Much has been written about the state of commerce today. It's either dying or thriving, thanks to online competition, depending on who you talk to. But after attending Shoptalk in Las Vegas March 3-6, it's clear that retail's transformation is picking up steam as retailers build out and reap the benefits of a robust omnichannel program, and direct-to-consumer brands fuel growth in stores, and online marketing remains the key to achieving personalization.
"Too much of retail is deeply out of date," said Anil Aggarwal, Founder and Chairman of Shoptalk, during his opening address at the conference. "Retail is entering an era of monumental change and we are at risk of under innovating. We've been too slow. We need to be more agile."
It's a sentiment echoed by Nordstrom President Erik Nordstrom a few minutes later. "We think we've been too slow," he told CNBC's Courtney Reagan. "We need to be more agile … to move faster."
The need for speed is a clear directive to brands today. That and more was the message coming out of Shoptalk, and for those fortunate enough to be in attendance, there was plenty of food for thought.
Direct-to-Consumer Brands are Driving Commerce
With their core advantage of moving with speed and agility, Direct-to-Consumer brands are maturing and helping to fuel retail growth in more powerful and far reaching ways than anyone could have imagined just a few short years ago.
Digitally native brands like Bonobos and Harry's Shave graced the stage at Shoptalk's inaugural event four years ago -- and DTC is every bit as much a part of the conversation today as it was then. But the positioning and role of DTC in commerce has changed. It's notable that the freshman class of DTC brands have graduated to bigger things. Warby Parker now operates stores in the U.S. and is growing fast. Harry's is in mass retail stores and has expanded into women's products with the Flamingo brand; Dollar Shave Club is now part of Unilever; Bonobos has joined the Walmart family of owned brands. The list goes on.
DTCs are opening stores at a rapid rate, even as legacy brands continue to shutter locations. The reason, plain and simple, is that brick-and-mortar drives online sales. This is true for both digitally native brands and established retailers.
When Macy's closes a store, online sales in that market decline, Jill Ramsey, COO of Macy's told Shoptalk attendees. The flipside is also true -- when a brand opens a physical location, digital sales climb. It's a halo effect that is fairly well documented. Opening a store can boost online traffic by 27%, while closing stores prompts a decline, according to research from the International Council of Shopping Centers.
"We have to look at the integrated contributions and also understand the negative effects of what happens to the digital business if a retailer closes their only store in a market," said Michael Brown, Partner, Consumer Products and Retail Practice, A.T. Kearney in the report.
Brand perception is also impacted to both the positive and negative. It's about immediacy and availability, and the ability to connect messaging to the right customer at the right moment in the correct physical market.
Flexing Marketing Muscle
For all its reported ills, social media still reigns supreme when it comes to brand marketing, a point driven home by multiple Shoptalk presenters.
DTCs have benefitted from social media in ways that cannot be understated. Warby Parker and others have used Facebook to introduce consumers to the brands while influencers on Instagram endorse the products. Videos from YouTube stars unboxing orders and demoing the goods have thousands, if not millions, of views.
The use of images and visual search are helping to drive marketing plans today. Pinterest is allowing retailers to upload entire product catalogs for the first time. Google is adding images to shoppable ads, according to Daniel Alegre, President, Global Partnerships at Google. Upward of 90% of consumers now discover new brands on YouTube, thanks to higher trust being placed in images. A majority of shoppers (59%) say they trust images more than text when it comes to product descriptions, according to a study from the Intent Lab, a partnership between Performics and Northwestern University Medill School of Journalism, Media, Integrated Marketing Communications.
Pinterest is allowing retailers to upload entire product catalogs for the first time. Home Depot is using visual recognition in its app and in stores to drive engagement and increase conversion.
All of this has big implications for brand transformation, provided they can move fast enough.
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