Ys and the Millennials, that whole concept of buying things off a shelf will probably make less sense to them. I suspect that generationally, the replication of a classic physical shelf as a way to solve the problem will probably change a fair amount, and in particular will change a fair amount for younger audiences that aren’t used to shopping that way.

You mean that younger consumers are more accustomed to seeing consumer choices in an app form or an Amazon layout, etc.?

Yeah. The real-time ability to select visually between roughly comparable and fungible options is something that the Millennials aren’t going to grow up with as a way to buy a lot of the things that are important to them. Either because they’re shopping in environments that are more tailored to their personal needs or shopping on devices where the physical screen isn’t big enough to display a lot of options, I think Gen Y and Millennials are growing up where they value curation over unlimited choice more than their parents will, just because it’s the way they’re used to processing the world.

You can’t interface with anything in the media environment that isn’t to some degree curated, either by the proprietor of that environment or by the participants within that environment. And whether that curation is as simple as ranking the videos that are most liked, or whether that is as subtle as understanding you well enough to be able to get the right ad words to pop up on Google, I don’t know that anybody has really gotten their head around just how hardwired curation of environment is becoming for people that have grown up digital.

So retailers will need to do much more personalization?

The flip side of it is the strange inability to process lots of options that aren’t personalized to you. As much as there is an expectation of the personal, there’s an unfamiliarity with the impersonal that conventional retailers are really going to struggle with. People my age grew up with stores that were basically aimed at everybody, and it was your job to sift through that store and find the parts of it that were useful for you. That responsibility was on you. There’s no possible way that’s going to work for people under 30.

They’re just not that patient, and it’s completely outside their world experience. Nothing they interface with on a regular basis isn’t to some degree curated for them. It’s a generation that, from a media environment, has been growing up with a far more targeted media than the generation that preceded them. I didn’t have the Disney Channel growing up, so I got to watch Sesame Street and cartoons and then what my parents watched. You’ve got a generation today that has grown up with swaths of media aimed at them at different life stages, and they’re just used to this. Conventional retail is going to have a very interesting time figuring out how to become more contextualized and more personalized.

That’s not just about product, that’s about information as well. Impersonal and uncontextualized expertise has no value to [these consumers]. They already know it, and they already got it for free. I mean, [patients] read about their condition on WebMD or Wikipedia, so they show up [at a drugstore] pre-informed with all the generally available information and probably some of the curative information they’re going to need. A lot of what you’re going to try to do with your in-store communication has to be part of what you know the dialogue is around that category before the shopper gets there. Every once in a while a rumor sweeps the Internet about the efficacy or danger of a particular product; your shelf vocabulary has to capture that conversation if you’re going to change people’s mind. You just can’t tell people that it’s safe—you have to be in that conversation.

You have to find a way to keep the shelf presence dynamic enough so that you’re changing their mind but in the frame of the conversation you know they’re having. That’s a very different way of thinking, where the store becomes less about broadcasting a simple idea and more about becoming part of the ongoing dialogue or conversation around the brand or the category.

How do you see mobile becoming more seamlessly embedded into purchase behavior?

It’s our belief that that’s where digital shopper stuff needs to go, and mobile will be the definitive platform by which digital marketing becomes digital shopper marketing. So a lot of what marketers are going to need to do is harness the power of mobile to really understand the role that the mobile device is playing in the shopping experience: How much information are shoppers getting? How much comparison are they doing? How willing are they to be in two shopping environments at the same time?

The other piece is that as you globalize this—Google estimates that between now and 2020, 3 billion people are going to get access to the Internet that don’t have it today. Almost all of them are going to use some sort of mobile device as their primary platform to do that. If you look at sub-Saharan Africa, for instance, you’ve got countries like Kenya where a disproportionate share of the banking today just skipped the physical banking industry altogether and has moved towards a mobile-based banking system. So it will be interesting to see over time, in markets like India which have very high wireless broadband penetration and relatively low modern retail penetration today, how those two things change each other as the modern trade continues to grow.

Looking ahead over the next several years, what are some of the key changes you think we’ll see among retailers?

You’ll see retailers having to reinvent a few big ideas around how they work. The easy answer is to say they’re all going to need to become omni-channel, and because it’s an easy answer doesn’t make it untrue. It’s just that the definition of that is going to vary quite wildly depending on the retailer. You’re going to see retailers whose offering is far more curated or targeted at specific shoppers or specific shopping trips. Those retailers have been winning in the marketplace for a long time. If you look at the Dollar Stores in the U.S., they’ve done a nice job of going after low-income shoppers, or the warehouse clubs—they’ve done a good job of going after higher-income shoppers, particularly those with kids. You’ve seen a fragmentation of growth, and we think that will continue.

The interesting dynamic is that by the end of Christmas, we expect Amazon will be the second most shopped outlet in America on a monthly basis. Only Walmart will get a higher percentage of American shoppers. So as Amazon moves from being a curiosity to being a $50 billion-plus part of the retail landscape, they are going to destabilize a fair number of retail businesses to the point where I think you’ll see, as you always have, some retailers really struggle to keep things going as Amazon siphons more and more of their trips in volume out of the store. That’s got some significant implications.

Amazon is going to continue to grow. They’ll be, by our estimate, a $100 billion global company by 2016. It would make them one of the top 10 retailers in the world. And they’re going to be an extremely disruptive force in the marketplace, particularly around pricing, because Amazon makes money in so many different ways. That’s the trick with Amazon: This isn’t about dot-com impacting brick-and-mortar, this is about Amazon impacting brick-and-mortar. Amazon is a very specific business with a very specific business model that does a few very specific things well. Their ability to be very dynamic from a pricing point of view is going to be very, very disruptive.

Retailers are going to have to really, really figure out what their price strategy and communication are going to look like in a world where Amazon and the third parties that sell through Amazon create an enormous amount of downward pricing pressure on the marketplace. Retailers are going to have to have what I would call a much more adult conversation with their shoppers around price-based value. “We’re the lowest price in the market every day; we can’t be beat.” That stuff is going to have to grow up. Shoppers don’t believe that anymore anyway.

For retailers the challenge is the price-sensitive shoppers, who flop back and forth as to where they think the best deal is. If I, as a retailer, pursue cherry-picking, discount-oriented shoppers like Barack Obama and Mitt Romney are pursuing people in Ohio, I’m going to go broke in a hurry. So I’ve got to understand when to let go, when to have a grown-up conversation, when to accept the fact that there are shoppers that aren’t going to perceive me as the lowest price, and that’s OK. And then manage that conversation in a much more mature way.

A big part of that from a pricing point of view is going to be retailers increasingly trying to take their pricing to their best shoppers—the ones that are their most profitable—and get it out of the public domain. That’s where mobile can play a huge role. Safeway in the U.S. is already starting to do this with what they call their “Just for U” pricing. You can walk in Safeway and if your loyalty card is loaded into your mobile phone, you can basically hold up your phone to the shelf and you’re not going to see the shelf price, you’re going to see your price. Effectively it’s a variation on the old loyalty card trick of “I know what you buy, so I know how to promote to you.” It’s just positioning those promotions as prices. That type of communication is going to be a much bigger part of how retailers talk to their best customers about price. It’s going to be a lot less public and a lot harder to do anything comparative.

The last piece is around that whole idea of in-store experience and showrooming. Stores have always been showrooms, that’s their job. It’s just, good ones close sales. So the trick for the retail environment, whether it’s online or in-store, is about closing. And that close isn’t just about stimulating demand, it’s about really understanding what the barriers to purchase are. Why doesn’t the shopper buy? The person who makes a ton of money on this in the 2010s will be the person who writes the book Why We Don’t Buy and How We Fix It.

Do you see all this happening on a global scale?

Certainly among what we call the major and postmodern retail markets, which are most of the large-scale markets in the world. … The modern retail trade in markets where GDP per capita is growing rapidly but started relatively low plays a slightly different role in those markets. People aren’t bored with it yet. The modern trade is, to some degree, still resetting expectations rather than having to deal with formed expectation.

So the roles will be a little different, but yes, by and large the ideas of retail owners needing to reinvent convenience—making it faster and easier to shop, and to really make the most of shoppers’ time—really reinventing loyalty to become more personalized and contextualized, reinventing the experience to overcome barriers to purchase, and reinventing value—to get over in a world of very dynamic and disruptive pricing and becoming more personal and private with it—I think all those attributes are fairly universal.

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