E-commerce has become much more mainstream in the last two years. And yet, no one company, except for Amazon or perhaps Apple, appears to be notably dominant. Earlier this week, WPP’s GroupM Next released a survey of 1,000 users that showed 45 percent of customers shopping in-store at brick and mortar locations will walk out and complete their purchase online for a discount as low as 2.5 percent. We spoke with GroupM Next CEO Chris Copeland about the trends in the space and why a pioneer like Groupon appears to be so weak, even in the face of producing its first profit.
AdExchanger: What did you hope to discover with this survey of showrooming?
Chris Copeland: Not surprisingly, one of the top concerns our clients have is about the economy and its affect on sales. We’ve seen, with the rise of mobile phone usage, a change in consumer behavior – there’s been a shift in how people find and choose what products they buy. We wanted to try to see if we could quantify and identify a price point for a given item that would make someone walk out of store. And would we be able to create media strategies down the road to change that behavior. After all, you can change prices, you can offer incentives – there are many things that brands can do. But understanding when and how to do those things is a challenge. We think this kind of research can help with that.
Did you find any particular examples of items that tested your theories of shoppers’ behavior?
We looked at headphones that had the highest retention rate of any of the other products we included in the survey. Plus, there’s a sense of immediacy about purchasing an item like headphones. People buy them when they need them – it’s not a deeply planned, considered purchase. And people buy in stores because they want something right now.
And we also found that there is this constant 10 percent of shoppers that will not leave the store, no matter the discount, and another 10 percent who will go online for the slightest price break. We showed them flatscreen TVs that were $200 cheaper online and they wouldn’t leave the store. We showed some bookstore shoppers $0.50 discounts for the same book online and they took that. It’s 10 percent at either end.
For us, the question then becomes, are there groups of people that we can have more influence on? For example, there are loyalty card programs than can be targeted toward certain consumers and that’s where online data will play a crucial role. Site data, cookie data is going to start getting more compelling for brands which want to know how to keep consumers in their store.
What surprised you most about the connection between the ways consumers navigate brick & mortar retailers and mobile e-commerce?
It’s clear that there are two things that people do when they’re standing in their aisle with their mobile devices. They look for price information and product reviews. If a brand says looks at its mobile strategy and says we’re going to go very strong in our bidding and messaging when someone types in “keyword-plus-price” or “keyword-plus-reviews,” they may have a way to own the showrooming effect.
That could especially help brands that don’t have brick & mortar locations. If someone types in reviews from a mobile device while they’re in a store, that online-only brand could capture their business. We think there’s a definite media strategy that can be applied there. For example, maintaining a continual presence in Google Shopping, third party review sites is crucial, particularly those that are highly targeted for mobile devices.
Last week, Groupon made a slight profit, but there were some worrying hints about its future growth. What does Groupon’s situation say about the opportunities and pitfalls in the competitive landscape for e-commerce?
You’re going to see specialization. You can look offline and see how Apple has created the blueprint for what an in-store experience is expected to be, while having an equally healthy online sales business. Also, you have marketing-focused online publishers like Thrillist, which is very niche and targeted toward young men while Gilt Groupe has focused on exclusivity women.
Groupon just hasn’t evolved, and they haven’t put all the data they have accrued to good use, as far as I can see. When we look at what will shape e-commerce in the future, data is at the center of it: loyalty data, customer relationship management data, site visitation and cookie data— all of it. The challenge with Groupon is that they’re still all about offering everyone the same deal at the same price. They’re not targeting their pricing based on how often someone has shopped with them in the past. They’re not offering things that are specifically customized to their audience. That’s disappointing.
If I were going to look to what’s really affecting the e-commerce landscape, I would look to the ongoing battle in the credit card purchasing space, and the battle between the Amexes and Visas of the world and [mobile payments company] Square. And Square is clearly putting itself in a position to make money off having the merchant data, in addition to making money on the sales it helps process. Over the long term, companies like Square will be the ones to have the valuable insights about who’s shopping where, for what and how often. I think they’ll ultimately partner with mobile e-tailers and third parties on the use of that data.
You mentioned online publishers like Thrillist as being a good example of the marriage of content and commerce. What about traditional publishers like newspapers and magazines? Pretty much every major newspaper chain and major magazine has some sort of e-commerce play. How successful can these players be in the e-commerce space?
I think publishing and e-commerce can mix, but frankly, I’m more optimistic about next-gen publishing models like Flipboard, which not only is a great way to distribute digital content, but it’s got the natural social media function that traditional publishers don’t have in their DNA. That offers a great platform for an e-commerce integration. The only thing traditional media outlets have done is append a local deal component. Groupon’s numbers show that even with a small profit, no one is killing it in this over-saturated e-commerce space.
I’ve found some interest in the new publishers who bringing content and deals into one location. But at the moment, most of those sites don’t have enough scale to be credible.
Lastly, I see Amazon continuing to shape the landscape, especially as they’re required to charge a national sales tax, it forces them to have pick-up stores and locations. That’s something that’s very prevalent in Europe. When that barrier of immediacy in making an online purchase is removed as Amazon has more distribution outlets, the need for a big box showroom diminishes. Selling will become more targeted, more one-to-one, as you watch TV with your wifi-enabled tablet and scan a code to order something. People will be in their living rooms, connected to an Xbox or another device that lets them try on clothes. That’s where we’re headed and we’ll be there within five years.
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