The Impact of Various Digital Dimensions on the General Merchandise Business

By Ashish Chaturvedi August 7, 2019

The latest Retail Hive benchmark – general merchandise retailers expounds on how different digital dimensions namely, direct channel, organic and paid keyword search, email marketing, social media, display ads, website user experience, site engagement, manifest into traffic and conversions on web/mobile sites. This article briefly covers a few of these dimensions that are experiencing noticeable activity.

The direct channel is the most critical yet complex to crack. In Q1 2019, the traffic share via the direct channel for top 100 leading general merchandise sites rose to 61.52% from 55.45% during Q4 2017. The already critical channel gained further importance. To do well in this dimension, a retailer needs to focus on multiple areas across its business model that go beyond the purview of the purely digital. A trifecta of things—namely assortment, price, and convenience—determine direct channel success. The more the brand is associated with the trifecta, and the more deeply embedded the brand in the customers’ mind (more on this later), the greater the likelihood of generating direct traffic. The assortment puzzle is being solved through building marketplaces, to greatly augment owned merchandise. The pricing conundrum is being fixed by product-level price matching and exclusive offers. Whereas, convenience is being enhanced via expedited delivery. The state of the art keeps improving from two days to next day to two-hour delivery. The general merchandise retailers are partnering with the likes of Instacart or Shipt to achieve this. In 2018, Target acquiring the delivery service company ‘Shipt’ to provide same-day delivery. On the other hand, the arms race to shave seconds off transactions has now reached its peak with voice commerce. The current installed base of voice commerce devices (Amazon Echo, Google Home, and Apple HomePod)  is close to 100 million devices and slated to reach 225 million by 2020. Thus, making retail a battle of ecosystems, channelled through an Amazon or a Google alliance. In 2019, Walmart enabled direct voice ordering through the Google assistant

A trifecta of things—namely assortment, price, and convenience—determine direct channel success. The more the brand is associated with the trifecta, and the more deeply embedded the brand in the customers’ mind (more on this later), the greater the likelihood of generating direct traffic. The assortment puzzle is being solved through building marketplaces, to greatly augment owned merchandise. The pricing conundrum is being fixed by product-level price matching and exclusive offers. Whereas, convenience is being enhanced via expedited delivery. The state of the art keeps improving from two days to next day to two-hour delivery. The general merchandise retailers are partnering with the likes of Instacart or Shipt to achieve this. In 2018, Target acquiring the delivery service company ‘Shipt’ to provide same-day delivery. On the other hand, the arms race to shave seconds off transactions has now reached its peak with voice commerce. The current installed base of voice commerce devices (Amazon Echo, Google Home, and Apple HomePod)  is close to 100 million devices and slated to reach 225 million by 2020. Thus, making retail a battle of ecosystems, channelled through an Amazon or a Google alliance. In 2019, Walmart enabled direct voice ordering through the Google assistant.

Also, the overall brand image has a key role to play in generating direct traffic. The consumer’s awareness and positive impression about a brand’s values and social activities translate into direct site visits. If the brand’s positioning is distinct and associated with a clear value proposition and/or the level of “entanglement” (to use a term Forrester used recently) through numerous touchpoints is high – the greater the likelihood of success on the direct channel.

SEO and SEM results are now tightly coupled with brand awareness. While studying the 10 leading general merchandise retailers in the recently concluded Retail Hive benchmark – general merchandise retailers, an interesting finding surfaced. While considering traffic via the search function, 9 out of the 10 retailers generate 75% or more traffic to their sites through branded keywords (search term including the brand’s name and its variations). This raises a very pertinent question of whether the search terms should be viewed as an extension to the direct channel. The most probable answer is ‘yes’. The right approach can be to first work on improving the direct channel traffic, which in turn dictates three-quarters of the search keywords performance and then, employ the right SEO and SEM strategy to accentuate the benefits.

Email marketing is losing its mojo. Over the years, the traffic contribution from email marketing has taken a big hit. Currently, it stands at 2.7% of the overall traffic, down from 5.2% in the last quarter of 2017. Email seems to given way push notifications. The traffic through push notifications is another reason for the prolific growth of direct channel traffic. 

Social media is being utilized more for the discovery and exploration of brands than generating site traffic.  Although social platforms contributed to just 4.1% of overall website traffic in Q1 2019, it’s being used to fulfil a broader purpose. Different retailers are leveraging social to accomplish different goals. The goals vary from growing brand loyalists to building/changing brand reputation, from product discovery to analyzing consumer behavior. For example: Target’s prime objective on social media is not selling. Instead, it’s about adding more brand loyalists and re-emphasizing brand positioning to the existing customer. This strategy is evident in the nature of its posts across social media channels, most of which reinforce the brand’s close, emotional association with its customers. Similarly, Wish.com—a nine-year-old billion-dollar e-commerce company that works on a rock bottom pricing strategy predicated on importing unbranded products from China (and often drop shipping)— is a phenomenal social media spender. In Q2 2017, Wish.com was the biggest app advertiser on Facebook, the fourth-biggest advertiser on Pinterest, and the six-biggest advertiser on Google. It leverages social media not just to notch up website views but to study customer ad view history, customer browsing patterns, and social profiles to make specific product recommendations. For more real-world examples, please refer to the article Role of social in general merchandise: to each his own

The industry-standard for UX is a constantly moving target. The features that were regarded as cutting-edge a year ago (such as buy online pick up in-store, buy online return in-store, multiple product wish lists, a good recommendation engine) are part of the must-have cohort now. New features such as availability of mini cart option, live 24/7 support, product bundling, displaying all available product options and its variants at the PLP page, and reserve online pay-in-store are making their way into leading merchandise sites.

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