The Pace of the Race Increases for Digital Transformation
A warning to Utilities brands: don't get left behind.
During a recent web conference, I hosted a roundtable with executives, Michael Darwal, Chief Digital Officer at ibex.Digital, and Joe Abraham, SVP of Marketing, on the topic of digital marketing, ecommerce, and the changing landscape for utility marketplaces.
This summary excerpts part of that discussion.
In 2019, ecommerce achieved what most analysts considered a breakout level of total retail, breaking through 15% to land on a 16% annualized basis by 4Q16, and the growth rate was making a steady climb.
Joe Abraham: Absolutely. Retail sales has taken a hit in the first half of 2020, but if you look at some of the data from Amazon, Target, and Walmart, customers have flocked to ecommerce during COVID-19, and in basically all segments. Shelter in place and quarantine restrictions didn’t impact by marketing segment. Everyone was impacted, and everyone stuck at home shifted their buying behaviors out of necessity.
Michael Darwal: That’s exactly right, and the shift didn’t just impact retail directly, but we saw a lot of services bump into traditional retail working on delivery services. At the beginning of the shelter conditions and in markets with strict lockdown requirements, retail had to find a way to fulfill delivery and curbside pickup. Every eCommerce vendor already has delivery services built into their business model, though many ecommerce companies have struggled to match the 2-day delivery standard of Amazon, Walmart, Home Depot, Best Buy and Target**. Those brands with retail stores already had all of the store pickup or curbside delivery options, in addition to traditional delivery to the home, which gave them a substantial advantage. Customers started viewing ecommerce delivery as equivalent to a planned visit to the store.
JA: Great point. Immediate delivery options used to really apply only to food services, but with COVID, retail started to get into the game especially for sensitive items like groceries, medication, health and safety supplies, etc. Those categories had been overwhelmingly in-store purchases in the past, and now that delivery window seems to be open. It may not be a “barn-door” moment where consumers don’t turn back to past behaviors, but for a lot of people, the convenience of getting their medication or groceries delivered will stick, especially for at-risk populations if we have another wave of COVID this fall or winter.
MD: The only thing I would add is this: prior to this pandemic, direct-to-consumer (D2C) ecommerce brands proved the model of how to market to, convert, and scale customers purely through digital engagement. In many ways, those ecommerce brands paved the road for traditional retailers to adopt online and hybrid online to curbside sales, not to mention train consumers what to expect and how to shop on these digital distribution channels. There’s no turning back from these types of evolutions in the industry.
JA: First, I think COVID inspired changes in buying behavior happened for a long enough period to become habits. Parents and grandparents who learned Zoom to keep in touch with children and grandchildren aren’t going to have trouble with modern ecommerce any longer. I fully expect the ecommerce share of overall retail spending to accelerate much faster into the next 5 years.
MD: And, that brings up some major disruptions in customer engagement. Traditional retail may still be dominated by major brands, but smaller or disruptive brands could always co-locate with big brands to take advantage of the “walk-by” traffic. Malls were the perfect examples of that phenomena throughout the 20th century, and we all know what’s happened to malls in the 21st century. But, in a full shift to ecommerce, drafting on major brands becomes more complex. Big brands can afford to overspend to protect their search, social and display positions and to maintain traffic, so smaller or disruptive brands have to get scrappy and innovative. It’s more critical for those disruptive brands to exploit their niches and be very clear on their ideal customers.
JA: Right. It’s very easy to let digital ad budgets to slip away from targets. With multi-million dollar media spend, the biggest brands can afford some inefficiency, but that’s not a great growth model for most brands. Really understanding the ideal customer for your brand makes a big difference in personalizing the message, keeping offers current and relevant, and getting the most value from digital marketing investments.
MD: I don’t know if we need to think in terms of new rules, but I do think that COVID has amplified the effects of digital engagement and developing momentum for ecommerce brands. I refer to it as an acceleration of the optimization process where the critical mass of ecommerce activity speeds up the process of CX evolution. Best practices thrive and inefficiencies get crushed by the consumer behavior a lot faster. Pricing and price sensitivity has already been automated. Every shopper can check prices automatically across multiple ecommerce brands with a simple browser plug-in, so there’s no excuse for new ecommerce sites not to understand the pricing environment and adjust offer strategies to avoid chasing the wrong customers. In a post-COVID world, we fully believe customers’ delivery expectations will accelerate. Amazon, for example, already offers same day delivery in some markets, and for certain categories of goods, the ability to have immediate delivery may become a staple of some ecommerce brands. Certainly, customers won’t tolerate paying a high price for 5-7 day delivery in the future.
JA: We’re seeing the tone and topics of customer engagement change. Every brand got caught flat-footed by the initial wave of shelter orders and panic. The early attempts to fill customers in-boxes with health and safety messages was a sign that brands realized that the same rules didn’t apply in terms of transactional campaigns. But, by late April, most brands had returned to sending offer-oriented email again. The tone of those emails changed. New products and offers highlighted themes like safety, comfort, convenience, to address overriding concerns in the consumer marketplace. But, the data says that transactional ecommerce, at least for the most adept brands, thrived. If we look ahead to the next 3-6 months, an eternity in digital commerce, the market has to deal with mixed attempts to reopen local economies, higher unemployment and financial anxiety, and general attempts to come out of quarantine. That’s going to make things even more challenging to digital marketers trying to keep campaigns relevant, timely and personalized. Seniors may face extended periods of shelter in place anxiety, for example, so that population may respond to convenience themes far more than younger consumers looking to get out of the house.
MD: And, Work@Home will have impacts on digital marketing in ways no one has anticipated. With so many people shifting away from the office to working from home, the hours of engagement and the methods may shift radically. Lunchtime shopping on mobile devices has long been a peak period, but lunch windows don’t mean the same thing at home. And, home browsing could shift from mobile back to desktop, at least for a time, as the home based workers spend more time on computers instead of tablets.
JA: Stay in the game and be really clear on the value proposition to your customers. Everyone is competing with Amazon, Walmart, Best Buy, and other major brands, so virtually every brand needs to be even more focused on why their customers should buy from them. And, I think it’s important to really understand the ideal customer so that brands don’t try to attract just any traffic and engagement. That’s a great way to lose efficiency in your marketing dollar.
MD: Agreed. I would add that there’s never been a better time to be fully engaged with the customer headspace. For the most part, brands have the same channels to develop awareness and interest in their digital marketplace, but not every brand has a well-developed plan. Now, more than ever, getting the tone, topic, and content right for your customer will pay dividends. Consumers have developed finely tuned mechanisms for recognizing tone deaf brands. Choice among so many ecommerce vendors means that consumers don’t have to settle for half-measures from brands. Brands that focus media and outreach to the customers who best fit their business and build multi-channel campaigns in the same fashion should see the best results. Knowing the customer and paying attention to how they want to shop always makes sense. Today, that evolution just happens faster than ever before.
JA: From my perspective, Utilities who haven’t already considered building ecommerce programs need to double down. A post-COVID world creates conditions among customers that make utilities uniquely suited to success. Customers trust utilities especially in difficult situations like outages or billing issues. And, utilities occupy an essential register for consumers, so they have the ability to make credible recommendations across key categories in the customer journey. Pair those advantages with strong CSAT and promoter scores, a solid email list, a highly visible website, and utilities have all the elements for successful ecommerce.
MD: I would add that Utilities are at the forefront of customer decisions at the moment, and for the foreseeable future, because of COVID. Customers have billing and payment questions, and are worried about keeping the lights on, literally. Customers are facing hard choices about spending, but rent, utilities and food remain essential. Utilities have been proactive about COVID communication related to payment policies and mitigation measures, and community support programs. Utilities still get the first call when new customers move into their market. A viable ecommerce program can help with products and services to save time and money, deliver conservation and energy efficiency content and products, and help customers find reliable service providers in their local community. As customers continue to shift reliance onto ecommerce connections with brands they trust, utilities should embrace that trend. Utilities always project an important brand name in whatever market they serve, so the path to ecommerce success has fewer obstacles than for truly new brands. I don’t think I’ve seen a better time for utilities to really embrace ecommerce to amplify the value of their customer relationship, provided that they lean in and really understand those consumers’ needs.
A warning to Utilities brands: don't get left behind.
Maximizing tools to deepen and enrich customer connections.
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