Episode Transcript:
Sara Lebow (00:00):
This episode is brought to you by TikTok for Business. Brat Summer is over, but TikTok for Business is just getting started. Whether your marketing goals are brand, performance, or full funnel related, leverage TikTok for Business' insights to drive business growth. Learn more at TikTok.com/business. Hello, listeners. Today is Wednesday, October 9th. Welcome to Behind the Numbers: Reimagining Retail, an EMARKETER podcast made possible by TikTok. This is the show where we talk about how retail collides with every part of our lives. I'm your host, Sara Lebow. Today's episode topic is How Not to Leave Revenue on the Table. Before we get into that, let's meet today's guests. Joining me for today's episode, we have two of our analysts. First up is Sarah Marzano. Hi, Sarah.
Sarah Marzano (00:54):
Hi, Sara. Thanks for having me.
Sara Lebow (00:56):
Thanks for being here. And also with us is Jeremy Goldman. Hey, Jeremy.
Jeremy Goldman (01:00):
Hey, I wish I was a Sarah. I feel left out, but looking forward to this.
Sara Lebow (01:04):
Everyone always does.
Sarah Marzano (01:05):
We'll let you hang out with us anyway.
Sara Lebow (01:07):
Yeah, we're a cool club. Okay, let's jump in. US e-commerce sales will total around $1.2 trillion this year. There are a lot of places throughout that e-commerce purchase funnel where retailers and brands are leaving revenue on the table. Maybe they're offering a discount to a shopper who would've made that purchase without the discount or they're creating friction that irritates shoppers and leads them to go somewhere else. Today, we're taking a look at that journey down the purchase funnel and discussing a place at each stage where money is being left on the table and what retailers can do about that. Let's start by going into this purchase funnel with the exploration phase, where you are just browsing around. Jeremy, where is money being left on the table here?
Jeremy Goldman (01:53):
Yeah, I think that this is such an important topic, Sara, because if you think about, from an exploration standpoint, there are so many different customers that you have to be speaking to and a lot of people don't really think about accessibility. It's not such a sexy topic, but retailers who ignore accessibility in their online and physical stores are definitely leaving money on the table for a number of different important reasons. And you even have people, like some of our fellow analysts we've talked about, who have problems reading things, like text that doesn't contrast all that much, and you have lost sales.
Sara Lebow (02:29):
You're referring to color blindness, right?
Jeremy Goldman (02:30):
Color blindness. There are some people who have problems being able to see the difference between, let's say, a light gray background with white text on it. It's something that wouldn't be a problem for me, but could be a problem for somebody else. And there's some data out there, more than 90% of customers who experienced a challenge like that don't reach out to the business running the website. They just take their business elsewhere. That's leaving money on the table.
Sara Lebow (02:55):
Yeah, accessibility is huge. It's something that gets left behind. So many people in the US have a disability or even just a preference. This is an in-store example, but I have left a grocery store before, because I've gotten overwhelmed with crowds and loudness. So yeah, any of those things, especially the really tangible things, using too many emojis on the screen, which I know that screen readers can't really process as well, can definitely cause those sorts of issues.
Sarah Marzano (03:25):
Wasn't it Walmart who announced low sensory shopping times earlier in the morning for customers who are more sensitive to various inputs around music and I don't know what else went into that?
Sara Lebow (03:39):
I think that was them. It's funny, because I feel like the nature of being in a Walmart is to be overwhelmed, that Walmart can be silent and it's still, just by the sheer volume of products there, kind of overwhelming.
Sarah Marzano (03:50):
Well, actually, to that point, there was some CivicScience data around holiday shopping this year, and the number one reason for shopping online was that their survey respondents indicated was avoiding crowds and going into stores.
Sara Lebow (04:01):
Yeah, that's a great reason. I know back when I had a car, that was something that I would fully avoid was just anywhere with stores, because there was nowhere to park, no traffic. I'm glad I don't have a car now. Okay, let's keep moving down the purchase funnel into consideration. Consideration overlaps with exploration, but everything kind of overlaps in the purchase funnel these days. So we'll take a look at it like it's separate. Sarah, where is a piece here where money is being left on the table?
Sarah Marzano (04:28):
Yeah, I think what kept coming up for me, when I was thinking about this topic, is just discounting and promotional strategies, which I feel like is a topic that has plagued the retail industry for at least as long as I've been a part of it. And I think the shift to e-commerce and the ease of being able to conduct price comparisons is one thing that's exacerbated that issue. We're also in a time where consumers are really continuing to feel the impact of several years of inflation that has raised the prices significantly on essential items and is putting pressure on their ability to spend on discretionary categories. But I think discounting and promotions in general is a place where retailers all too frequently get caught up in the short-term goal of juicing sales, get caught up in the short-term goal of taking advantage of promotional environments by using promotions as a lever, again, to drive conversion and the short-term.
(05:27):
But I think what gets very dangerous there is that you can really erode the value of your brand. You can condition your shoppers to only be willing to convert when they see that sale price. And I think, over the long term, that runs the risk of then you're eroding your margin, so the only option is to degrade the quality of your product. And they think we are, at some point, going to get to a place where there is no white space left to introduce a new promotion that's going to juice sales. And we've got entrants like SHEIN and Temu, who frankly are going to make competing on price impossible to do, so I think it is paramount for retailers to get a bit more strategic around how they're approaching discounts and promotion and really align that to the goal that they're looking for.
(06:09):
I would challenge retailers to make... I think, every loyalty program out there promises exclusive discounts and promotions. I can probably count, on one hand, the amount of times that has happened to me, where I feel like I've been the recipient of a discount or promotion that was actually surprising or exclusive to me.
Sara Lebow (06:26):
Yeah, this is definitely also a common holiday thing, where we'll see holiday sales volume increase, but profits won't actually increase at the rate you might expect. And that's because that sales volume is happening with such discounted merchandise. This is something that also our colleague Zach has talked about on this podcast before, which is offering ways to provide value without necessarily providing discounts, finding other ways that don't necessarily mean cutting into your bottom line there.
Jeremy Goldman (06:58):
I just got to say super quickly, it drives me crazy, because giving a discount to somebody who was willing to pay full price, but also, this is the number one thing that retailers say that they're so great at, they're so great at personalization. And the reality is they're often following a promotional calendar and most people are getting the same thing. It's such an easy thing to get even incrementally better at.
Sara Lebow (07:18):
That also has to do with when you offer that discount too, so in e-commerce or in physical commerce as well, what is it called? In-store, that's what we call it. You'll sometimes be offered a discount at checkout, but likely, if I've made it to checkout, especially in-store, where I can't do card abandonment as easily, I'm already going to make that purchase, so that's kind of a weird time to offer that discount. The same thing happens with buy now, pay later or pay in four, where you won't necessarily be offered it on the item page, but you'll be offered it at checkout. And that might be the wrong time to target me with that, because likely, if I've made it that far, I'm willing to buy that item for the price that I've been quoted. Now, if I get, we'll get into this, but if I get a steep shipping price at that point, that's where I'm more likely to abandon my card there.
(08:09):
Okay. Let's keep moving through our purchase funnel. So our retailers have worked out their accessibility issues during the exploration phase, they've worked out their discounting friction during the consideration phase, and now, it's time for our shopper to make their purchase. Jeremy, where is money being left on the table here?
Jeremy Goldman (08:28):
So many different places. Where to begin? We've two hours to talk about it, great. No, one of the things that is very interesting here is I've seen mobile experiences, where generally, you have an okay m-commerce experience, and then, for whatever reason, the carts, when you're at the point of purchase, basically, you don't have the level of optimization that you would like. And this is a big deal, because mobile cart abandonment rates are significantly higher. Some data I've seen says that they're 15% higher than desktop rates. I think that that could be even higher than that. And retailers who don't optimize their mobile checkout, they're missing out on a significant portion of sales. I think, obviously, anything that you can do to streamline the checkout process, sure, we all love, he said sarcastically, when we get asked for a number of pieces of information that are unnecessary to ship me an item, but you're asking me for them anyway. If you want to ask me that information, that's fine, but don't do it at the point of checkout. Unexpected costs that weren't disclosed earlier in the process, so anything basically...
Sara Lebow (09:38):
That shipping cost I mentioned, yeah.
Jeremy Goldman (09:39):
Yeah. Anything along those lines that creates additional friction, this is not the place for them. This is just they need to be kept to a minimum.
Sara Lebow (09:49):
What are your no brainer optimizations here? I have to imagine that one is like Apple Pay.
Jeremy Goldman (09:55):
Absolutely. Anything that is going to lead to less clicks and less typing, that should ultimately be your goal.
Sarah Marzano (10:03):
There's a few that shock me when I see some retailers do them and then, some retailers seemingly choosing not to, things like let me enter my zip code and then, guess what? My city and state can be auto populated, right? Having one line for my first and last name, again, assuming that a lot of folks are going to be on their mobile phone, you've got a small screen, you want to reduce the number of clicks. There are some low hanging fruit sort of optimizations that I think I am shocked that I don't see being more commonplace. And there are areas where I will notice when retailers have them. How nice is it to just be able to enter this into one line or not have to go through an entire scrolling process to choose that I'm in New York State, but when my zip code should be everything you need in terms of finding out that information.
Sara Lebow (10:46):
Yeah, you don't have that Alabama or Arkansas privilege of not having to scroll?
Sarah Marzano (10:50):
No.
Sara Lebow (10:51):
Yeah, I feel like we've been mentioning holidays a lot. You can tell that it's top of mind for us, but last year, we hit the tipping point of 50% of e-commerce holiday sales taking place on mobile. That'll happen again this year. That's according to both our forecast and Adobe Analytics data. So I think it just shows how important that optimization is now to get those sales. This is purely anecdotal, but I honestly think I would prefer to pay a steeper price for something and then, have free shipping than to pay a lower price and pay for shipping. If you bake in that shipping price, I'm probably more likely to convert, because there's not an unexpected price coming later.
Sarah Marzano (11:30):
There's the same survey that I referenced earlier from CivicScience, and it's, "Which of the following is the most important to you in shopping online this holiday?" Free shipping was the number one answer, far and away. 45% of their survey respondents said it was the most important. Compare that the option to expedite shipping, 2% said it was the most important. So I think we have to do away with the assumption that the fastest shipping is sort of the only option, it has to be prioritized over everything else. Free shipping is actually much more important, and I challenge that customers are more likely to wait in exchange for that free option.
Sara Lebow (12:07):
I do, unfortunately, think a lot of consumers expect both free and fast shipping, that Amazon has sort of broken our brains to expect that. But yeah, you can't always have both, so if you're going to pick one, it's good to know that free is sort of the better option often there.
Sarah Marzano (12:22):
I think, a lot of times too, customers just want transparency in terms of, "Exactly, when can I expect this to get here?" So that you can build planning into your process and really make an educated decision on whether paying extra for expedited shipping is going to be worth it to you. So I love when retailers are able to get really clear about exactly when my package is going to arrive. I know there's challenges there too, but...
Jeremy Goldman (12:43):
I was just going to say, not to back up your argument so much, Sara Lebow, but another holiday study said that 11% of people plan to cut back to save money during the holiday season by boycotting brands that don't offer free shipping or free returns. And that, to me, the word, "boycott," certainly stands out. That's pretty hardcore, but I think these are the types of things that become table stakes and understanding what consumer expectations are means you will offer something that people don't appreciate, like get it extra fast, when people don't always need it extra fast, they just need it by a certain day and don't incur the expense to send it too quickly to people, but also, understand what are the deal breakers in the consumer's mind. And in some cases, free shipping or free returns not being included is a deal breaker.
Sara Lebow (13:31):
I heard you mention returns. I'm going to latch onto that, because that moves us to the end of our purchase funnel. Turns out you can still leave money on the table even after a purchase has occurred. So Sara, tell us about a place that money is being left on the table post-purchase.
Sarah Marzano (13:48):
I think the post-purchase moment is very fascinating, because it is such an important part of the consumer's experience interacting with you as a brand or a retailer. But I think it can be really neglected also. Returns are something that really comes up within this phase, and I think one of the biggest trends in the news this past year has been the wave of headlines around retailers actually pulling back on overly generous return policies and trying to tamp down on some of the behavior, that expectation that you can try something in multiple sizes or buy a bunch of stuff that you don't necessarily intend to keep, which can really sort of hurt the bottom line. But I like when retailers get creative around the return as an opportunity to engage, so I've seen some retailers play with, "Hey, you can either return this in a traditional sense and we'll deduct the shipping from your return, or we'll give you credit and you can use it right now."
(14:41):
How can I keep this customer within my ecosystem? I think it's sort of a well-known thing in retail that it costs a lot more to acquire a customer than keep one. So I think the return is this opportunity to either say, "We'll incentivize you in some way to stay with us and use this credit with us," or even something as simple as gathering information about the return, which I think has become a lot more commonplace. But I challenge retailers to really put that stuff into practice. Is there something around the fit of this product that could be communicated better within the merchandising strategy to reduce the amount of returns that are happening?
Jeremy Goldman (15:15):
By the way, building that returns data into the purchase experience, yeah, is critical. Amazon actually does a really good job at this in particular of using, if people return things, because it was too small, automatically adding that to the product page, which then-
Sara Lebow (15:32):
Oh, that's a good point.
Jeremy Goldman (15:32):
... Means that, yeah, you're not going to incur as many returns, because you're using that to improve the information you're putting in front of the customer. So I think that's critical. I also think, building on what Sarah Marzano said, the idea about engaging customers. I kind of say that, by engaging, actually upsell them, sell them something new, give them a reason to come into the store, if they have to return something from the holidays, rather than having them just send it back through a UPS store, let's say, get them to come into your physical location, make sure that you will allow people to come in to return, because some omnichannel retailers don't.
Sara Lebow (16:12):
Returns are a reason that some people have talked about January as part of the holiday season, because those margins that you had might actually get a little slimmer in January when returns take place. I'm really not opposed to strict return policies. They make life much easier for retailers. They tend to be more environmentally friendly. And then, my shameful truth as a consumer, an e-commerce consumer, is that I don't make returns. I don't make returns. I have stuff in the corner that I'm saying I'm going to return and then, I never do. So as a consumer, I'm okay with stricter return policies.
Sarah Marzano (16:48):
Because it's annoying to print out the label?
Sara Lebow (16:52):
It's like you have to figure out, yeah, I don't have a printer, I don't know how to use the ones at work. Jeremy, you have to tell me how to do that.
Jeremy Goldman (17:00):
I will tell you, because I honestly do process my, if our IT team is listening, I do print out a lot of labels at work. Thank you very much. We've got a great office. Should I be saying that? Let's see if Victoria edits this out.
Sarah Marzano (17:13):
I print out labels, but I also print out note cards for moderating panels. It's all a balance, guys.
Sara Lebow (17:18):
But yeah, I have to figure out what to print out. I have to find tape, and I maybe have thrown out the original bag. I live in an apartment. I can't just leave things on my stoop. I need to go to the return center. Whole Foods is a walk away. The post office is only open while I am working. I don't have a good reason for this, but I don't make returns. I'm what retailers want. I'm the e-commerce consumer they dream of.
Sarah Marzano (17:47):
I know. I was just thinking, I was mulling over, are you though? Do you know, if a retailer made making the return, even if it wasn't free, a lot easier for you, wouldn't that reinforce some loyalty?
Sara Lebow (17:58):
It would. I can think particularly of one brand that I bought something for, I needed it for a wedding, it didn't come by the date of the wedding, and then, I didn't return it. And now, I have so much shame around that that I just can't see myself buying from that brand again. Sorry, Kim Kardashian, because it was SKIMS.
Jeremy Goldman (18:17):
One last thing about this returns thing that's really important is that the smarter retailers now are actually doing real-time calculations, based off of your overall value as a customer and how much it's going to cost to process the return. And sometimes, they're saying, "Eh, don't even bother sending it back," but the key thing is you have to say that to the right people. You can't say that to everybody. So for Instacart, when I get the wrong item, they're like, "Ah, don't worry about it, just keep it," because they can tell that I've bought an obscene amount of groceries with them over the last four years.
Sarah Marzano (18:47):
And they're weighing that probably against the fact that the person they have delivering that, the friction it would take to help you enable that return is just not going to be worth it. It's way more worth it for them to keep you as a customer.
Sara Lebow (18:58):
Okay. Well, that is all we have time for today, so thank you so much for walking through this purchase journey with me, Jeremy.
Jeremy Goldman (19:05):
Thank you, Sara.
Sara Lebow (19:06):
Thank you, also, other Sarah.
Sarah Marzano (19:08):
Thank you, Sarah.
Sara Lebow (19:10):
Thank you to our listeners and to Victoria who edits the podcast and leaves nothing on the table or maybe everything on the table. Which one of those is a good thing? The good side of that is what she does.
Sarah Marzano (19:20):
I think leaves nothing on the table is better in this case.
Sara Lebow (19:22):
Great. That's what she does. We'll be back next Wednesday with another episode of Reimagining Retail, an EMARKETER podcast made possible by TikTok. And tomorrow, join Marcus for another episode of the Behind the Numbers daily.
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