To understand how Forrester’s predictions will unfold in the retail industry in 2020, my colleague Madeline Cyr and I interviewed experts within Forrester for our “Applying 2020 Predictions To Retail” series. To understand the B2C marketing predictions for the year, we spoke with Forrester experts Tina Moffett and Jim Nail.
Madeline Cyr: You predict that marketers will shift 10% of their budget to influencer marketing. What retail segments do you think lend themselves most to this type of marketing? Should all retailers and brands have influencer marketing as part of their plan in 2020?
Tina Moffett and Jim Nail: The retail industry can really benefit from investments in influencer marketing. Where we have seen the greatest examples of this is in the beauty sector and among luxury retailers. As we mentioned in our marketing predictions report, Estee Lauder’s CEO stated that 75% of its investments are now in “digital social media influencers.” This sizable investment in influencer marketing has driven a significant amount of incremental revenue for the company.
Although the beauty and apparel segments are seeing the most investments so far, we see a forthcoming shift across the board in other segments moving toward paid influencer marketing, including direct-to-consumer (DTC) brands. They are looking to reach their customer base with authentic, efficient interactions and messages without the high-cost advertising agency and creative fees. Influencer marketing is an area they are going to try — and probably will realize good investment return.
Madeline: You predict that Netflix will double its marketing partnership investments. Besides streaming services, where else do you see potential for marketing partnerships for retailers or brands?
Tina and Jim: Retailers will become media companies. For example, we might see a retailer like Target build its own in-house agency to work directly with consumer packaged goods (CPG) companies on their marketing efforts. Therefore, that CPG or manufacturing company would work directly with Target instead of working with an agency.
A lot of this stems from the relationship between advertisers and the big tech companies such as Amazon, Apple, Facebook, and Google. They’re holding hostage a lot of data that marketers want about their consumers for advertising and marketing purposes. The tech companies often won’t let this data out of the ecosystem.
Madeline: In 2020, you predict that five Fortune 500 brands will seek B Corp status. Will specific retailers or retail segments seek certification in 2020?
Tina and Jim: While we don’t have a prediction on certain retailers, we believe they will be companies that have already proved strong commitment to their “authentic” values. By “authentic values,” we mean in terms of how their values are executed within their business model and how that business model is focused on building common good for society.
Where we are starting to see this happen more is the DTC companies. There are several DTC companies such as the sock company Bombas, where if you purchase a pair, the company will donate a pair of socks to someone in need. These smaller DTC companies are the leaders in this movement. However, we caution retailers that you have to be authentic, and it must make sense within your business model.
Madeline: You predict that four stalled legacy brands will consider acquiring a DTC brand. What should legacy brands consider if they are considering going down this route?
Tina and Jim: Retailers need to define the anticipated benefits of acquiring a DTC brand. If they only want to acquire the firm for its revenue or as a new distribution channel, they should not make an acquisition. The DTC trend is about far more than selling directly to consumers; it is about understanding how today’s consumers have redefined core benefits such as quality, convenience, and trust. And it is not just about delivering goods directly to consumers; it is about having a very active two-way relationship with consumers that is deeper and more interactive than even digital relationships have been.
Better questions a retailer should ask about a potential DTC acquisition include:
- Will the DTC brand bring intellectual property (IP) and expertise around understanding and marketing to today’s customer?
- Will the DTC brand bring IP around advanced customer analytics and insights?
- Will the DTC brand help update the legacy brand’s perception in the marketplace to align with today’s consumer expectations?
Prior to kicking off a potential acquisition inquiry, a retailer must assess its own organization and ensure that the DTC fills a functional gap and is an appropriate cultural fit. Additionally, retailers should consider if a potential DTC acquisition target can connect with customers in a way that provides benefits, value, and meaning. Failing to appropriately scope out a good DTC acquisition could result in not fully understanding the brand mission and values.