May 19, 2015
Deloitte: Digital moving closer to dominating physical retail
Digital interactions are expected to influence 64 cents of every dollar spent in retail stores by the end of 2015, or $2.2 trillion, according to Deloitte Digital’s latest study, "Navigating the New Digital Divide."
The figure compares to digital interactions accounting for only 14 cents of each dollar spent in brick-and-mortar stores in 2012, the first year Deloitte conducted the annual study, and 36 cents as reported last April. Last year’s jump was attributed to more customers using digital devices before and during their shopping journeys.
The latest jump to 64 cents represents not only a further acceleration, according to the study authors, but shows how shopping is changing "as inspiration, information, and decision making have become decoupled from the physical trip."
Deloitte said an increasing number of consumers have already determined what to buy by the time they reach the store with their decisions supported by "sources of information they trust that are more often not controlled by the retailer."
Deloitte believes many retailers are "dramatically underestimating" digital’s influence and using e-commerce sales as the way to measure digital success and required investments. However, e-commerce represented only $300 billion in sales last year while digitally influenced store sales were over five times higher, topping $1.7 trillion. Also as part of digital, mobile-influenced store sales accounted for $971 billion last year.
Source: “Navigating the New Digital Divide,” Deloitte
"It would seem from our data that the degree to which consumers value the traditional in-store shopping and browsing experience is decreasing," wrote Deloitte in the study. "This raises the stakes on how retailers leverage digital in creating a more valuable in-store experience."
Deloitte’s research also indicated that, in the last five years, the top 25 established retailers have lost two percent of their combined market share to smaller players with digital at their core.
Kasey Lobaugh, principal, Deloitte Digital’s chief retail innovation officer, said in statement, "We are seeing a real change in the competitive dynamics, with digital as the great equalizer. The findings indicate that the large retailers are collectively losing ground to much smaller competitors."
Deloitte defines "digital influence" as the percentage of traditional brick-and-mortar retail sales that are affected by shoppers’ use of digital devices: desktop and laptop computers, smartphones, tablets, wearable devices and in-store devices (i.e., kiosks and mobile payment devices).
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Keith Anderson
Founder, Decarbonizing Commerce
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Discussion Questions
Is the influence of digital and mobile reducing the value of traditional in-store shopping and browsing? Do you agree that many larger retailers are underestimating the shopping changes being caused by digital and mobile?
Poll
Digital can be an equalizer when small merchants carry the same products as large merchants and offer them at competitive prices. But having a website is no longer good enough, sites need to be optimized for mobile devices. And retailers need to pay attention to digital basics: site search needs to be simplified and accurate, checkout should be simple and free shipping is almost a must. Retailers who master digital, be they large or small, will see benefits.
Digital and mobile are augmenting the store, not reducing its value.
Some dollar volume is undoubtedly shifting out of the store — but as the Deloitte work concludes, the bigger impact is on decisions about which stores to shop, what to buy and what price to pay.
There is a threat, but the threat derives from inaction. Digital and mobile will be a source of loyalty, retention and increased lifetime value for the retailers that thoughtfully balance their digital strategy with strong fundamentals like merchandising, operations and service.
It is clear that the mindset of the consumer is changing with regard to digital-assisted shopping. While most retailers are not seeing dozens of shoppers down their aisles interacting with shopping apps and smartphones, it is high time that retailers stake their claim to a digital strategy and gain an understanding of the many technology options they have before them.
In my mind the biggest opportunity retailers have is NOT with their websites or shopping apps, but making the right investments into in-store technology that actually enhances the physical shopping experience. Kiosks, touch screens, video streaming of promotions and recipes are all good starts, but the shopper is looking for customized information that assists in the decision making process and makes the shopping trip more productive.
If I were back in my retailing chair I would be an advocate of a c-level Customer Experience Officer that reports to the CEO being tasked with the focused goal of mapping out the shortest route to a technologically-based in-store shopping experience.
Every day we hear about how digital is going to change the world of shopping, and how the brick-and-mortar stores will be hung out to dry. Maybe so, but there are tons of small business owners who are pretty savvy and are already engaging in ways to enhance their presences online, and their mobile presences as well. All of us in business need to engage the shopper digitally, and in my case with print ads as well.
Once the customer gets into your business is where you can make a big difference in how the experience makes the customer feel special. That is where we can shine. Yes digital is absolutely critical to get involved with, and it is up to each business to determine what path to choose, as there are millions of apps to choose from. The big stores have the capital to go all out on digital, but the small business owners must do it smarter with the limited budget they have. I hope they choose well.
I’ve been hearing this from multiple clients who are seeing decreases in traffic but increases in conversion. This confirms that browsing is moving to digital but stores still have a role late in the journey for decision validation and purchase. Retailers should understand if this is happening among their customers and adjust their experience to accommodate and capitalize on the trend.
I don’t believe large retailers underestimate the changes, but rather struggle with bringing large scale changes to their complex retail organization. It is much easier for the nimble, small retailer.
I do think many larger retailers are underestimating the value of digital in-store. Until the mindset changes from “checking the digital box” by installing a couple screens running their TV ads to a more holistic, personal, interactive experience, retailers will not realize the true, bottom-line upside of the medium.
As an agency, it’s our job to present the “why and how” behind in-store digital AND give the metrics backing up its efficacy. The future is bright for this space. And shoppers are starting to not only crave in-store digital, but they are starting to expect it.
The Pizza Hut app revolutionized the way customers order dinner. I’m talking with an increasing number of retail executives who are augmenting their mobile strategies with apps, sensors in the store, suggested selling and some other really innovative ways to interact with customers. To Deloitte’s point, companies that don’t have a plan to leverage those kiosks that customers carry around had better get one.
Digital and mobile are enhancing the value of the in-store shopping experience. Remember, it’s all about giving the customer value. The more retailers who get this will be winners. They need to be looking at more digital and mobile opportunities.
According to my 2 cents.
When consumers are faced with making complex purchase decisions, the first move is usually for information. Generally the focus is for information on the needed ingredients and/or services for the investment. When the solution for the investment is a collection of components, the prioritizing and relevance of the information becomes a whole new set of problems to solve. The weight and subsequent dismissal of this scheduling act is governed by the monetary size of the front end sunk costs and/or regularly scheduled payments burdened from the buy.
Information technologies have and will continue to supply vast amounts of information for consumers to seek and digest. As time has gone by, we have created a consumer with more awareness of the lessening value(s) of this mountain of diluted data. The next consideration is to somehow eliminate redundancy and irrelevance. Without third party software support this is a tedious project with with very low probability for accurate results which is further complicated because anyone can say anything, true or false, on the internet. A large portion of these consumers will turn to the brick and mortar side of retail for assistance with selection. Stores with little or no expertise on the floor will lose the consumer’s interest for a long time to come.
As we all know, retailers are short sighted in this need and staffed for down stocking and directions to product only. So the consumer does what confuses us the most, they guess their needs and go online and shop price. To get the lion’s share of the windfall from those consumers left, technically abandoned e-commerce mavens add free services like delivery and returns of merchandise in any condition. These self contrived schemes further erode margins forcing management to continue to reduce staffing needs as well as to dummy down employee talent requirements.
There are many ways to look at a mess of information such as that which was used by Deloitte Digital for this discussion. What serves us best is providing undisputed information of pertinent value that is proven to increase sales and or margin.
Stuff and piffle! Are we talking a lady’s fine gown, a tent for camping, new computer or something on the 2.3 trips per week to the supermarket? Let’s get real. Lot’s of people are trying to magnify the role of digital. It doesn’t mean that it is not relevant, but billions of dollars have been and will be wasted on cheerleading.
And lest you think I am just stuck in the mud, bear in mind I recently did an AMA presentation on the “Webby store,” converging online with bricks, and am looking ahead to making virtual reality practical in the bricks store.
The idea that people make purchase decisions outside the bricks store has been known for more than a decade, and it is NOT about technology. The reality is that large amounts of purchasing happens based on autopilot mode (habit) where the actual “decision” was made months or years ago.
If the entire world pretends reality does not exist, does that make it go away? Not really, there are cavernous ditches to accommodate all who rush in to join their mates. 😉
I’m quite torn here. It’s not surprising that digital interactions affect (in some small way) a large percentage of sales. But we need to be clear: They did not say they drive sales at that level—merely that there is some level of influence.
At the same time, this study is based on interviews with consumers. Given past research history with work of this type, the increase may not reflect a change in behavior, but rather a change in consumer tendency to attribute influence to digital.
Unfortunately, even after downloading the study it’s hard to tell to what degree these results are important.
That said, perhaps the most significant statistic in the entire report is that despite the tremendous hype we’ve all had to put up with for nearly 2 decades about digital supplanting retail, online sales were found to account for 6.5% of retail sales.
To me, that suggests we not only take this survey with a grain of salt, but take care not to expect that we can control the future through digital. After all, influence by digital can be as simple as “somebody mentioned something in an article.”
When industries adopt methods, it’s a bell curve. When audiences adopt new ideas, it looks like a hockey stick. Apologies for going sports analog on this question but it’s playoff time.
Deliotte is saying we are in the third period. The experts are saying it’s only game 2. Deliotte may be arguing that traditional retailing is a great team, but the new teams are showing some new techniques that will challenge our dominance. Your fans want to see you win. The haters want to see you choke.
The players (your stores) have to skate against these new methods—pay attention, listen to your team between periods. For now the message is: keep your head up or you’ll get your “bell rung!” Deliotte is saying: start planning for next season now—they are trying to tell us where the puck is going.
It compliments the in-store value, doesn’t reduce it. For products with high research components on the path to purchase, digital has a larger role to play. None the less when the shopper gets drawn into the store, they are just as likely (or more likely) to make opportune and complimentary buys as someone who didn’t do the research/buy online.
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Digital can be an equalizer when small merchants carry the same products as large merchants and offer them at competitive prices. But having a website is no longer good enough, sites need to be optimized for mobile devices. And retailers need to pay attention to digital basics: site search needs to be simplified and accurate, checkout should be simple and free shipping is almost a must. Retailers who master digital, be they large or small, will see benefits.
Digital and mobile are augmenting the store, not reducing its value.
Some dollar volume is undoubtedly shifting out of the store — but as the Deloitte work concludes, the bigger impact is on decisions about which stores to shop, what to buy and what price to pay.
There is a threat, but the threat derives from inaction. Digital and mobile will be a source of loyalty, retention and increased lifetime value for the retailers that thoughtfully balance their digital strategy with strong fundamentals like merchandising, operations and service.
It is clear that the mindset of the consumer is changing with regard to digital-assisted shopping. While most retailers are not seeing dozens of shoppers down their aisles interacting with shopping apps and smartphones, it is high time that retailers stake their claim to a digital strategy and gain an understanding of the many technology options they have before them.
In my mind the biggest opportunity retailers have is NOT with their websites or shopping apps, but making the right investments into in-store technology that actually enhances the physical shopping experience. Kiosks, touch screens, video streaming of promotions and recipes are all good starts, but the shopper is looking for customized information that assists in the decision making process and makes the shopping trip more productive.
If I were back in my retailing chair I would be an advocate of a c-level Customer Experience Officer that reports to the CEO being tasked with the focused goal of mapping out the shortest route to a technologically-based in-store shopping experience.
Every day we hear about how digital is going to change the world of shopping, and how the brick-and-mortar stores will be hung out to dry. Maybe so, but there are tons of small business owners who are pretty savvy and are already engaging in ways to enhance their presences online, and their mobile presences as well. All of us in business need to engage the shopper digitally, and in my case with print ads as well.
Once the customer gets into your business is where you can make a big difference in how the experience makes the customer feel special. That is where we can shine. Yes digital is absolutely critical to get involved with, and it is up to each business to determine what path to choose, as there are millions of apps to choose from. The big stores have the capital to go all out on digital, but the small business owners must do it smarter with the limited budget they have. I hope they choose well.
I’ve been hearing this from multiple clients who are seeing decreases in traffic but increases in conversion. This confirms that browsing is moving to digital but stores still have a role late in the journey for decision validation and purchase. Retailers should understand if this is happening among their customers and adjust their experience to accommodate and capitalize on the trend.
I don’t believe large retailers underestimate the changes, but rather struggle with bringing large scale changes to their complex retail organization. It is much easier for the nimble, small retailer.
I do think many larger retailers are underestimating the value of digital in-store. Until the mindset changes from “checking the digital box” by installing a couple screens running their TV ads to a more holistic, personal, interactive experience, retailers will not realize the true, bottom-line upside of the medium.
As an agency, it’s our job to present the “why and how” behind in-store digital AND give the metrics backing up its efficacy. The future is bright for this space. And shoppers are starting to not only crave in-store digital, but they are starting to expect it.
The Pizza Hut app revolutionized the way customers order dinner. I’m talking with an increasing number of retail executives who are augmenting their mobile strategies with apps, sensors in the store, suggested selling and some other really innovative ways to interact with customers. To Deloitte’s point, companies that don’t have a plan to leverage those kiosks that customers carry around had better get one.
Digital and mobile are enhancing the value of the in-store shopping experience. Remember, it’s all about giving the customer value. The more retailers who get this will be winners. They need to be looking at more digital and mobile opportunities.
According to my 2 cents.
When consumers are faced with making complex purchase decisions, the first move is usually for information. Generally the focus is for information on the needed ingredients and/or services for the investment. When the solution for the investment is a collection of components, the prioritizing and relevance of the information becomes a whole new set of problems to solve. The weight and subsequent dismissal of this scheduling act is governed by the monetary size of the front end sunk costs and/or regularly scheduled payments burdened from the buy.
Information technologies have and will continue to supply vast amounts of information for consumers to seek and digest. As time has gone by, we have created a consumer with more awareness of the lessening value(s) of this mountain of diluted data. The next consideration is to somehow eliminate redundancy and irrelevance. Without third party software support this is a tedious project with with very low probability for accurate results which is further complicated because anyone can say anything, true or false, on the internet. A large portion of these consumers will turn to the brick and mortar side of retail for assistance with selection. Stores with little or no expertise on the floor will lose the consumer’s interest for a long time to come.
As we all know, retailers are short sighted in this need and staffed for down stocking and directions to product only. So the consumer does what confuses us the most, they guess their needs and go online and shop price. To get the lion’s share of the windfall from those consumers left, technically abandoned e-commerce mavens add free services like delivery and returns of merchandise in any condition. These self contrived schemes further erode margins forcing management to continue to reduce staffing needs as well as to dummy down employee talent requirements.
There are many ways to look at a mess of information such as that which was used by Deloitte Digital for this discussion. What serves us best is providing undisputed information of pertinent value that is proven to increase sales and or margin.
Stuff and piffle! Are we talking a lady’s fine gown, a tent for camping, new computer or something on the 2.3 trips per week to the supermarket? Let’s get real. Lot’s of people are trying to magnify the role of digital. It doesn’t mean that it is not relevant, but billions of dollars have been and will be wasted on cheerleading.
And lest you think I am just stuck in the mud, bear in mind I recently did an AMA presentation on the “Webby store,” converging online with bricks, and am looking ahead to making virtual reality practical in the bricks store.
The idea that people make purchase decisions outside the bricks store has been known for more than a decade, and it is NOT about technology. The reality is that large amounts of purchasing happens based on autopilot mode (habit) where the actual “decision” was made months or years ago.
If the entire world pretends reality does not exist, does that make it go away? Not really, there are cavernous ditches to accommodate all who rush in to join their mates. 😉
I’m quite torn here. It’s not surprising that digital interactions affect (in some small way) a large percentage of sales. But we need to be clear: They did not say they drive sales at that level—merely that there is some level of influence.
At the same time, this study is based on interviews with consumers. Given past research history with work of this type, the increase may not reflect a change in behavior, but rather a change in consumer tendency to attribute influence to digital.
Unfortunately, even after downloading the study it’s hard to tell to what degree these results are important.
That said, perhaps the most significant statistic in the entire report is that despite the tremendous hype we’ve all had to put up with for nearly 2 decades about digital supplanting retail, online sales were found to account for 6.5% of retail sales.
To me, that suggests we not only take this survey with a grain of salt, but take care not to expect that we can control the future through digital. After all, influence by digital can be as simple as “somebody mentioned something in an article.”
When industries adopt methods, it’s a bell curve. When audiences adopt new ideas, it looks like a hockey stick. Apologies for going sports analog on this question but it’s playoff time.
Deliotte is saying we are in the third period. The experts are saying it’s only game 2. Deliotte may be arguing that traditional retailing is a great team, but the new teams are showing some new techniques that will challenge our dominance. Your fans want to see you win. The haters want to see you choke.
The players (your stores) have to skate against these new methods—pay attention, listen to your team between periods. For now the message is: keep your head up or you’ll get your “bell rung!” Deliotte is saying: start planning for next season now—they are trying to tell us where the puck is going.
It compliments the in-store value, doesn’t reduce it. For products with high research components on the path to purchase, digital has a larger role to play. None the less when the shopper gets drawn into the store, they are just as likely (or more likely) to make opportune and complimentary buys as someone who didn’t do the research/buy online.