Market View: Are You Up to Date on the Ways of Digital Natives?

Mobile, online and in-store are no longer separate marketing channels.

By John Stanton, Contributing Editor

I knew I was not a digital native or even an up-to-date technology guy when I asked the students in my class if many of them are twerking.

They all seemed shocked, and one finally asked, “Do you mean tweeting?” I didn’t feel embarrassed until I found out what twerking was and that it was quite different from tweeting. At that point I knew I needed to update myself.

Here’s my question to food processors: Are you updated on what is happening in the mobile shopping world and the ways of the digital natives? When I decided to really explore what was happening I was surprised. First of all, it’s a new world. Mobile, online and in-store are no longer separate channels. One supermarket chain is testing a system where you could order from billboards on the street. Just use your phone to scan and place the order.

Let me share some statistics. The expected growth of bricks and mortar food retailers is about 3.4 percent whereas the CAGR for online is 11 percent. Granted this is a lower base, but that still is a big difference. 14 percent of U.S. households went online in the past three months to buy food, beverages or groceries and purchased as much as 5 percent or more of their groceries that way.

We are seeing more “click and collect” models like Tesco, which recently announced that it is allowing shoppers to pick up their groceries at convenient locations throughout the community in over 200 locations. Target recently rolled out its subscription program as a way to combat Amazon’s subscribe and save program. Focused right now on moms, it allows the retailer to be easier for its core shopper – Mom – to increase the lifetime value of the relationship and to keep the dialogue going.

Amazon has 46 fulfillment centers representing 36.6 million sq. ft. In 2013/14, Amazon announced 8 more FCs with a total of 8.3 million sq-ft. This will bring the U.S. total to 54 FCs, representing 45 million sq. ft. Amazon’s U.S. footprint is one-third of Walmart’s and it is just starting. The company has 500,000 SKUs because it doesn’t have to store them all using its fulfillment system.

There was a time when I used to say having an online presence is very important. Now I believe if you don’t have a very functional online presence it will be like trying to sell horse-drawn carriages in the 1960s. I have the opportunity to see this transformation take place in my classroom full of millennials. But I’ve also seen it in my 40-year-old son and my 25-year-old nephew who lives with me.

Social media and digital marketing are the first choices when digital natives think about and purchase products. It is that simple. My advice is don’t listen to anything else but that. The digital natives of today buy virtually nothing without extensive searching on the Internet. They look at just about everything including the websites of the companies, various review websites, online retailers such as Amazon, etc.

I’ll give you two short examples but I’m sure each of you has some examples of your own and might think that they are unusual rather than typical. My research assistant thinks of a bricks and mortar store as her absolute last choice when buying a product. In another case, my colleague invited his family for a week at the ocean. Upon arrival he told his daughter that the first order of business was to drive to the grocery store and get the food and cleaning supplies that they needed. His daughter looked puzzled and asked her father why and then pointed to about five boxes from Amazon which had everything that they needed.

Things are really different because going to a bricks and mortar store is my first choice, and I would have never in a hundred years thought to order supplies for a vacation home from Amazon.

This change is not necessarily bad. We can now have direct contact with each of our consumers. We don’t have to put a 15 second ad on television and hope that someone watches. This is clearly the end of “mass marketing” -- that is, going to mass on Sunday and praying that somebody buys your product. It's the new era of targeting.

We not only can send messages to people in their homes, but we can now deliver a coupon or any promotional message when someone is standing in front of the items in the grocery store. We also have a chance to show consumers we really care about them by responding to their email messages and twerks – I mean, tweets – about problems they may have had with our products.

Every marketing speaker I have heard (including me) makes the point that things have changed. And they have! But the switch of our new consumers to mobile platforms is no small change; it should impact every aspect of our business. The future is neither good nor bad, it just is.

You can make it a good future.

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