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Insider’s Corner with Peter Rosenwald: Retail Lives

Just when we thought the retail apocalypse couldn’t get any worse, Covid-19 hit.

However, according to our industry insider, all is not lost. Find out how retailers can take advantage of the changes in the market to emerge better, stronger and more connected than before.

For tips on making tough decisions, read Peter’s previous post here.

Insider’s Corner: Retail Lives

Like so much else, both our large and small retail environment has been turned on its ear by the changes driven by the Covid-19 pandemic. Businesses in the retail industry have been forced to assess how best to stay in business and grow their businesses in the face of new challenges.

As Ometria’s Hannah Stacey wrote recently, “…with many traditional brick-and-mortar competitive advantages like store location and footfall-drivers gone, it’ll be vital for retailers to set their sights online to survive and thrive.”1 With greatly reduced foot and vehicular traffic on Main Street and in badly hurting shopping malls now and in the foreseeable future, astute retailers who managed to weather this storm have a rich opportunity ready for grasping. As Ms. Stacey argues, online is where more and more of the action is now and likely will continue to be in the future.

Not only can retailers expand their businesses by building or increasing their online activities to reach far beyond their immediate geographic boundaries, but they can also create a new and more beneficial set of business economics and lock in future purchases through tried and true continuous sales and “club” programs. Instead of being just a “stop” on the customer journey, they can serve as a friendly guide the whole way through.

D2C Vs. B2C

There is a certain amount of alphabet soup which needs straining. D2C is defined as “a strategy in which a company promotes and sells a product or service directly to consumers, cutting out the need for any intermediaries. … D2C differs from traditional B2C (business to consumer) in that manufacturers sell directly to consumers in D2C, while B2C usually relies on a retailer stepping in between a manufacturer and customers. In standard B2C models, intermediary retailers (think Walmart) typically sell products of several manufacturers.”2

The retail industry has primarily functioned as B2C. Retailers have principally relied on the consumer to come to a storefront, helped, even incentivized, by marketing and advertising. The retail store was part of a chain starting with the product creator and producer, moving through the wholesalers and other middle men and finally winning a competitive battle to get the goods on their shelves. The consumer selling price had to factor in mark-ups at each stage of the journey and if ultimately the goods didn’t sell and had to be discounted, it was the retailer who took the hit. But it is also the retailer who has pricing and prioritizing flexibility, essential competitive advantages over retail brands and manufacturers.

Brands and manufacturers had traditionally been wary to bypass the retailer in order to go direct to the consumer, because it would often incur the retailer’s wrath. Likewise, for many years, retail stores were understandably cautious about diving into all the complicated issues of virtual D2C and despite the great success of many “direct” merchants, traditional retailers tended to shy away to sensibly concentrate on what they did best, face to face with customers in a brick and mortar storefront.

The Not-So-Secret Ingredient

But pressure from the critical “millennial” cohort whose preference is for a more instant and intimate customer experience has tipped the scales in favor of the merchants who meet their priorities: “convenience, low cost, authenticity, and a seamless shopping experience.”1 However, there’s an undervalued yet essential ingredient to making this new retail model work. That ingredient is data – and it’s worth its weight in gold.

Just how valuable is data and are D2C brands, manufacturers and retailers tapping into that value? Traditionally, the asset value of data has been vastly undervalued. To fully realize that underutilized value, D2C retailers would do well to make certain they achieve the highest possible return on its use by leveraging data for channels such as email marketing that carry a high ROI. And, the beauty of data is that once it’s leveraged for one campaign, it doesn’t go away. Data can be used again and again and gains value with each use.

First the internet, with its relatively low cost of data-driven email promotion to well-targeted prospects, and then the pandemic have combined to dramatically increase the awareness and use of this valuable virtual channel.

Case In Point

A striking example of the convergence of these two factors is the result of fashion brand Entireworld’s heartfelt, off-the-cuff email on March 15th promoting its sweatsuits to its 30,000 “subscribers” (customers and prospects who had added their name to Entireworld’s mailing list). A normal day’s sales were around 50 sweats. As the NYTimes reported, “That day they sold more than 1,000. When they ran out of sweatsuits, shoppers moved through the T-shirts, socks and underwear. By month’s end, the brand’s sales were up 662 percent over March the previous year.”3 We often forget that D2C has impulse purchases just like the “specials” featured by brick-and-mortar merchants. Can you believe that the company had also sold out of 600 pairs of lavender women’s socks?

If email cost Entireworld at most, $100.00 per thousand sent (substantially above the industry average), on a total promotional investment of $3,000.00, each of the 1,000 orders had a promotional cost of only $3.00 for a minimum $88.00 ticket. How does that compare to the normal retail product display, inventory and real estate costs?

This enormous upside is hardly surprising when, according to an eMarketer study, “the median email marketing ROI is 122%, four times higher than any other digital marketing channel.”4 For the retail industry, as for many others, access to the right data to maximize their email marketing efforts has indeed become an essential element in direct marketing and an essential part of retail’s future going forward. If the retail industry can successfully move online and utilize detailed data to directly connect with customers in a meaningful way, no matter what crises may come, retail will live to see another day.


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