In a WWD-produced webinar, Sherene Hilal, senior vice president of marketing and operations at the retail technology solution Bluecore, joined WWD executive editor Arthur Zaczkiewicz in discussing expedited digital trends, how brands are able to drive recovery with consumer behavior insights, and retention strategies.
With a nearly 150 percent increase in first-time buyers online, compared to April 2019, luxury and beauty retailers are experiencing an opportunity to optimize digital strategies for retention beyond acquisition and meaningful lifetime value. In fact, during the coronavirus pandemic retailers across industries have experienced a huge digital shift, driving trends on the tipping point into fruition. According to Hilal, the 50/50 online/off-line shift is now a permanent reality.
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Hilal also pointed out that while many, or most, retailers were preparing to make investments for e-commerce to represent about 15 percent of sales in January of this year, e-commerce has since become the primary or sole revenue generator that has exposed many vulnerabilities about the state of digital retail. “We’re seeing retailers believe so strongly in the future of online that they’re restructuring their debt because they think digital will save their business,” Hilal said. “While there are no modern parallels to COVID-19, I think the 2008 U.S. recession is a good model to analyze retail recovery. Constraints like those we’re experiencing right now forced brands to invest and innovate. Those that do, instead of just cutting cost and waiting for stability, are those that thrive.”
To illustrate, Hilal pointed to Sephora’s launch of its successful VIP loyalty program in 2009, which encouraged the discovery of new products and store loyalty. Another example is Nike, which launched its sportswear line during the recession that ultimately extended its product line options to shoppers who wanted to live in the Nike style. Also notable were DTC brands, like Warby Parker and Bonobos, who were founded shortly after the recession to address access and affordability of products in response to capital constraints.
Now, Hilal explained, we are far beyond the anticipation period of the shift to digital and consumers are spending more and more time online for purchases. One of the key vulnerabilities exposed by COVID-19 is that brands have invested in multiple vendors that have invested in technology vendors that work to automate manual work instead of technology that uses key advancements.
“Across the board, I’m seeing retailers consolidate onto modern vendors that are built on the cloud, who can support workflows built for intelligence and can also act quickly on customer and product signal,” Hilal said. “[From] my perspective, the most critical technology will merge the historically styled processes of audience management, campaign management and execution into a single system and replace that manual work of segmentation with predictive intelligence. So, we can move out of the world of lists and lists management and into one where we can personalize content offer and product recommendations at the individual level and have that optimize automatically because of the agility of existing technology.”
But why is personalization so critical to digital retail? Because retention is a primary lever for retail recovery. One-time purchase consumers cause brand acquisition costs to be higher. However, personalization technologies can be automated to act on real-time signals that convert consumers to make second purchases and drive revenue without the cost of acquisition.
It is important to recognize that personalization is not segmentation. “Brands often mistake retention for access, [meaning] access to data and access to a list of subscribers,” Hilal said. “But in fact, brands that are only communicating with a small percentage of their total list are doing so because segmentation excludes shoppers with few attributes, which means that on top of this first purchase problem, you’re most likely only accessing 40 to 50 percent of your subscriber base.”
According to Bluecore data, nearly 80 percent of customers are one-time buyers. It is in fact the second purchase that represents a gateway purchase and more likely that a customer will come back to a retailer for a third and fourth purchase. During COVID-19, luxury retailers are experiencing a notable surge in first-time buyers as consumers have found a new level of experimentation.