Retailers and manufacturers are not achieving their full digital potential, according to Kantar Retail’s Digital Power Study, which benchmarks the digital performances of retailers and manufacturers.
The study suggests while manufacturers consider Wal-Mart and Amazon to be digital trail blazers, they believe there are still significant opportunities for both companies to further improve their multi-channel presence and offer. Retailers named Procter & Gamble (P&G) and Unilever as manufacturing digital leaders but no company achieved the standards Kantar Retail set for its digital ‘Best in Class’ status (see below guidance on how to close the gap).
Lack of clarity around defining digital is one of the major hurdles for companies and Kantar Retail has developed a unique 10:50:100 framework to help retailers and manufacturers understand the true impact of digital on retail and what is required to win.
The framework illustrates that while e-commerce will surpass 10% of total retail sales in the US, the influence of online interactions on retail sales is actually 50%. But to truly succeed, organisations need to adopt a 100% impact mentality, with digital integral throughout the entire business planning process – and not just added on as an afterthought.
The Digital Power Study gathered feedback from 400 US retailers and manufacturers to determine who they consider the current digital leaders in the three disciplines of strategy, marketing and capabilities. The findings enabled Kantar Retail to group manufacturers and retailers into four tiers of performance and capability based on the views of their trading partners – best in class; performing; progressing; and participating.
As well as the individual disciplines, the results are also grouped into a composite to show the overall performers. The highlights of this composite are:
1. Best in class – according to the research no company reached best in class status
2. Performing – the results found manufacturers P&G and Unilever and retailers Wal-Mart, Target and Amazon are the current digital leaders, due to the significant investments they are seen to have already made both financially and in dedicated resources
3. Progressing – this group includes Safeway and Best Buy, which are viewed by manufacturers as aspiring to be a significant multichannel player and are beginning to allocate resources. Manufacturers in the group include PepsiCo and Coca-Cola
4. Participating – this group is emerging from a bricks-and-mortar approach and understands the importance of digital only in pockets of the organisation, allocating only shared resources to digital marketing and e-commerce. Retailers perceive LEGO and Samsung to be in this category, with manufacturers placing Macy’s and Home Depot here
To close the gap to Best in Class, Kantar Retail suggests five principles for retailers and manufacturers. They are:
- Multi-channel strategy – develop a strategic roadmap that informs the corporate and business unit strategy. Digital is an integral part of the processes of the company
- Omni-shopper Path to Purchase – become experts in behavioural segmentation (rather than just demographic and psychographic segmentation) by identifying and demystifying omni-shoppers’ multichannel path to purchase
- Multi-channel category leadership – develop innovative approaches to multichannel by using the real-time store and site Point of Sale data that digital allows to test and improve ideas
- Integrated campaigns – create fully integrated merchandising and marketing strategies with a shopper-centric view of the item, brand and category
- Optimised supply chain – optimise e-commerce packaging, logistics, and fulfilment centres to same levels as bricks-and-mortar systems and networks
The study also highlighted the Power Players of the next 10 years – revealing who trading partners think will define the future of multi-channel retailing.
Kantar Retail’s director of digital retail, Steve Mader, said: “The retail landscape across Europe is primed for the digital revolution – 2014 will be the year we expect many companies to look to make the transition from participating to progressing. Manufacturers are well positioned to bring category leadership and multi-channel expertise to their retail customers in a systematic and scalable way that can be portable and replicable at the local level.”