The Economist March 13th, 2021 pp3-4 |Special report “The future of shopping” “One-to-one commerce” “Not since the Industrial Revolutions has shopping been in such upheaval, writes Henry Tricks”
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Read the overview article of a special report consisting eight reports over ten pages; “One-to-one commerce”, “Deplatforming”, “Rise of the rebels”, “Arming the rebels”, “Omnivores”, “Made to measure”, “Servants and masters” and “Land left to conquer”.
Summary of “One to one commerce”
Back in early days of Nike their first employee opened the “company’s first store in Santa Monica." At that time, Phil Knight and Nike were literally selling pairs of shoes one customer at a time. The employee, Jeff Johnson, “kept card files of each customer including their shoe sizes. He sent them Christmas cards and congratulatory notes if they won a big race.” As Nike grew through wholesale marketing most of the 1966 personalization fell by the wayside. Now in a reversal, aided at least in part by the pandemic, Nike and other firms are more and more going “Direct to customer (DTC).” Also known as one-to-one selling companies are leveraging massive amounts of data collected during the marketing and sales process. In this seemingly impersonal way they are selling in a targeted rather than broadcasted way. This personalized or "pull" approach is reducing touchpoints and eliminating middlemen vital to the process of "pushing" mass produced widely across many selling-channels.
As online sales surged during the pandemic Nike prematurely hit its 2023 goal of having 30% of its sales online. The data for $4 trn in retail spending are striking for global markets as well, China leads the way with ~52% of sales online, Britain ~29%, Worldwide 20%, U.S. ~15% and Europe at ~12%. As the pandemic winds-down online sales growth will flatten mostly except for China expected to hit nearly 60% by 2024 and U.S. 20% by 2024. So the model is really changing from mass producing and pushing items at the firm's marketing direction to tailoring products lines based on direct customer data. As an example of the latter, Nike used it’s “reams of real-time data” to realize that customers were taking up yoga so “it swiftly produced new yoga gear” creating something akin to Jeff Johnson’s original personalized approach.
The shift to online has resulted in the closing of tens of thousands of stores in America, Britain and elsewhere and causing the attendant loss of retail jobs. Going forward retailers will have to effectively manage and maximize profits of a dual model of online and “offline” selling. Online selling includes paying for well-positioned advertisements on social media, free-delivery, at-store pickup and of course increasingly dealing with returned merchandise now amounting to $1 trn. In China, where square-footage for in-store selling is much less than America for example, the need for in-store is well understood but there’s evidence of a hybrid approach, dubbed “omnichannel” by marketers, featuring “cashier-free shops and video promotions, to its supermarkets in the biggest cities.” Video promotions in stores include “live-streaming by celebrity lipstick sellers.”
In total, all consumer sales globally are $65 trn so with retail at $4 trn there are still many markets to tap with this “omnichannel” approach. Some worry that large online retailers like Amazon (America, Europe and parts of Asia) and Alibaba (China) will dominate but DTC, as explained above, is an example of cutting sales through large distributors. Regardless “Regulators in America, the European Union and China are keeping the industry leaders under scrutiny.”
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