Most Americans are enjoying their last few weeks of summer. Meanwhile, retailers are halfway through the back-to-school shopping season, one of the most lucrative shopping periods in the industry. Last year, the average family spent $635 on back-to-school supplies. This year, the National Retail Federation (NRF) predicts a three percent increase in back-to-school shopping, or $74.9 billion in spending (See the 2014 outlook). Despite this positive forecast, Deloitte’s back-to-school survey paints a different picture. The annual report reveals that families are spending less every year on back-to-school shopping. Concerns over rising taxes and higher food and energy prices are making families cautious and budget conscious. It seems that while the economy is recovering from the recession, consumers are not.
Given all this, retailers should tailor their back-to-school shopping strategies to accommodate consumers’ cautious approach to spending. Not only are parents shopping online for deals and promotions, they’re also going to discount stores and using their mobile devices to help with the process. The customer experience is shifting, with a greater emphasis placed on an individual’s unique needs. Non-traditional channels, personalized offers and analytics-based retargeting could all boost sales. As a first step to address this shifting landscape, retailers have stretched the back-to-school shopping season this year, with some starting as early as mid-July. In doing so, brands hope consumers will spend more over the long run. Yet Deloitte finds that the majority of shoppers will wait until just a few weeks prior to the school season to begin shopping for school supplies. So what else can retailers do to capitalize on the trends impacting families this school year? Let’s examine a few possibilities:
Wal-Mart made headlines this week with its website redesign. But it’s not just the new layout attracting attention. Wal-Mart’s ultimate goal is to better compete with e-commerce behemoth Amazon by boosting online sales and delivering personalized shopping experiences. Wal-Mart’s aggressive personalization strategy, in particular, reflects the changing nature of today’s retail landscape and connected consumer. Consumers are increasingly mobile-centric and hungry for engagement, convenience and personalized shopping. Wal-Mart’s investment and website overhaul is a smart move that reflects its customer awareness. Some might argue, however, that Wal-Mart is too late to the game. Here’s why:
The Wal-Mart effect
No one will doubt Wal-Mart’s reach and influence in the retail ecosystem. The company added $2.7 billion in net sales in the second quarter, despite an uncertain economic climate and an industry-wide decline in in-store sales. Looking to the future, Wal-Mart is wise to invest in its online business. However, the website makeover is just the tip of the iceberg. By adding personalization to the mix, Wal-Mart will align its brick-and-mortar business with its e-commerce goals. If Wal-Mart does this right, customers will get personalized experiences based on their unique shopping behavior online and in-store. Sales associates will have better visibility into inventory, and the company may expedite same-day delivery as Amazon did.
The recent changes at Wal-Mart highlight the company’s view of its competitors. Amazon’s vast resources, size and market influence make it Wal-Mart’s biggest threat. The two rivals have kept a close eye on one another for years, often pursuing similar ventures. For example, Amazon followed Wal-Mart into the grocery store space while Wal-Mart continues its efforts to be the one-stop-shop for consumers online and in-store. While these two conglomerates duke it out for retail dominance, however, they may be missing another larger competitor lurking in the shadows: Alibaba.
The Alibaba threat
Alibaba is a significant threat for retailers, Amazon and Wal-Mart in particular. The Chinese e-commerce giant is determined to penetrate the US market. Not only will the company soon go public in the US, but it is eyeing several US-based tech startups and partners to help grow its business. Most recently, Alibaba was reportedly involved in a $10 million talk with popular messaging start-up, SnapChat. Alibaba’s IPO is expected to raise the company billions of dollars, and with that, a series of acquisitions will likely occur aimed to expand the company’s global footprint and stronghold in the e-commerce sector.
This is bad news for Wal-Mart. BusinessWeek reported that Alibaba’s IPO may very well end US dominance in e-commerce. While Wal-Mart is the only one of its kind in terms of size, scale and value proposition, it is not a pure e-commerce player like Amazon or Alibaba. There is still a brick-and-mortar business to consider, and with that, more resources and investments must be made to streamline the customer experience on mobile, online and in-store. This is why Wal-Mart’s personalization strategy is so critical. It is the glue that ties all of Wal-Mart’s channels together. Customers on mobile will have the same personalized experience as they would on desktop or in a physical location. Wal-Mart’s changes are important for the retail industry because they underscore the need to meet customers where they are now (on mobile) and address their desire for engaging and personalized content, while also keeping the company competitive. We will likely see other e-commerce players follow Wal-Mart’s lead, and it’ll be important to do so with the Alibaba threat looming over the industry.
Wal-Mart’s investment in online, mobile and personalization means customers can count on the discount retailer for everything they need. More importantly, Wal-Mart can continue to grow without sacrificing quality of experience or brand equity. Standing from the outside, Wal-Mart’s strategy is undeniable: Compete with Amazon. But if the retail giant wants to continue growing, it must also expand its ambitions to compete with Alibaba. Only time will tell how the retail ecosystem will take shape once Alibaba enters the scene in full force, but Wal-Mart is off to a great start by focusing its resources on innovative technologies and strategies.