This is the first in a multi-part blog series that focuses on marketing in the era of digital commerce in the retail industry.
CEOs are turning to marketing to drive their company’s growth agenda, and they are giving CMOs the runway and support to do so. In the latest study by McKinsey, 83 percent of global CEOs say that marketing can be a major driver of growth. Increasingly, CMOs are considering digital commerce a vital capability for delivering their marketing strategy. It is enabling them to build a strategy to drive revenue and market growth through digital sales channels. Digital commerce also fuels two marketing imperatives: Expanding brand presence into channels where customers are and nurturing more transactions through a better customer experience.
Growth of e-commerce subscription model
Enabled by digital revolution, customers today have taken control of the purchasing journey and now seek long-term subscription based relationships, rather than one-off transactions with brands – from automating the purchase of commodity items (replenishment subscription), to providing new items or highly personalized experiences in categories such as apparel, beauty, and food (curation subscription), and paying a monthly fee to obtain lower prices or members-only perks (access subscription), primarily in the apparel and food categories.
Subscription e-commerce, led by digital disruptors such as Ipsy (beauty), BirchBox (beauty), Blue Apron (meal kits) and Birchbox (meal kits), is a fast-growing new way of buying online. According to McKinsey’s research, the subscription e-commerce market has grown by more than 100 percent a year over the past five years. The largest such retailers generated more than $2.6 billion in sales in 2016, up from a mere $57.0 million in 2011.
Customers are expecting great experiences, not great subscriptions
For consumers, subscription products or boxes offer a convenient, personalized, and often lower-cost way to buy what they want and need. However it can be difficult for retailers to acquire and then retain consumers. Consumers do not have an inherent love of subscriptions. They want a great end-to-end experience and are willing to subscribe only where automated purchasing gives them tangible benefits, such as lower costs or increased personalization, as the figure below shows. The bigger challenge facing retailers is churn as the subscription e-commerce business model depend on their long-term relationships to provide predictable revenue growth and deep insights into customer behavior to personalize the experience. Churn can dramatically undermine their viability, since the cost of replacing lost subscribers could not only make it difficult to meet their growth objectives.
Retailers in the space must develop great experiences (as opposed to great subscriptions) to avoid high churn rates and to accelerate both growth and profitability.
Time for retailers to embrace digital commerce
Everywhere commerce is the next step for e-commerce. In the future of commerce, the customer journeys will not be limited to the websites and mobile apps we know today, nor will they focus on conventional devices like laptops and smartphones. Instead, touchpoints will be embedded in the physical world, shifting to online, mobile, conversational commerce and also to the changing consumption models.
Consumers are adapting to digitally-enabled shopping experiences. More purchases than ever before are influenced by digital touchpoints on the path to purchase. Fashionistas are turning to social media to find out about the latest trends – it’s the one place where they can instantly critique their friends’ outfits; get up-to-date information on top selling items; and find out what influencers are saying about what’s hot, and what’s not.
According to ANA Marketing Futures and eMarketer, as consumers move fluidly between online and in-store shopping experiences, they expect seamless engagement no matter where they choose to encounter a retailer. The future of retail is a highly integrated online and offline environment that recognizes that the buying journey can start in one place and end in the other. The norm is that many in-store purchases are digitally influenced, while the reverse is also true. And as these consumers move between the online and offline shopping experience, they also expect omnichannel fulfillment.
Grounded in customer data, digital commerce marketing connects customer interactions across channels to deliver delightful shopping experiences—one that results in higher sales, consistent engagement and increased loyalty. This includes all interactions such as marketing, shopping and services experience. To provide a unified experience throughout the customer’s journey, achieve profitable growth, and set themselves apart from the competition, marketers need to build up their digital commerce marketing strategy. Specifically, marketers driving these imperatives should focus on customer understanding, conversation and customer journey to strike the right balance in the customer relationship in order to create trust, engagement, affinity, desire and delight.
In our next blog in this series, we will take a look at the three keys to building a digital commerce marketing strategy: Customer Understanding, Conversation and Customer Journey.