In the past, companies have seen digital and physical sales as separate, and even competing entities. Framed this way, we’ve created a battle between the two.
As a result, different operating groups at the same company strived to find ways to draw customers away from one and pull them toward the other. Most marketers are trying to funnel their customers into one direction, when digital marketing can be used to augment the physical in-store experience and vice versa.
Take a look at Target Corp. It’s the marriage of digital and physical experiences that helped Target stage an impressive comeback after it fell victim to a wide-scale credit- and debit-card hack in 2013. Target’s annual profit fell 34 percent to $1.97 billion and revenue slipped 1 percent during that year. However, thanks in part to its proactive marketing efforts combining digital and physical retail, the retailer has seen an incredible upswing of late. Analysts expect Target to post a net income of $2.99 billion for fiscal-year 2015, up 22 percent from last year.
Savvy companies aren’t looking at digital and physical as a competition. Instead, they’re merging the two and changing the way we look at shopping entirely. Brands that are able to weave in the convenience and real-time nature of digital experiences with the human element of physical interactions will win.
How Mobile Renders the Digital vs. Physical Debate Passé
Recently Target has moved to focusing more heavily on digital, while simultaneously innovating with its in-store experience. Target hired some of the best in the digital industry and in 2015, they invested in $1 billion in e-commerce. Last year, more than 50 percent of total visitors exclusively shopped at Target trough smartphones and/or tablets.
By creating an app that worked not just with online shopping, but allowed interaction in the physical world, Target expanded its digital reach along with its physical. Target’s online storefront powered entirely by top-trending items on Pinterest, “Target Awesome Shop” provides users with a curated experience. The retailer has also adapted Twitter and Instagram-like habits on its mobile site. By tapping little hearts next to products, shoppers can save products for future reference. The data come back to Target and tells them what people are interested in to deliver smarter, more personalized recommendations. It’s no coincidence that Target saw an increase in digital sales by 30 percent in the second quarter of 2015, enabling the company to compete on a larger digital playing field than ever.
People aren’t just very open to having in-store experiences that use their mobile devices; they expect this. In fact, according to a recent State of Content Report from Adobe, on average, 83 percent of consumers are using multi-screens. About 69 percent of consumers expect in-store retail personnel to be able to provide product information via a mobile device. As retailers struggle to meet those expectations, customers’ expectations will only grow. They won’t just want to get information from a sales associate’s device. They’ll want to be able to pull it up on their own device.
In a recent whitepaper done by Adobe, it was revealed that in-store mobile experiences are lagging behind Web site development, despite the fact that people are moving away from Web sites and to mobile for searching. It was found that 86 percent of marketers personalize the e-commerce retail experience, but only 69 percent of them personalize the in-store digital experience.
Many retailers stay away from this because they consider mobile marketing channels to be the lowest area of marketing impact. In fact, 66 percent of organizations don’t have a mobile strategy. This is a misconception, as mobile is a growing market. Also, just look to the recent Thanksgiving weekend. According to Adobe Digital Index, 37 percent of online sales came from mobile on Thanksgiving, 33 percent on Black Friday and 28 percent on Cyber Monday. By the end of 2018, mobile sales will reach about $173 billion, nearly double what they are today. As a result, the areas of opportunity in streamlining the in-store and mobile experience are huge.
Target is an example of a big retailer proactive with its marketing budget. The company focuses on digital to improve not just its digital experience, but also its in-store experience.
Perfecting the Blend of Digital and Physical Experiences
About 45 percent of consumers have made an in-store purchase after viewing a mobile advertisement. These consumers receive deals when they’re more likely to buy, like when they’re already in or near the store, and that capitalizes on their location. One thing companies are doing is working with something called micro-location technology, which allows them to target customers with offers based on their location. It’s certainly something most consumers would be open to. Adobe’s State of Content report suggests 75 percent of digital service users are willing to share at least one piece of information to improve content recommendations from brands.
Target pulled ahead with its ability to provide same-day service merged with its app. Called Store Pickup, customers can buy online and have the product(s) ready and waiting for pickup at a nearby store in as soon as a few hours. Imagine the power of getting your items immediately without having to deal with crowds of people on Black Friday, while getting the same deals as what’s offered in-store.
Beaconing through mobile apps works because it reaches a customer when they’re more likely to make a purchase, and it creates scarcity, making the customer want to get deals before they expire. The use of beacons helps drive sales and keep customers coming through the doors. Recognizing this, in August 2015 Target rolled out beacon technology in 50 of its stores.
Another example of the merge between digital and physical stores is Rebecca Minkoff, a popular clothing label. In November 2014, it rolled out their first interactive store. With the use of digital technology and touchscreens, customers are able to control everything from the lighting in the dressing room, to what items are brought to them by the sales associate. Customers can choose items via a large mirrored interactive display. This creates an online experience that merges with an in-store experience.
Another luxury clothing brand, Burberry is doing its own thing using RFID technology. Using radio frequency identification, Burberry can send a signal that gives customers the history of a product they might be looking at. The chips in the products activate short videos that might show the product on the runway, or tell how it’s made. It allows customers to digitally interact with an item and encourages them to order or preorder the items.
Successful companies aren’t competing with digital brands. They’re merging them to create a universal experience. Currently, half of all local searches are being performed via mobile technology, and that number is continuously climbing. That means customers are looking for items not from home, but on the go. In this, stores with physical locations have the advantage.
Striking the Right Balance
While many companies don’t focus on the digital aspect of their stores, others, especially digital giants like Amazon, can become too focused on creating digital hype. Companies need to remember that when working to get people buzzing, they’re limited by a finite number of products, while consumers have the infinite ability to leave comments.
On Prime Day, for example, Amazon’s sales day was a success, at least early on. Amazon made record sales for tons of big-ticket products like televisions and other high-demand electronics. The problem was, they underestimated demand. So when the big-ticket items sold out, the company’s extremely large algorithm started offering anything. People began getting urgent notices about discount shoehorns and dish detergent. As a result, people started treating the day as a joke and soon Amazon lost complete control of their message and Amazon lost control of the situation on social media.
The problem was they had to use a very broad algorithm to make their recommendations. Because they didn’t scale back their campaign, and tried to make it too big, it turned on them. While they gained some sign-ups for Amazon Prime, their reputation took a bit of a beating on social media because the comments got out of control. By focusing too much on physical sales, Amazon lost something in digital reputation.
Unlike Target, Amazon didn’t have the ability to scale back their deals by location. Amazon is a digital company that offers deals everywhere. While that might be an advantage sometimes, when the scale of their campaign exceeds the amount of its inventory, the lack of location-enabled technology becomes a definite drawback.
Creating a Seamless Experience on a Personal Level
Target was able to win because they had a competitive advantage. They were able to scale back their sales campaign by tying in their physical locations. This kept them from running out of inventory and causing a consumer backlash. Amazon, on the other hand, was dealing with an unwieldy algorithm, which disappointed late-to-the-game consumers. While they had great early sales, a steady stream might have had more impactful results.
It’s not about competing on just one level. Successful companies are able to meld the digital with the physical in order to drive sales and create brand advocate relationships. Target has established the digital advantage because of its physical presence.
Loni Stark is senior director of strategy and product marketing at Adobe. In her role, Stark leads business growth and go-to-market strategy and execution for Adobe’s digital experience management business.