If there’s one sobering stat that sums up the state of affairs in a year rocked by a Covid-19 pandemic spurring retail’s seismic direct-to-consumer shift, it just might be this: While 2019 delivered just two $2-billion e-commerce days outside of the holiday period, the current year through August has coughed up a whopping 130, Interactive Advertising Bureau CEO Randall Rothenberg reported during the company’s annual Brand Disruption Summit Monday, citing Adobe Analytics data.
Digital shopping’s share of retail is growing five to seven times faster than pre-pandemic rates, depending on the month, according to the IAB’s Brand Disruption 2021 report published Monday. This massive evolution is rewriting the brand value chain, replacing brick-and-mortar’s value with nimble, always-on commerce. Beyond the obvious channel implications for this new reality, brands also must be data-rich, participatory, entertaining, localized and streaming if they have any shot of winning in 2021 and beyond.
The fourth annual IAB report cited data from McKinsey & Co. to illustrate where shoppers continue to make their shift. For example, the percentage of shoppers who buy apparel online jumped to 71 percent, 17 percent (or 10 percentage points) ahead of pre-Covid levels of 61 percent. Similarly, the number of footwear shoppers who purchase shoes online jumped 18 percent—also approximately 10 percentage points—from pre-Covid levels of 53 percent to 63 percent, according to the report authored by IAB’s Chris Bruderle, senior director, research and analytics, and Susan Hogan, senior vice president of research and analytics, in addition to Rothenberg.
Relative to most industries, the online consumer growth isn’t as robust. Of the 20 categories highlighted, footwear and apparel were only ahead of jewelry (14 percent growth), tobacco (12 percent), books, magazines and newspapers (11 percent) and entertainment at home (seven percent), lagging behind grocery, personal care products, other-the-counter medicine, and household supplies.
Across all categories, buy online, pick up in-store (BOPIS) has surged 259 percent since the start of the pandemic, according to McKinsey data. And while this has been a Covid-related phenomenon, brands must realize that it is very likely to stick. The report emphasized research collected by GlobalData, with support from Amazon, to point out that 68.2 percent of consumers will continue to click-and-collect at the store curb after the pandemic subsides, while 59.6 percent will continue to collect online orders from inside a store.
As many as 43 percent of the top 500 U.S. retailers now offer BOPIS, up from 7 percent last December.
The report highlighted that the disruption across the value chain has made brands adjust by pushing themselves into new segments, and pointed to companies such as Allbirds, which broke into performance footwear early in the pandemic as it aimed to rival Nike and new partner Adidas in the category and recently launched sustainable underwear and clothing lines, and cosmetics company Madison Reed, which recently introduced hair color for men.
Additionally, the report detailed the emergence of DTC as companies become less reliant on other parties and channels to get their products to the end consumer, specifically Nike, which recently unveiled its new Consumer Direct Acceleration (CDA), aiming to take 50 percent of total sales online.
For brands to grow, IAB says they must be must be data companies that make things, not the other way around: consumer-facing companies cannot remain competitive without growing their first-party relationships and first-party data.
Stitch Fix exemplified this trend, leveraging first-party data modeling to offer one-off purchases for non-subscribers, therefore expanding the company’s “direct buy” business, which CEO Katrina Lake has already referred to as a potential “acquisition engine” for the online apparel seller.
Increased use of first-party data is the highest “post-cookie” priority for brands as they look to leverage data going forward. Google and other major browser developers have either discontinued support for third-party audience cookies—which are tracked by websites other than the one the shopper is currently visiting and typically operated by advertisers, marketers and social media platforms—or have announced plans to do so. With this in mind, 60 percent of brands say they wanted to increase their spending or emphasis on use of first-party data due to the change, according to IAB.
“Companies tend to use first-party data from everything from inventory management to consumer experience,” Rothenberg said when offering an overview of the report during the summit. “As subscription-based data fell during the early days of Covid, Stitch Fix used its first-party subscriber data models on non-subscribers. Stitch Fix’s direct buy revenues grew 3X and its stock is up 50 percent since the beginning of the year.”
Another 38 percent say they plan to boost interest in third-party identity resolution solutions, while 36 percent said they would increase efforts to build second-party data relationships. Thirty-six percent also want to both increase focus on developing custom or in-house identity resolution solutions and engage with third-party industry groups to build identity resolution solutions.
IAB predicts a rise in demand for customer data platforms (CDPs) for all brands as they attempt to gather more first-party data, citing June data from Fortune Business Insights. The North American CDP market reached $494 million in 2019.
And as the demand for data rises, so too does the demand for new ways to shop. Retailers can also remain in front of their consumers via live sales consultations, with Rothenberg pointing to success stories from digital natives such as luxury women’s apparel retailer M.M.LaFleur, furniture seller Burrow, bedding and home décor retailer Parachute and Bobbi Brown Cosmetics as inspiration for where brands should take their business next.
“Parachute reported that it was making about 45 virtual appointments per week, and 60 percent of those customer interactions convert to immediate sales, or two to three times Parachute’s average order size,” Rothenberg said. “Bobbi Brown’s ‘Artistry Like Never Before’ virtual consultation program launched for all shoppers in June. The company said that 46 percent of people convert within three hours of the conversation, and 51 percent who converted during the pilot came back to repurchase.”
IAB cited Valuates Reports data from April indicating that retailers across the board will grow their augmented reality (AR) investments by nearly 300 percent to $4.6 billion by 2025 at a projected annual rate of 20 percent. Shopify, in particular, found that AR models increased conversion rates by 250 percent.
The firm also pointed to livestreaming as a growing shopping alternative, with one estimate from Coresight Research expecting the market to reach $25 billion in the U.S. by 2023. Alibaba is the brand arguably most known for its livestreaming capabilities, which have been used during its 11.11 Singles Day shopping extravaganza and are an option for sellers on its marketplace platforms.
Social media titans TikTok and Snap blend livestreams with shoppable advertising formats, with the sector overall expected to increase 21 percent year over year, according to IAB data. Recently, TikTok partnered with Shopify to enable its merchants to create and connect their TikTok For Business account and deploy In-Feed shoppable video ads directly within Shopify, so that shoppers can buy products that they see being used or worn in the videos.
“While the goal of marketing remains ‘creating a customer,’ the way to do so is through participation via ongoing communities, social selling, live virtual events, classes and other forms of active involvement in the brand. These tactics will experience hypergrowth as Covid-19 mainstreams them, and there will be no turning back for the participatory brand,” Rothenberg said.
“Since virtual engagements are replacing stores, media advertising increasingly will focus on driving participation in live events,” he added. “Successful publishers, brands, retail brands and experience providers will partner to promote and fulfill live experiences and enable shopping directly within the experience.”