Retail distribution marketing: why change some aspects of the business

In this moment of recovery from the Covid-19 emergency, retail distribution marketing will need to take advantage of the tools for digital transformation

Every player in retail distribution marketing trade must examine what it will take to remain competitive in a post-Covid world. 

 

Why must the retail distibution marketing be renewed?

The sector must begin to prepare itself for a fundamental transformation that may forever change some aspects of the business. Why? Let’s see the reasons.

 

First: the competition is getting tough and digital

The current economic environment is very competitive and is destined to become even more so.

In the past, large organized distribution has played the part of the industry ”giant”, that has been able to count on a considerable competitive advantage, largely due to their size and the large variety of products available for sale.

Today, it is the large-scale retail players who have to react to an unexpected competitor, which is showing itself to be particularly aggressive: e-commerce. Of the entire retail sector, in fact, online shopping is the segment that shows the greatest growth, often with double-digit percentages, both in Italy and in the rest of Europe (ecommercemonitor.it).

Incidentally, not even the recent pandemic seems to slow down its growth. On the contrary, since the beginning of 2020, the number of online consumers in Italy has tripled, reaching 2 million users (agi.it). Among other things, this growth trend seems likely to continue in the future, given that the estimated growth of the sector worldwide is around +55%, despite Covid-19.

On the contrary, it is precisely this phase of health emergency that seems to have accelerated this rise, given that the prolonged lockdown has impacted some important consumption habits, introducing relatively new ones such as the online purchase of grocery items.

This is particularly critical for companies in the retail distibution marketing, considering that the food sector has always been the consumer “stronghold” where digital players find it difficult to enter.

 

The second reason: getting back to the neighborhood

The second reason that companies in the sector need an effective marketing strategy is because consumers are rediscovering proximity shopping.

During the health emergency, small neighborhood stores, in some ways even unexpectedly, helped meet the needs of customers. In the first half of April 2020 alone, growth in purchases from small neighborhood retailers was 30% higher than in the same period of the previous year. This is because, for once, smaller sizes proved to be an advantage. In just a short amount of time, retailers were able to remodel their product offerings to suit the needs of the people in their neighborhood, meeting the most frequent needs and reducing waste.

Secondly, many shops quickly organized a home delivery service, activating communication channels that had previously been neglected, such as Facebook, Instagram, and Whatsapp. In doing so, they not only increased the number of consumers they were able to reach, but they also strengthened relationships with the community.

 

Third reason: even supermarkets are getting older

In the past, supermarkets, hypermarkets, and especially shopping malls (the American style shopping mall in particular) were centers of activity almost in themselves. The variety of shops, the open spaces, the food courts were just some of the features that made shopping malls popular, even for those who weren’t necessarily interested in buying. And because they were located in suburban areas, this made them real “attractions”. 

However, this form of retail has also lost its allure of “novelty”.

As a result, people are no longer visiting malls for the fun of it, and many shopping malls have been abandoned altogether. This has kicked off the phenomenon known as the “retail apocalypse”, which has affected the American market in particular (intralogistica-italia.com).

Precisely because of the new habits of younger generations, between 2010 and 2013, the influx of people into American malls fell by 50%, leading to the closure of many stores, even famous chain stores like Macy’s, American Apparel, Abercrombie & Fitch, and Guess.

This means that shopping malls, in order to remain competitive, must become attractive again for new consumers. For this to happen, an effective and structured marketing strategy is essential.

 

Fourth reason: resistible growth

Obviously, the e-commerce sector is not the only one impacted by the effects of the pandemic. Compared to what had been estimated at the beginning of the year, the sales of retail distribution marketing have increased considerably. For example, in this past March, Nielsen recorded a positive double-digit trend in Italy, with an increase of 16.4% compared to the same period in 2019, with the same number of stores (nielsen.com).

This might seem like excellent news, and it certainly is, if it were not for the fact that this important expansive phase was followed by the health emergency. Over time, in fact, the initial acceleration of sales has gradually slowed down, unlike the e-commerce segment which continues to grow (askanews.it).

What does it mean for the growth of large-scale retail in this period? It’s not easy to answer, but one thing is certain: the Italian large-scale retail trade is at a delicate time, when it is necessary to take decisive measures to ensure its competitiveness.

 

Between growth and stagnation

While it’s true that the sales figures for this first half of the year were influenced by the health situation, those for the previous period tell a decidedly different story. Certainly the Italian retail sector was not on the margins of an Italian-style “retail apocalypse,” but this does not mean that such a scenario isn’t possible.

If, in fact, if you look at the ISTAT surveys dating back to January 2020, you can see that retail distibution marketing showed a positive trend, but nothing to do with the data that were recorded, since the value of sales had increased “only” by 2.3% compared to January 2019 (istat.it).

In the same way, the Italian large – scale retail trade had been growing for a four-year period (2013-2017) in which the aggregate turnover had grown – even in 2017 sales reached €83 billion,  the best result since 2014, but with figures far from those of phase one of Covid-19. Add to this the fact that, at the same time, the net operating margin had decreased by 5.5% and the current result by 5.9% in the pre-Covid period. This means that the retail sector, including large-scale organized distribution, was beginning to enter a state of stagnation even in the face of partial market saturation. And the positive results of the last four months certainly do not ensure against this possibility.

However, if we take into account the fact that in 2019, shopping center rents dropped from an all-time high of 6.4% to 5% and that Italy and Europe in general will most likely face a period of stagnation, we can understand why an effective marketing strategy should be the priority of all large-scale retail operators.

 

What is retail distribution marketing currently like?

If you look at the Italian retail distribution marketing situation, you can’t help but notice that the tools used are quite outdated. For example, retailers use paper to communicate with customers about discounts, offers, and new products on sale. In fact, the paper flyer is the preferred channel of communication for big supermarket brands, both for its simplicity of use and for the ability to reach almost everyone or at least the majority of shoppers (businessweekly.it). 

Another widely used strategy is that of field marketing, which is carried out through a “field” test of the products proposed to customers by a hostess or a salesperson (en.wikipedia.org). Compared to other marketing strategies, field marketing takes place inside or in the immediate vicinity of the shop: however, this means that in order to be implemented, the potential buyer must have already entered, which could be a problem.

Another widely used channel is posters, signs, and flags, which are mainly used to communicate discounts and promotions.

 

The marketing message in your own strategy

If the channels most used by retail distribution marketing are the traditional ones, the same can be said about the messages that are usually conveyed. As pointed out above, a large part of the marketing messages in the context of large-scale retailing focus mainly on the communication of discount campaigns, temporary promotions, prize competitions, or points collections. Obviously, such an approach is not wrong, but it is rather limiting.

Attention to the territory, the sustainability of products and packaging, support for campaigns to protect workers involved in the supply chain: these are all issues to which consumers are becoming increasingly attentive, demanding a concrete commitment also from the various retailers.

For example, developing eco-sustainable formats that have a radical impact on production and distribution is a perfect way to build an innovative marketing strategy that shopping centers can adopt to start attracting customers again (green-mktg.com). It is no coincidence that in recent years, some major brands have taken this path, such as Auchan and Carrefour or Esselunga and Coop, which have chosen a less radical approach both by increasing the number of “green” references on the shelves and by launching eco-friendly products with the retailer’s brand.

The problem, therefore, is not the options available, but how to communicate these initiatives in order to attract consumers.

 

The theme of the new marketing strategy for retail distribution marketing must be “innovation”

The substance, in fact, is all here, and there are many tools with which to build effective marketing strategies. It’s also clear that an innovative approach will be necessary for Italian retail distribution marketing to embrace digital  transformation and the changes it has brought about.

In this sense, e-commerce is the stimulus that will push large retailers to renew themselves. There are many ways to do it, from the use of big data, to Artificial Intelligence, from in-house strategies designed to reduce the environmental impact to the development of mobile apps to increase the purchasing cycle (gdonews.it).

 

The customer at the center of the business 

Obviously, each of these tools can have an extremely positive impact on the entire business, provided that they are consistently integrated within a clear and organic marketing strategy, with specific objectives. Retailers can’t simply play lip service to environmental or social issues, for example (gdonews.it).

Upstream of all of this there must be an idea, a positioning, a clear objective that isn’t just about increasing revenue. On the contrary, the long-term goal must be to put the customer and his needs at the center, building a memorable customer experience around him. And to do this, there is no doubt that digital tools are the ideal means to do it: greater competitiveness and the return of customers will be the direct consequence of a path designed to project the retail sector into the future.