The state of play in digital retail today
— John Chambers, Executive Chairman, Cisco Systems
It has been a pretty challenging period recently for many of our nation’s retail CEOs, with consumer spending weathering tougher times. And yet the speed of change in consumer behaviour continues to accelerate with demands for more mobility of retail offer, construction of retail “ecosystems” and increasing returns on trading. Capital is increasing and while there are many opportunities, there are corresponding pressure points.
Digital branding expenditure and deployment within a retailer’s brand portfolio is an interesting weathervane to understand how, if in fact at all, we are matching consumer demand for increased innovative digital reach among our retail community, or merely digitalising older methods of reaching our audience.
To understand these questions and more (as part of a larger study), our consumer insights team went out to a large cross section of Australian retail CEOs, CMOs and shopping centre owners.
Here are a few high level summary points:
Digital marketing spend dynamics
- Digital marketing spends have significantly increased across all categories over last 12 months and this trend is expected to continue.
- The average spend increase across all categories was in the order of 20-25 per cent over prior year.
- The most significant increase is noticed in the fashion, shoes & accessories category.
- Shopping centres & malls increased their digital marketing spends by an average 20-30 per cent.
- This dynamic is “moving the money around the pie rather than increasing the size of the pie”, according to most retailers, however according to the BDO trend spend report, Australian retailers increased their overall marketing spends (digital and non-digital) by a significant 35 per cent over the past year. So we see that overall branding and marketing expenditure didn’t generally increase over prior year however the composition of budget did change.
(Paradoxically, with some notable exceptions, investment in retail “ecosystem” (Omnichannel) strategy planning remained static to last year, somewhat revealing the highly tactical nature taken to leading and managing change within broader differentiation opportunities).
We also observed the following within current practices in digital:
Current practices in digital
- All respondents stated that investment in digital will be the major investment category to drive customer engagement and retention going forward.
- Respondents are on growth journey of digital (adoption to early growth).
- Retailers increasingly focus on data and insights to generate ROI.
- Some retailers show relative inexperience in terms of capability to consolidate, interpret and action the data available.
- Dilemma between capital investment (e.g. IT systems) and operational expense continued to derail strategic intent.
- Willingness to learn, test and measure relative to perception of risk and cost was mixed, that is the appetite to innovate in this space and take risks.
- EDMs are currently the most widely used digital activity – 14 out of 16 (88 per cent) retailers use EDMs as an example, here we see that the old practice of reliance on EDMs still high ,with the method of application evolving , rather than attempting newer ways to reach current and future customers.
- Achieving a single view of the customer is a top of mind priority for the majority of retailers but most of them are in the early stages of development or initial assessment
So we see a changing and more promiscuous customer, more noise within the marketplace, and retailers in the relatively early stages of building a true “retail ecosystem” and as we look at digital planning and expenditure as a symbol of this journey, we see a longer road for many retailers with only a short runway to master the digital changes afoot.
Brian Walker is founder and CEO of Retail Doctor Group and can be contacted on (02) 9460 2882 or [email protected]. Damian Milne is Client Services and Insights Analyst at Retail Doctor Group and contributor to this column. Damian can be contacted on (02) 9460 2882 or [email protected].
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