Retail is detail as the old saying goes. But to effectively compete in today’s world, retailers need to do far more if they are to deliver sustainability for the long term. The term ‘sustainable growth’ is bandied around a lot, but the truth and reality is whilst much has changed within the retail space over the past decade, much is anticipated to change over the next decade and more of the same won’t ensure sustainable growth. By 2033, it is anticipated a third of all consumer retail spend down under will be occurring online and that is before we even consider the role digital plays to influence sales. It is already believed today that 59% of all sales are influenced by digital in some way (US stat) and this will only grow as audiences migrate more of their shopping behaviours online.
Consumer expectations of retailers are high and continuing to evolve, and the threat of marketplaces looms large down-under as increasingly consumers opt to buy via a marketplace as opposed to buying from retailer sites.
The continued growth and shift to buying online, the rise of marketplaces down under and changing expectations mean retailers aren’t able to stand still and it heightens the importance of building capabilities for the future.
Based on the data from the study, we have been able to compile responses from 56 retailers, to see how Australian retailers are faring on a number of fronts – from capability build and maturity in areas of digital and data, to eCommerce channel investment areas and more.
Personalisation is important for customers and retailers alike, but building capability is proving tough
With most retailers stocking sizeable ranges, enabling effective discovery is paramount and that’s why personalisation is so important. According to a study from SOTI in 2023, 49% of Australian consumers prefer to shop with retailers offering an experience based on their personal preferences. As this study and countless others reinforce, consumers want retailers to serve products that are relevant to them, use their data to deliver a seamless and convenient experience, remind them when it might be time to re-stock, be rewarded for their engagement and spend, and the list goes on. The importance of personalisation is not lost on retailers – but the practical realities of delivering it when it matters most is something that many retailers are still trying to master based on the study findings.
When asked which strategic capabilities retailers see/perceive to be most important to their marketing and digital strategy over the next 12 – 24 months, nearly two thirds of retailers stated that personalisation was very important and a further 23% stated it was important. It topped the list of strategies of strategic importance just pipping online sales and lead generation at 60%.
How strategically important are the following strategies to your overall marketing / digital strategy over the next 12 - 24 months?
| Not important | Somewhat important | Important | Very important |
Personalisation | 5% | 23% | 29% | 43% |
Retailers | 2% | 12% | 23% | 63% |
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CX management | 2% | 11% | 32% | 55% |
Retailers | 0% | 16% | 33% | 51% |
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Online sales and lead generation | 5% | 18% | 21% | 56% |
Retailers | 2% | 14% | 23% | 60% |
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MarTech utilisation | 5% | 19% | 44% | 32% |
Retailers | 4% | 21% | 47% | 28% |
However, despite its importance, many retailers are struggling to build the capability they need to effectively compete within the market. When retailers were asked to rate their capability within the personalisation space, nearly six in 10 (58%) rated their personalisation capability as lagging the market.
How mature is your digital and/or marketing team's capability in these areas?
| Lagging the market | Meeting the market | Exceeding the market |
Personalisation | 59% | 36% | 5% |
Retailers | 58% | 33% | 9% |
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CX management | 40% | 50% | 10% |
Retailers | 33% | 55% | 12% |
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Online sales and lead generation | 35% | 49% | 16% |
Retailers | 26% | 49% | 26% |
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MarTech utilisation | 54% | 39% | 7% |
Retailers | 58% | 37% | 5% |
But just what is it that is holding retailers back when it comes to personalisation? One of the big problems we see in market is brands lacking clarity over what they are looking to achieve from a personalisation perspective. Personalisation can be executed at many different stages of the lifecycle, deliver value in different ways and go beyond specials and offers. For retailers to succeed, the clarity in direction and role personalisation will play across the journey is critical to galvanise the organisation to deliver on its ambitions.
But it isn’t just vision and direction which are challenges for retailers looking to deliver on their personalisation ambition. To build personalisation capability brands must have the right processes, tech, data and skills in place to underpin their ambition. And on many fronts the data demonstrates that retailers are falling short on building these very important foundations.
Through the study we have gleaned that...
only 24% of retail marketing & digital leaders agreed “we have developed a unified view of the customer”.
For bricks and clicks retailers, a unified view of the customer is crucial to unpin personalisation endeavours. Whilst doing so is no mean feat, as it requires brands to stitch data together across various in-store and online sources to build a 360° view of behaviour, relevant and timely personalisation can’t happen with out it. In recent years we are seeing retailers flock to CDPs as an answer to unifying data and to enable identity resolution (and the study reinforced this – with 44% of retailers expressing their MarTech focus for investment includes CDPs over the next 12 – 18 months).
In addition, only...
18% of leaders agreed “our data is well managed and maintained, providing us with high quality data”.
What we know and see from all of the work we undertake in market, is that if teams do not trust the data, they are unwilling to trust models and algorithms that power personalisation as well as demonstrate a lack of willingness to activate the data.
Assuming however brands solve the data issue, and have effective data foundations in place, they still struggle to activate it and that is because data alone doesn’t not power personalisation endeavours.
When it comes to MarTech, which platforms are your priorities for investment in the next 12–18 months? (Select up to 3) | OVERALL | RETAILERS |
CRM | 43% | 44% |
Marketing Automation | 41% | 35% |
CDP | 35% | 44% |
Digital analytics | 22% | 23% |
Content Management System | 18% | 14% |
Digital Asset Management | 18% | 16% |
Lead generation & management tools | 14% | 7% |
Workflow and resource management | 12% | 16% |
Data warehouse | 11% | 9% |
Digital commerce | 8% | 7% |
Data Management Platform | 8% | 5% |
Customer identity management & resolution | 9% | 12% |
None of the above | 5% | 5% |
When we look at MarTech investment priorities by retailers over the coming 12 – 18 months, both CDPs and CRM topped the list, followed by marketing automation. With the strategic importance of personalisation, growing need to manage data privacy and the need to better activate first party data assets as a result of 1st party cookie deprecation it is little surprise retailers are seeking to double down and invest in CDPs to develop that unified view and better identify customers. Retailers are also more likely than the average to be investing in customer identity management & resolution tech (12% vs 9%). Having the right and highly skilled team to execute on the vision is important which means retailers must be prepared to evolve structures and roles within those teams to deliver.
eCommerce channel proliferation will push retail eCommerce teams and require them to re-think how they manage brand experience more than ever before
According to the Wundermann 2023 Future of Shopping report, 56% of consumers say they want seamless communication across digital and physical channels, and the ability to move between them. Whilst many brands have been working to drive a seamless experience across their online and instore channels, the challenge takes on a whole new meaning as eCommerce increasingly occurs outside of a brands own environment.
On average, retailers are currently managing 2.4 channels for eCommerce
What the study has revealed is today retail brands are managing their ecommerce presence across an average of 2.4 channels but it anticipated this will change. Those channels include the following;
Channel | Portion of retailers leveraging it |
Your own site | 98% |
Social commerce | 43% |
Marketplaces | 39% |
Quick commerce | 24% |
Specialist e-tail sites | 18% |
In-store kiosks | 4% |
As social commerce increasingly becomes the go-to for consumers to shop, there is little surprise that nearly half of all retailers are leveraging social commerce today and a further 11.1% intend to start to leverage and trial leveraging the channel over the coming 12 – 18 months. Equally as marketplace dominance grows, we see retailers looking to double down on investment with one in four signalling they will increase investment and focus in the space over the coming 12 – 18 months and 13.3% looking to trial and leverage these platforms.
Where do you plan to focus energy and invest at a channel level over the next 12 - 18 months?
| START TO TRIAL & LEVERAGE | INCREASE INVESTMENT & FOCUS |
Social commerce | 11.1% | 22.2% |
Marketplace & aggregators | 13.3% | 25% |
Conversational Commerce | 15.5% | 9% |
Quick commerce | 15.5% | 11.1% |
As channels proliferate, retailers will need to double down on content and build new capabilities to manage content outside of their core environments as each platform has a different set of content requirements driven by nuances in how products are displayed and how the platform’s algorithms function to serve search results. In addition, over time, consumer preferences for product/services content and how it is consumed continues to evolve. According to a study from Salsify in 2023, 28% of Australians now use video content, and 12% use 360-degree views or augmented reality content to inform their product purchase. All of this reinforces the importance of continuous improvement and evolution of product content to deliver in line with customer expectations on an increasing number of channels.
There is still a long way to go to meet the market with respect to eCommerce and digital commerce experiences.
On a scale of 1 - 5, how would you rate your organisations maturity in the eCommerce space vs global leaders?
RETAIL | |
1 = very low, we have a lot of work to do | 8.0% |
2 = low, we have a fair bit of work to do | 23.5% |
3 = satisfactory, but more work to do | 37.0% |
4 = high, we are edging towards global leaders | 21.5% |
5 = very high, we are on par with global leaders | 10.0% |
Whilst channel management and proliferation are one challenge retailers are facing, it’s not the only one. Nearly seven in 10 leaders rated their eCommerce maturity vs global leaders as “satisfactory”, “low” or “very low”, demonstrating that many retailers understand there is more work to do to lead in the eCommerce space and meet consumer expectations.
Too often eCommerce is still seen as a separate channel and the link between eCommerce performance and overall business performance is not well understood. This sees retailers investing in eCommerce based on total eCommerce sales as opposed to the true value eCommerce delivers to the entire business and bottom line. In addition, retailers are investing based on the revenues for today as opposed to investing to build capability for today and tomorrow, which equally limits their ability to build maturity over time. To shift investment conversations, retailers need to re-think measurement frameworks to demonstrate the true return and value of eCommerce to the business.
When we look at the core metrics executive retailers use today to measure the performance of their eCommerce business, it is easy to see why investment is being stifled. Revenue, conversion rate, margin, traffic and average order value round out the top five performance metrics utilised by retailers. Whilst respondents were only able to choose their top five, a few interesting insights emerge from the metrics that are being leveraged by brands. The first is that research online and buy instore (ROBIS) is only utilised by 16% of retailers as a key metric to measure performance. This means at present, many retailers fail to demonstrate the true value of eCommerce to the business and the bottom line beyond eCommerce tracked sales. With digital increasingly influencing the majority of in-store purchases, it is vital that more brands begin to adopt metrics like ROBIS to demonstrate the true influence and value of eCommerce. Stock availability and returns polled very poorly by respondents. This demonstrates the focus and emphasis on revenue and profitability, and the potential gaps in measurement frameworks that help to better understand customer experience and lost value from eCommerce which help to guide decisions and build maturity over time for the retailer.
What are the key metrics your executive team uses to assess effectiveness of eCommerce performance? (Select up to 5)
| RETAIL |
Total revenue | 90% |
Conversion rate | 68% |
Margin | 60% |
Traffic - web & app | 52% |
Contribution of channel to overall sales | 36% |
Average order value | 46% |
Online market share / share of category sales online | 18% |
Average selling price | 4% |
ROBIS - Research online/buy instore (digitally influenced sales) | 16% |
Overall customer value | 8% |
Percentage of returns | 14% |
Stock availability | 8% |
Re-imaging measurement approaches and re-educating leaders on the shifts in measurement frameworks is vital to change the conversation around eCommerce investment and to support investment to deliver growth outcomes today and tomorrow. So to is educating leaders on understanding that our performance today, is influenced by the investments we made to build capability yesterday. In the eCommerce space, larger investments and capability build don’t automatically return today, they are likely to deliver increasing value over time which is why the investment discussion needs to be balanced based on short and longer term returns.
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