Five Things for Commerce

2024

Over the holidays, I was sitting down to write this article and my daughter asked me why I was doing it while on break. We are very similar, so I know that she was genuinely interested if this was an ‘assignment’ or something else. My answer to her was this exercise helps me to process the past year and look forward. It is a kind of fresh start and it is something I not only like, but look forward to.

If this is your first time at Five Things, welcome. This article started out as a way for me to process what is driving the commerce landscape so that I might generate a point-of-view, which is essential to my work in solving problems. This exercise seeks to contextualize the current commerce ecosystem in which those problems exist so the solutions can be both successful and lasting.?

As always, I like to see how last year turned out (2023 Five Things). Beginning with Retail Media is the best bet since it was everywhere this past year. And, much of what I mentioned (disparate maturity, data, reporting, and siloed approaches) still exists, and in some cases is getting worse. I knew I was on to something when I spoke to marketers at this year’s ShopTalk, I heard directly how difficult it is to manage this complex landscape and their desire for help.?

I also spoke about operational necessities for retailers, including returns and elimination of free shipping, both of which are headed in the direction I pointed (HERE). But I was sad to see that product innovation for digital channels still seems to be stalled despite its enormous upside potential. Hopefully AI will accelerate this in the new year.

Speaking of AI, I certainly didn’t see the wave of generative conversations that stole the headlines. And, that is a great place to start for 2024 as AI isn’t one of the Five Things. Mostly this is because it will impact absolutely everything and AI isn’t a monolith. Different applications have been evolving within commerce for more than a decade in areas like operations, supply chain, and chatbots. So, even if it isn’t mentioned, there is AI throughout this year’s Five Things, including the cover image.

Return of Shopper Marketing

For many of us in commerce, shopper marketing (or in-store) has always been part of any Omni-channel conversation. However, in 2024 it is going to get a lot of attention from people who don’t normally think much about it. The wave of new screens, behavior adoption (QR codes, NFC, etc.) and technologies are not just driving operational efficiency, but providing new marketing opportunities to shoppers.

Most marketers are used to putting together plans retailer-by-retailer and many of the best solutions (i.e. Walmart) include online and in-store as part of a holistic approach. However, we already see a wave of 3rd-party, cross-retailer solutions hitting the market and many have a ‘walled garden’ approach to KPIs, data and reporting.?

It will be interesting to see how these operators, like Criteo, Stratacache and CoolerScreens, can provide options across multiple retailers and how marketers will adjust to plan for it.?

For CoolerScreens specifically, 2024 will also answer questions about ongoing tests with retailers who operate networks of their own and, finally, what is to become of the current court battle with Walgreens who has backed out of a large-scale implementation.

Something for sure is that these new in-store options will change the approach and create more complexity for marketers.

DTC…Again

Direct-to-consumer is suddenly in the headlines again and 2024 will see a shift back from the platform conversations of the past few years to purpose, experience and business operations.?

On this topic, much is being made of DTC innovators, Nike, as they announced last summer that many of the wholesale partners they had eliminated just years earlier are coming back (HERE). This is supposed to be an indicator that their efforts have somehow failed or that they are abandoning their strategy. However, as Steve Dennis points out, Nike has achieved 30%+ sales growth and 50%+ profit increases over the past three years under this strategy which indicates this is more of an adjustment than a major change, and that DTC is, indeed, delivering.

For almost all brands, DTC remains key to obtaining first-party data, powering loyalty programs and product innovation. 61% of marketing executives are prioritizing personalized experiences in the upcoming year (1) in response to reports that 81% of consumers plan on buying from a DTC site (2).

The takeaway is that DTC is very important to both sales and data acquisition, but there isn’t a singular roadmap to success. 2024 will give brands and retailers an opportunity to break free of the sales construct and discover exactly what DTC means for them.

Sustainability

The message for 2024 is that Sustainability is everyone’s responsibility. This is the message from consumers and retailers in the UK, who are substantially ahead of the curve on this trend, which promises to be a big topic in the US and other markets moving forward.

At the forefront of the current push is both a renewed sense of sustainability’s importance and the need to hold companies accountable. 61% in the UK say that sustainability is more important to them now than just two years ago (3), and they see online and offline retailers as companies who are performing the best against their expectations (4).

This year’s Global Shop conference was another indicator of sustainability’s importance with many industry partners highlighting their efforts with materials in-store and things like optimizing supply chains via AI to reduce carbon. I predict this year’s NRF Big Show and ShopTalk will see an increased discussion around this topic and I'm excited to see how vendors will be bringing it to life.

Hard Questions for Retail Media

It has already been mentioned, but the retail media landscape is complex for marketers and is still in expansion mode. Retail media networks are great, and they have direct attribution which has eluded marketers for a long time. However, sometimes these returns, especially on modest networks, are outweighed by the organizational lift required to budget, manage, track and constantly update these programs.?

Each network is vying for more budget and promising great returns, but very few are helping their customers contextualize the bigger picture. Even agencies and service providers are falling down here, with siloed practices dedicated to managing these networks without vision or impact on the larger spend.

As brands move into 2024 it is imperative for them to be asking hard questions of themselves, these networks and the partners who are helping them. Primarily there are three tenets that can help.

Balance - Since only a small portion of retail media budgets are incremental, it means dollars are coming from other sources to fund these initiatives. Often the justification is increased closure / sales on digital channels (measured with ROAS) but often overlooked is what is being sacrificed in the name of short-term gains, like brand value, loyalty, campaign consistency, and the like.

Role of RMN - For many brands, retailers play different roles as part of the business lifecycle. Some lend themselves to discovery, others are replenishment channels or stock-up. In the same way inventory, pricing and products are configured for those retailers, it is also important to make sure the retail media is working toward the same goals and not over-extending to the wrong audience.

Continuity of CX - Because many of these networks are siloed, along with the teams that manage them, there isn’t anyone looking out for the holistic consumer experience. Consistency of experience is important to customers and while the ‘deal’ may capture them once, inconsistent experiences erode trust over time.

Bye to Gimmicks and Hello to Service

Last year I spoke about the massive return to physical retail which continues into 2024. To quantify this trend, more than 16,000 stores have opened since the pandemic with the most recent year showing physical retail revenue growing by more than 11% (5).

Configuration of these new stores indicates an increased focus on service while creating more contiguous brand experiences. Three main features of these stores are setting a blueprint for the coming future; Smaller footprints, Fewer gimmicks and Holistic brand approach.

Even IKEA is testing smaller footprint stores, which create more intimate experiences, are easier to staff, maintain and update at the pace of culture. 2024 will see more big names doing the same.?

This leads to fewer gimmicks, like Instagrammable moments in-store, for a more authentic brand (and service) experience. Pop-ups have proven much better for creating ‘Experiential Retail’ and delivering on short-term ‘buzz.’ So, instead of trying to incorporate these moments into core experiences, the coming year will continue to see more of a purpose-driven approach. Further proof can be seen in the current environment around self-checkout which has been removed by some retailers as consumers look for service when in-person (HERE).

Finally, the upcoming year will see more brands bringing together their online, mobile and store experiences not just in product offering and functionality but in design aesthetic, purpose and personality.

The More Things Change…

It is very interesting to be talking about old things being made new again. New shopper marketing vehicles, store experiences, retail media, DTC and sustainability have all had their time in the spotlight. They have all caused disruption and forced adoption by consumers, brands and retailers alike. From this year’s Five Things, 2024 looks to be a time where the maturity of these ideas will be in-focus instead of the hype.?

Since the pandemic year of 2020, commerce feels like it has been a constant sprint to bring new services, technologies and behaviors to market. This year poses the opportunity to take a deep breath and get back to the original goal of customer-centricity that technology promised more than a decade ago. It is an interesting notion and I hope you all are as excited as I am to see how it unfolds.?

Until next time…

Credits:

1 - PwC, 2023

2 - Why Every Brand Should be Going DTC, Forbes, 2022

3 - The Changing Climate of Sustainability, Nielsen IQ, 2023

4 - Statista, 2023

5 - Brick and Mortar Retail is Back, FastCompany, 2023