Updated on 02/02/2023
Retail distribution: introduction to new marketing strategies
Too often, for retail distribution, discount flyers and signs have been the only marketing strategies. Being competitive today will require them to widen their lens to embrace new strategies for staying competitive for the long run.
In an earlier post, we talked about the importance of retail distribution strategies, especially at a time like this, when the health emergency has given an incredible and unexpected push to the entire retail sector.
The data on the first phase of the pandemic confirm that the sales of Italian distribution chains have grown, especially as far as food and household products are concerned (ansa.it). At the same time, however, the same data indicate that this expansive phase can be rapidly reduced if it is not consolidated. And this consolidation can only take place if marketing strategies are put in place to attract consumers again.
Moving away from consumers
It is no coincidence that, over the years, a large proportion of consumers, especially those from younger generations, have moved away from shopping centers. This is because, also as a result of the digital transformation, consumers have begun to have more sophisticated needs and requirements, to which large retailers have not always been able to provide an adequate response. This is why, in some parts of the world, we have seen the collapse of shopping malls and subsequently of some prominent retail chains, some of which have reduced their presence in the territory by a third.
The growth statistics for the Italian retail distribution, while positive, delineated an economic environment headed towards stagnation, caused by a certain saturation of the market. Market that, moreover, was thought could slow down also because of the aftermath of the health emergency, which affected the consumption of Italians, given the lack of confidence in the future. However, according to the most recent data, the sector’s sales in Italy are estimated to grow by 1.3% in 2022, thus recovering from the slight decrease of 0.1% recorded last year, but following the 5.7% leap in 2020, the year of lockdowns.
An entire business to rethink
In light of all this, to remain competitive, players in the retail distribution sector must quickly set changes in motion to make some potentially courageous changes to the business. On closer inspection, one of the main evils that large-scale distribution must beware of is stagnation.
According to many observers, large retailers should renew themselves quickly and constantly, about every 3-4 years, perhaps based on market studies or big data analysis (econopoly.ilsole24ore.com). It is no longer conceivable, in fact, that the survival of the retail business should be entrusted solely to new convenience offers or to the gradual reduction of costs, which, moreover, risks impacting workers and suppliers and, consequently, on the quality of the products that are put on the market.
However, it should be pointed out that when we talk about renewal, we use this word in the broadest sense of the term: the internal change in a shopping center cannot be limited to superficial interventions, such as just creating new promotional campaigns or changing the layout of the shops. On the contrary, a radical intervention is needed, one that changes some structural components of the business and also affects the way the companies communicate and how they come into contact with consumers. This is why one of the key areas that will be most affected by this cyclical renewal is the marketing strategy.
Many elements to start from
First of all, it is essential to intervene in how consumers perceive shopping malls, so that they stop being simply places to buy something. This means that you have to start building your entire marketing strategy by creating more complex messages with which to reach the customer, involve them, and engage them. In other words, players must identify something really relevant to the consumer and find a way to communicate it in an innovative, engaging, and unexpected way.
Fortunately, as we shall see, those who operate in the retail distribution sector have many aspects that they can focus on in implementing a marketing strategy that is suitable for attracting the consumer’s attention.
Retail distribution strategies become green
From this point of view, one aspect that is the question of the environmental sustainability of distribution. Attention to the environment and the impact that one’s choices have is a continuing trend.
According to a recent study, it turns out that this need is so strong that many Italians have even declared themselves willing to pay more to be sure to buy eco-friendly products (focus.it). Not only that: this same trend seems to have been further accentuated following the Covid-19 emergency, from which consumers are even more sensitized and attentive to these issues (repubblica.it). This means that shopping malls, which by definition are the places where a customer has the opportunity to make an informed choice about what to consume, can make use of their positioning on such issues in order to reach customers.
To do so, there are many different methods that may be employed, depending on the retailer’s communication strategy and on the specifics of its sustainability strategy.
One example is to activate channels that are closely linked to eco-sustainable consumption (like the European chain Carrefour) or, alternatively, to enrich the product selection by introducing some green lines, even better if with the retailer’s brand, think of Esselunga Bio, in order to directly link the brand to respect for the environment (green-mktg.com).
Another green marketing approach for large-scale retailers could be the eco-efficient management of their stores. In this sense, the Italian chain Coop is a perfect case study. For some time now, Coop Italia has been striving to become self-sufficient in its supply of energy, installing a system of photovoltaic panels in several of its stores in order to gradually embrace renewable forms of energy. Alongside this, the Italian giant has also launched projects such as the one to combat deforestation or to combat the intensive exploitation of cotton plantations for the fashion industry. All of this, of course, is accompanied by a perfect communication strategy, the activation of certain social channels, and the strategic involvement of influencers.
Marketing can also be done at the point of sale
The above examples are particularly complex approaches to large-scale retail marketing, which require considerable intervention in the organization and management of the business, as well as a fairly broad time horizon to be implemented. In reality, there are less invasive and more feasible interventions in the short term, which can also have a significant impact in the shopping experience for all consumers.
For example, you can intervene in field marketing, giving a new role to traditional brands. This is exactly what has been done with the Tasting Rainbow project by Italpepe, which displays an assortment of products in order to help consumers choose based on the health and production characteristics of the product (gdonews.it). In this way, not only does the display encourage the impulse purchase of products, it almost communicates with the customer, providing them with ideas and suggestions on what to buy and how to use it.
Smartphone: a necessity for retail distribution strategies
For some time now, the smartphone has become a fundamental tool when it comes to shopping in general. According to several studies, more consumers use their phones before going to a physical store or while they are inside the store to get information on products. For this reason, an effective and innovative marketing strategy for large retailers cannot overlook a strategic touch point like mobile, which can become an exceptional tool to stimulate purchase and increase customer retention.
An example of this approach is the Despar group, who has developed an app that alerts consumers when special offers or promotions are available. The app also includes sections for coupons, the collection of loyalty program points, and a gaming area where the user can earn discounts and special offers.
The smartphone can also be used to improve the in-store experience. This is what some important players in the retail distribution sector have done, for example, by developing applications that allow customers to avoid the checkout line (gq.com).
Italian chain Esselunga activated its Ufirst app, which allows customers to monitor shopping queues from home. The app lets customers know when the lines are shorter so that they can go into the store in non-peak times.
Coop has also adopted a similar solution by implementing the CoDaC@sa system, which allows customers to book a purchase time. They simply register with their chosen location and then choose the time slot when they would like to shop and purchase. In doing so, the consumer not only saves time, but also perceives the brand’s commitment to making the shopping experience more comfortable and tailored to their needs: all of which contribute to improving customer satisfaction.
Given the current situation, implementing such a strategy seems even more forward-looking. The need to avoid large gatherings of people, which is now the norm following Covid-19, such applications allow the brand to emphasize its commitment and responsiveness to issues that impact the local community.
Retail distribution strategies and Big Data
Another great resource that retail players can use is Big Data. The hundreds of customers who peruse its aisles every day leave a large amount of data that every operator in the sector must be able to take advantage of in order to increase its competitiveness in the market. But how to do it?
In reality, there are many ways to approach a big data strategy; a lot depends on your objectives and the structure of your business. For example, you can use purchase data or loyalty cards to develop a personalized marketing strategy based on predictive analysis. By analyzing this data, you can understand the purchasing habits, price sensitivity, and lifestyle of your consumers, which can then be collected in specific clusters and become the subject of a targeted communication strategy.
Alternatively, Big Data can be useful to intercept new customers and stimulate the impulse to purchase. For example, they can be used to identify the best arrangement of products on shelves or to manage the workforce more efficiently. In this sense, an interesting case is that of La Rinascente, one of most well-known Italian department store chains, where the analytics approach to marketing has been a reality for several years.
This chain uses Big Data in such a way that management and CIOs can make decisions quickly according to the needs and preferences expressed by consumers or according to the customer flow that needs to be managed at that time.
Such an approach requires a long-term investment of time and resources, as well as the use of specialized professionals capable of managing this type of information in real time. At the same time, retailers can no longer base their marketing on just discounts and weekly circulars.
Customers and the market itself is asking for more, and it’s the companies with a broad vision and ambitious goals who will be able to remain competitive and become a brand that customers love.