18/03/15 17:51The Death of Pure Play Retail, Impulse and the Candy Aisle | L2: The Daily

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The Death of Pure Play Retail, Impulse and the Candy AisleBy Homa Zaryouni | 16 March 2015

At L2’s members-only “Clicks & Mortar” clinic, NYU Marketing Professor Scott Galloway makespredictions about the state of retail in 2015. Galloway says pure play retail – whether pure e-commerceor pure brick-and-mortar – is dying. Content and commerce will become more integrated andessential to converting browsers into buyers. Impulse purchases are on their way out and Apple willbecome luxury brand.

1) The Death of Pure Play RetailDespite charismatic founders and enticing offerings for consumers, none of the e-commerce stars ofthe early 2000s have met expectations. Net-a-porter is still not profitable. Fab.com went from a $1billion valuation and raising $150 million of additional funding in 2013 to a $15 million fire sale inNovember 2014. Gilt raised $50 million of funding in February and disappointed investors waiting foran IPO in 2014.

Simply put, Amazon’s low-cost and fast delivery options have made it too expensive for any brand tocompete with an online-only model. However, stores are where brands can and should compete. Smarte-tailers (Warby Parker, Birchbox, Rent the Runway, Bonobos) realized early on that their customersprefer to pick up or try on their items in-store at the own convenience rather than wait for (and oftenmiss) delivery. The last-mile problem – or the yellow slip left at the door – is Amazon’s Achilles heel.Galloway predicts that Amazon will make a transformative acquisition to gain a retail footprint in2015: a JC Penney, a gas station chain, the U.S. Postal Service or Radio Shack.

2) Integration of Content & CommerceThe death of e-tailers does not mean brands with limited online and mobile presence are safe.Commerce has reached a tipping point where more than half of all consumer purchases are influencedby online information. And consumers who go online (on a mobile device) while at the storeexperience a 27% lift in conversion, dispelling the myth that showrooming hurts stores. Consumerswho research a purchase online prior to visiting a store and pull out their smartphone during the visitexperience a 40% lift in conversion.

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18/03/15 17:51The Death of Pure Play Retail, Impulse and the Candy Aisle | L2: The Daily

Page 2 sur 3http://www.l2inc.com/the-death-of-pure-play-retail-impulse-and-the-candy-aisle/2015/blog

So how can brands make sure they are improving the likelihood that the consumer looking at theironline and mobile site will make a purchase? And how can they increase cart sizes? Content. Savvybrands incorporate content on the path to purchase that helps shoppers make a decision. ScottGalloway presents three questions brands should ask themselves when placing content on their site:

1) Does your strongest content sit on somewhere other than your brand site – on a blog or microsite?

2) Are your most expensive pieces of content a commerce dead end? (e.g. tutorials without a link topurchase featured products.)

3) Are your hardest-working content publishers ignored? (Are you publishing reviews and featuringuser-generated content on your desktop and mobile sites?)

4) Does your top sales associate provide better customer service than your digital channels?

Gap was the first brand to integrate content and commerce. Lacking the budget for billboards, thebrand placed content in its stores and developed the branding with blonde wood floors, well-trainedsales associates, and television-quality videos broadcast in store.

3) The Death of Impulse Purchases:Foot traffic to malls and retail stores is declining, even though 90% of sales still happen in physicalstores. The new shopper researches items online and picks them up at the store, marking the end ofaimless browsing and impulse purchases at the mall. Similarly, as online grocery takes off, brands thatrely the impulse purchases made at the aisle line – flowers, magazines, candy bars – will experience adecline.

For food and CPG brands, making it into the 50 million first online grocery baskets (predicted for2015) of online consumers is critical. Online shoppers tend to repeat their purchases rather thanbrowse aisle and be open to trying new items.

4) The Rise of Luxury Brands and Apple:Luxury brands will intensify the competition for specialty retailers because of their high margins andconsumers’ tendency to opt for high-value or low cost. Luxury brands can be characterized by thefollowing: an iconic founder, an exceptional price point, craftsmanship, vertical distribution, globalpresence and recognition, and a self expressive benefit that extends beyond the item’s face value.Apple contains all of these characteristics and has completed its transformation to a luxury brand withthe Apple Watch.

Apple’s iconic founder, craftsmanship, distribution, global presence and exceptional price point are nomystery. But what is the self-expressive benefit? Scott Galloway shows a heat map of operatingsystems in New York with the red representing iOS. The entire island of Manhattan uses iOS while theless wealthy bureaus and suburbs use Android. The iPhone has become the ultimate accessory with aself-expressive benefit.

Members can view the entire Clicks & Mortar clinic here.

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18/03/15 17:51The Death of Pure Play Retail, Impulse and the Candy Aisle | L2: The Daily

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Tags: Achilles heel, Amazon, Android, Birchbox, Bonobos, Candy Aisle, Click & Mortar, Content & Commerce, Contentand Commerce, CPG, Craftsmanship, digitally savvy brands, Fab, Flowers, Gap, gas stations, Gilt, impulse purchases,iOS, IPO, JC Penney, L2, L2 Clinic, L2 Inc, Manhattan, NYU, Radio Shack, Rent the Runway, Scott Galloway, self-expressive benefit, showrooming, U.S. Postal Service, Warby Parker

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