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"For me, the big [Q1] takeaway for brands is really focusing on that loyalty marketing ... We need to focus on retaining those existing customers. It's much cheaper to retain an existing customer than it is to acquire a new one."
— Andrea Leigh, Founder and CEO, Allume Group
Every quarter, several trends shake up the retail landscape. Q1 was no different. In the beginning of the year, companies had to deal with waning consumer loyalty, but they also focused on delivering premium products and more immersive and entertaining product content, according to Andrea Leigh, founder and CEO of Allume Group, an ecommerce education consultancy.
Leigh joined a recent episode of the “Unpacking the Digital Shelf” podcast entitled, “The Liberated Consumer Has Roared to Life,” to recap Q1 and share the consumer and industry insights brands need to know to drive better ecommerce performance going forward.
With inflation still lingering and consumers growing weary of stockouts and product availability issues, brand switching has become the norm. Consumers would leave their favorite brand for a more affordable one without hesitation, according to research from Pymnts, a firm that covers the payments and commerce industry.
Shifting brand loyalty has led to the rise of the “liberated consumer,” Leigh says, or a consumer that isn’t beholden to any one brand. These consumers probably embrace the motto, “Make me your best offer.” In today’s competitive ecommerce environment, the brands that do win their business will answer that call — but not their undying loyalty just yet.
The best method for tackling customer disloyalty is to focus on customer retention rather than acquisition, says Leigh.
"For me, the big [Q1] takeaway for the brands is really focusing on that loyalty marketing,” she says. “We need to focus on retaining those existing customers. It's much cheaper to retain an existing customer than it is to acquire a new one."
Leigh and her team also uncovered other industry insights that defy the conventional wisdom brands have accepted in recent years: Consumers care about speed more than anything else. Q1 industry data indicates this isn’t the case.
“They [consumers] cite that when choosing where they're going to shop, the most important factor is ease and convenience, followed by price and discounts,” Leigh says. “Down at the bottom, of lowest importance, is pick-up and delivery options and speed.”
Brands often think speed and convenience are synonymous, but recent industry data suggests there’s a disconnect between what consumers really want and what brands and retailers think they need.
Value is now an even greater priority for consumers. Half of shoppers say they’re reducing their spending in some way right now, according to Pymnts’ research.
However, some categories are feeling this pull back more than others. Consumers are cutting back their spending in clothing, shoes, groceries and electronics. Their spending is about the same in the pet products, office supplies, and health and wellness categories.
As consumers get more discerning about their spending, it’s crucial for brands to more clearly communicate their value, even if they’re selling a premium product, Leigh says. She gives the example of a skincare company that sells a moisturizer that’s $5 more than its nearest competitor.
“You need to be able to really succinctly explain why that product is more expensive, what is different about the formulation, what's different about the regimen that you're supposed to follow. Maybe it's not a daily-use moisturizer, so it's more expensive, but it stretches longer from a usage perspective,” she says.
Leigh admits it’s hard to communicate this value when consumers are even more conscious, but brands have more tools at their disposal than ever before to navigate this challenge.
Retail media is one of the most impactful tools they have. Leigh says retail media allows brands to more easily customize their messaging and present relevant product content that helps consumers make a more informed buying decision.
“If you look at the tools in our arsenal, they're expanding, and they're changing … They allow us to focus on all types of marketing goals and objectives, but they really do allow us to focus on loyalty in a different way than we could a few years ago.”
— Andrea Leigh, Founder and CEO, of Allume Group
Along with shifting consumer loyalty, industry data shows experiential commerce and what’s being called “premiumization” are two growing trends.
With premiumization, brands are focused on selling more expensive products with added features and benefits rather than lower-priced items. Why would they do this in today’s uncertain economic times? Because they know exclusivity often drives purchases. This year alone, executives have mentioned “premiumization” in nearly 60 earnings calls.
“A great way to improve your profit position is to raise your prices, and it can be sustainable if you're really offering more value to the consumers,” Leigh says.
Retailers are also focused on experiential commerce, or delivering “infotainment” during the shopping experience. Experiential commerce allows them to educate and delight consumers at the same time using tools like artificial intelligence (AI) to automate content creation and delivery and influencer marketing to give consumers more information through social media content such as “unboxing” or “haul” videos where they showcase products and review them (via a paid post, of course).
“The more that we can capitalize on that intersection between entertainment and commerce, I think the better chance we have of engaging that shopper, of increasing that digital engagement,” Leigh says.
Because no conversation about ecommerce is complete without Amazon, Leigh also spent some time discussing the company’s ecommerce performance in the first quarter and what it could mean for the rest of the year.
In Q1, Amazon made a big entry into health care with its acquisition of One Medical, a human-powered, technology-centered health care organization.
“They're really focused on becoming a platform for providers. One Medical is a little bit of an anomaly relative to their other efforts. If you look at the clinics and some of the other things that they're working on, they're becoming a marketplace aggregator for different online clinics to schedule appointments, for example,” Leigh says. “So, you can go online and you can say, ‘I need to see someone this afternoon,’ and the marketplace will serve you up all the local clinics in your area that have an appointment available for you.”
Amazon’s presence in health care is growing. It already has 24% market share in the healthcare cloud computing market. With the consumer and operational data the company is gathering across its health care portfolio, it’s positioned to grow even bigger and use its learnings from the healthcare space to deliver the same automated, self-service model to other service-based industries.
As usual, this means brands will need to be nimble and stay on their toes — whether it’s with Amazon or today’s newly liberated consumers.
To hear more of Leigh’s Q1 insights and what drives ecommerce performance today, listen to the full episode.