What’s driving retailers’ investments in 2019

Every year NRF and Forrester Research look at what’s driving retailers’ investments and strategies across their businesses. The latest results from the 2019 State of Retailing Online report are in, and the findings showcase how modern retailers think about meeting the demands of today’s multichannel consumer. Notably, for many retailers it includes focusing on expanding their physical footprint in 2019 to better meet shoppers’ needs. It also means inventory and fulfillment solutions remain a priority for the industry. At the same time, new challenges are emerging. Today’s retail leaders are looking to balance multichannel strategies against the growing cost of ecommerce and how to expand their influence across new marketing platforms. To understand what’s behind these trends, NRF spoke to Sucharita Kodali, vice president and principal analyst at Forrester.

What surprised you most about the findings in this year’s State of Retailing Online report?

This is a study that we’ve been doing for over a decade, and there is a lot that has remained surprisingly stable over the years — for instance, conversion rates and retailers’ investments in omnichannel shopping and personalization to meet consumer demands. The big difference this year is a shift in digital marketing tactics. For years, retailers prioritized marketing dollars on search and email marketing. This year social marketing was the fastest-growing digital marketing tactic, and online video came in fourth.

What is driving this shift in social and video marketing edging out search as an area for growing retail investment?

Retailers have been saying for years that search has been getting more expensive and the ROI has been smaller. Email, on the other hand, is still inexpensive but consumers are so inundated with emails that it’s hard to stand out. This has forced retailers to look for new marketing opportunities. Facebook, with its hypertargeting, has proven effective, and YouTube takes advantage of the vast amount of time that shoppers [spend] consuming short-form video content.

 

 

Personalization is something we hear about a lot, and the study’s findings certainly suggest that many retailers have a personalization strategy. However, it doesn’t seem like personalization has evolved much beyond email and websites. Why do you think that is?

Personalization is difficult because retailers have set such a high bar for the amount of revenue they’d like to deliver from personalization. These expectations are often just unrealistic. When I first started studying “personalization” over a decade ago, we knew the bulk of value came from segmented emails and collaborative filtering. Because of the preponderance of shopper data, vendors and data scientists thought they could do much better than those simple solutions. It turns out those simple solutions still deliver great benefits, and there hasn’t been a silver bullet that substantially improves sales beyond those best practices that have been around for years.

What do you think is really needed to have a successful personalization program?

Retailers often look at better conversion rates as the metric of their success. If there was also a way to look at cross-channel conversion and engagement, that would be even better. That would impact personalization as well as a company’s entire digital strategy. Companies are still working through how to properly measure the influence of one channel on the sales in another.

Get the data

Download the State of Retailing Online 2019 report to see the numbers behind the trends.

After spending some time with this data, what are your recommendations for where retailers need to be investing in 2019 in order to keep up with how the industry is evolving?

Certainly, a diverse digital marketing portfolio is important. Much of the report was also focused on omnichannel fulfillment. That continues to be a work in progress, with many companies still investing in inventory accuracy. Every challenge that retailers face — growth, profitability, the competitive landscape, rising costs — is made worse by not having an accurate view of inventory. Retailers can invest all they want in things like chatbots and robots, but until they get a better handle on what is and isn’t in their stores and where items are located, all those other investments will be wasted.

Looking beyond the study, what do you see coming down the road in 2020 that forward-looking retailers should pay attention to?

Retailers need to think about diversifying their revenue mix into services or other adjacencies that could be more profitable. As technology continues to advance and play a larger role in the retail industry, retailers need to stay informed on state and federal technology regulations that may impact their businesses.

Read next

NRF NXT
 
two women are smiling while at work on their computers
Our newest event is a digital deep dive into the latest trends in data analytics and emerging technology.
Learn more
The State of Retailing Online 2019
 
woman is sitting on her bed with her phone and credit card in hand getting ready to order something offline
Metrics from the previous year and retailers’ key priorities, investments and challenges for this year.
Download
4 steps to predicting retail trends
 
Hand doing calculations on tablet and making notes
Tips from WGSN’s Andrea Bell.
Read more