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This will be the most competitive holiday on record. Consumers recovering from their tryptophan-induced comas on Black Friday will walk into the hands of manufacturers and retailers seeking to win their loyalty. This will be no ordinary turkey shoot. This year’s consumers will be more informed, more demanding and more frugal than ever before. And with flat retail sales, retail not hiring as much seasonal staff, and no new holiday “must haves,” our 2011 CE retail holiday forecast predicts it will be a difficult holiday for manufacturers.
Retail is Still King
Internet sales represent approximately 6% of U.S. sales and are expected to grow to 8% by 2014 (majority of online retailing is computers, apparel and consumer electronics). This means that almost 95% of U.S. sales still take place at brick and mortar stores! However, other factors are becoming more important in the shopper journey. Customers have greater access to information about products including other customers’ ratings and opinions. Customers are able to easily tap into their social graph for recommendations and insight. In fact, brand advocates within your company’s enterprise social graph are 83% more likely to proactively share information about products. Even though online access is vast and online shopping convenient, according to this month’s NPD Group report, a majority of consumers are still unwilling to buy online.
The Power of Social Recommendations
Before writing this post, I went to my own social graph and asked a few questions about holiday shopping plans as well as what “must haves” deserve a place on my holiday shopping list. My social media-savvy friends have gotten used to me polling them, and I’m not the only one turning to the social graph for information. With 50 million pages being “liked” daily on Facebook, brands and customers are interacting at record pace. According to Facebook and Neilsen, customers are 300% more likely to buy when someone in their social graph recommends a product. This powerful influencer tool is gaining traction and affecting the CE retail holiday forecast for 2011.
POS Brand Switching
Even though the social graph is a significant influence factor, customers are still switching brands. Recently, we conducted a study where a number of customers walked into stores and asked to purchase a specific brand’s product. In those interactions with salespeople, one-third of the customers were switched to a different brand than what they originally asked for. This indicates that while a conversation and influence may start at the social graph, it doesn’t stop until a purchase is finalized. An influential social media campaign extends into the store, where the brand needs to transition from online to in-person in order to secure their customer’s loyalty.
Now more than ever, your presence in-store will make or break your holiday sales. Although customers are more informed through online resources, 95% of their purchases happen in-store. Keep in mind that even after careful online engagement, one-third of customers can still be persuaded at purchase point to switch brands. This means that though shoppers may have a list in mind, they are still open to influence at the POS. Given the competitive nature of this holiday season, our advice is to interact with your customers early and often. Even more importantly, continue the conversation all the way into the store to ensure your customers stick with your brand.
It’s really fascinating to me that even with all of the alternative options that 95% of purchases still happen in the store.
Hmmm… how does the percentage of Internet sales vary with the customer’s age demographics? I would guess as the baby-boomers age they are less likely to change their buying habits and stick to the brick and mortar processes they grew up with and the younger gen X & Y are driving the Internet bus. What are your insights on age demographics and how do they differ?
According to the Pew Research Center (http://www.pewinternet.org/Reports/2010/Generations-2010.aspx) there are differences in online behaviors amongst the generations. For instance, the millennials (18-23) surpass all other generations in online activity. However, an emerging trend is that, while the very youngest and oldest internet users may differ, certain key internet uses are becoming more uniformly popular – such as purchasing products, seeking health information, and social networking. Over time, we suspect that more and more internet uses (communication, research, purchasing, etc.) will become standards across all demographics but certain types of content (health, news, video, gaming, etc.) will be the key differentiators amongst how the demographics use online.
I’d be curious to learn what the various factors were that drove the 1/3 change in store? Was it promotion related, sales person advice related, or perhaps product not appear as desireable in person versus the online representation, or something else altogether.
Good question Rob. The reasons for brand switching vary. If you take out environmental issues such as a product being out of stock or pricing promotion, then the reasons for a salesperson to brand switch come down to either an extrinsic motivation such as a SPIFF or commission, or intrinsic motivation such as an affinity for a brand or a personal positive experience with the product. Interestingly, these positive experiences can be cultivated over time not only by ownership of the product but also through positive continued interaction with a brand or product (e.g. through a manufacturer’s rep, product demonstration, etc.)
Assuring to know that brick and mortal is still the King! Please share best practices or “methods to close the sale”. For example, be prepared and know the “facts” – is this an award winning product? If so, then show the online award or magazine reprint to the customer and associate. Always gather “information” – ask associates about best sellers and why they outsell other products (pricing, availability, celebrity endorsement, recommendations) and use this information to overcome objections and present the “value” of what you’re recommending. Is your recommendation trustworthy? -do you prefer or use the type of product you’re recommending?
Thanks for the share!
Nancy.R
I’m surprised that such a small percent of retail purchases are done online. I think it goes to show that face to face expertise and customer service go along way.
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