Retail 3.0: what it is, and what it means to loyalty

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By: Wise Marketer Staff |

Posted on May 5, 2009

Retail 3.0: what it is, and what it means to loyalty

What is 'Retail 3.0'? Is it just another marketing buzzword, or does it represent a real step forward in retail marketing and enterprise-wide growth strategy? According to Gary Hawkins of Hawkins Strategic, it's not just another buzzword, and it has some very real benefits as well as organisational implications.

According to Hawkins, Retail 3.0 is "the next-generation retail industry ecosystem driven by relevant marketing to the individual shopper, real-time marketing and supply chain synergies, all built on the foundation of shopper-identified transaction data."

In fact, Hawkins explains, "The Development of national broadcast television in the 1940s facilitated the growth of national brand consumer goods as manufacturers leveraged the new medium to reach broad swaths of the population efficiently and effectively. For decades subsequent to that event, consumer goods manufacturers held sway in the industry using their significant revenue and profit margins to fund consumer research, direct-to-consumer promotion, and national advertising. These same companies helped turn marketing into a science. Retail shelves were seen simply as real estate to be leased or purchased to facilitate distribution of the valuable national brands. Power within the supply chain clearly resided with the manufacturers."

So that was Retail 1.0. But it was in the mid 1990s that two significant trends reached a tipping point and began to converge. The first was consolidation in the Fast Moving Consumer Goods (FMCG) retail channels, in part caused by the growth of Walmart and its entry into such new channels as food retailing. The net result was fewer, bigger, retailers-significant market share held by a relative handful of companies.

These larger retail firms leveraged their size and buying power into a more forceful position when dealing with the consumer goods manufacturers. In addition, these retailers used their newfound size to adopt some of the same sophisticated marketing skills formerly the province of the national brands while also funding development of strategic private label programmes. Such events began the shift of power in the supply chain to the retailers and away from the manufacturers.

But it was a second significant trend occurring simultaneously and ultimately converging with the first that more clearly marked the end of an era: the development and rapid growth of loyalty programmes within many retail channels.

It was not loyalty that was of importance, so much as it was the detailed shopper purchasing data gathered through the programmes. While it can be argued that many, perhaps most, of retailers launching such programmes - a trend that spread like wildfire through supermarket and chain store drug retail sectors in the mid to late 1990s - have failed to live up to their initial promise, the accumulation of such powerful data, combined with consolidation, indeed drove the power shift. For the first time, retailers had more powerful and actionable data than the consumer goods manufacturers. And that was Retail 2.0.

But now, according to Hawkins, we are at the dawn of the next profound power shift in the retail supply chain, and this time the power shifting to the individual shopper. This is Retail 3.0.

Just as with previous shifts in industry power, it is the convergence of several developments that is driving this change. Today one can observe:

  • A supermarket retailer heavily leveraging web-based technologies to efficiently and effectively provide personalised ad flyers to each of its shoppers, communicated across multiple digital channels and delivered automatically into the transaction at checkout-realising increased sales, shopping visits and customer retention through the power of relevancy;  
  • A collaborative marketing portal enabling supply chain partners to create content and promotions, enabling actionable collaboration at a shopper level with different shopper segments receiving different marketing initiatives across different channels, and closing the loop by providing effectiveness measures for each, from ad flyer to email to kiosk interaction;  
  • A next-generation system for making shopper data actionable, automatically creating extensive shopper segmentations based on behaviour, and supporting category managers and buyers as they collaborate with manufacturers-realising improved trade promotion ROI from more relevant and timely marketing initiatives that integrate traditional product category management with customer category management;  
  • Development of a new supply chain distribution model, where goods flow from point of manufacture to automated mammoth distribution centres, where mixed pallets of case quantity goods are built by robots and staged for delivery to the store, with skids built by aisle to maximize efficiency. This disintermediates traditional wholesalers and regional depots while providing real-time views into inventory movement, from manufacture to store delivery dock, and realises significant cost reductions through speeding up the distribution cycle, reducing inventory, and creating new efficiencies at the store level;  
  • A retailer providing realtime views of POS movement data by SKU and by store to vendors via the web, enlisting its trading partners in measuring promotion effectiveness, and realising millions of dollars in increased revenue by minimizing stock issues and reduced costs through just-in-time deliveries;  
  • Retailers availing themselves of time- and location-based mobile marketing services, able to communicate a lunchtime promotion to a shopper's mobile phone a mile away from the store at noon-the system then shifting to providing marketing promotions based on where the shopper is in the store.  
  • Each of these solutions is powerful in its own right. Each provides a new level of marketing and supply chain efficiency while driving revenue and cost savings. But consider what happens when you begin to connect these seemingly disparate pieces, when you start to leverage the synergies that can be created across the supply chain, both in product efficiencies and in marketing effectiveness - all with the individual shopper as the focus.

This resulting environment, this ecosystem, is what Hawkins Strategic calls 'Retail 3.0': relevant, personalised marketing to individual shoppers, supported by real-time marketing and supply chain synergies, built on a foundation of shopper-identified transaction data.

This introduction to Retail 3.0 and a full explanation of the concept and its practical implications has been made available in the form of a free white paper, downloadable from Hawkins Strategic's web site - click here (PDF document).

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