The world of European retail is in flux. In the span of a few months, high inflation and rapid technological innovation have combined to paint a picture of a highly uncertain business landscape.
Consumer-facing retail brands are often at the forefront of these shifts, having to adapt fast in a cutthroat industry. But they are increasingly finding that succeeding in a progressively more chaotic world requires embracing those changes first.
“When you’re looking at shoppers and what disposable income they have, it’s not going to be that much going forward, and wage inflation is not keeping track,” said Danny Micklethwaite, VP of marketing at dairy company Arla Foods, during a panel discussion at Advertising Week Europe in May.
“The [retail brands] that are going to win are the ones that are going to adapt to where, when, and how people want to shop. And if you look at the proliferation of channels, that’s clearly where the growth is,” he added.
Thoughtful marketing informed by cold, hard data
While inflation is uprooting marketers’ strategies, on the other side it has also focused their attention on what matters to many people right now: value. To respond successfully in this rapidly changing and emotional environment, some marketers are turning to the steadiness of data to inform their pivots.
“We saw that we had a decline in trust and a lack of reassurance amongst our customer base,” said Lisa McDowell, brand director at online grocer Ocado. In response, Ocado price-matched more than 10,000 Tesco products in the span of three months, to tackle any concern of ‘greedflation,’ she said.
Health and beauty retailer Boots U.K. adapted as well, evolving their Advantage Card loyalty program to offer more instant rewards than points-based rewards. “Our customers are telling us they want to get rewarded straightaway versus building up points,” said Ollie Shayer, omnimedia director at Boots.
First-party data was a big help in crafting a response that showed understanding of where the customer is at this moment. “Boots has a wealth of first-party data, and we’ve used it not only to understand what customers want to purchase, but equally how we show those products to customers,” said Shayer.
But even though people want value, some believe it should be more nuanced. “There’s a temptation to go value. But it’s about moving from value to value-add,” said Diego Mandelbaum, CEO at beauty brand KF Beauty. He said the beauty industry is grappling with how to offer more value to customers, through initiatives such as bundling different products together into beauty routines.
Retail media’s ascent
A bright spot in an otherwise cloudy landscape, retail media has seen retailers set up advertising networks on their online and offline properties, opening up a new channel for brands to find highly targeted audiences using retailers’ wealth of first-party data.
“It’s increasingly sophisticated and personalized. That’s what we’re finding our brands are really looking for — they want better access to their consumer base,” said McDowell. “If you’ve got customers searching for your brand, you need to show up.”
Retailers’ data can also be used by brands on other channels, such as in Boots’ partnership with streaming service ITVX that allows advertisers to buy ads on it using Boots audiences. The retailer has also invested in closed-loop measurement by digitizing the store environment. “We’re bringing digital elements into the store that will effectively be programmatic in the future,” said Shayer.
For brands, retail media has also quickly become an essential channel. “It’s a fundamental part of the way that we build our brands,” said Micklethwaite. The reason behind this symbiotic relationship is simple: “The really big thing for us is clearly we don’t have that first-party data. We don’t have that level of targeting,” he said.
Investing (and divesting) in innovation
Operating on thin margins, it can often be challenging for retail brands to take the plunge into unproven technologies or new channels. For this, a pragmatic approach works best, said Micklethwaite, evaluating whether these innovations really help solve a business need.
“Even if our competitors get in there and then do something that maybe works, that’s a very short-term tactical advantage that they get. So let them burn the money. We’ll be very much a fast follower,” he added.
However, being static also isn’t a good strategy, especially in such a fast-moving technological environment. “Innovation is necessary because if you’re not innovating, you’re not in the place where your customers are,” said Shayer, pointing to augmented reality as an area that the retailer is exploring. But that also means having the vision to look beyond the usual digital channels, like Google and Meta’s Instagram and Facebook.
While the two walled gardens continue to deliver the results advertisers are looking for, marketers should be cautious about consolidating their spend on just two platforms, said Mandelbaum. “They should be key ingredients in the recipe, but they shouldn’t be the only two ingredients in the recipe.”