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1 Survey conducted by CommerceNext and sponsored by Oracle Customer Experience (CX) Cloud How Leading Retailers and Direct-to-Consumer Brands Are Investing in Digital A benchmark report based on a survey of ecommerce marketing executives.2 LETTER FROM COMMERCENEXT Thanks,Allan, Scott and Veronika CommerceNext Co-Founders Ecommerce marketing is an ever-changing discipline. What works one year may not work the next. The best ecommerce marketers are always studying the customer, the platforms and channels, and what their competitors are doing. We at CommerceNext understand better than most that you need data to better determine whether youre focusing on the right things. That was the intent with this report: to provide a useful benchmark by which online retailers can measure their own priorities and evaluate which technologies deserve a larger or smaller portion of the budget. For this report, “How Leading Retailers and Direct-to-Consumer Brands are Investing in Digital” we surveyed 100 top marketing decision-makers at leading brands in two major camps: the traditional retailers and multi-brand merchants that began as brick-and-mortar retail outlets and now also sell online; and the digital-first DTC brands who are transforming the entire ecommerce industry. The research tells us that both traditional and DTC brands point to acquisition marketing, personalization and gaining a unified view of the customer as key prioritiesand challenges. But the survey also delineates the differences in how these two camps invest in tools and roll out initiatives around these priorities. We hope these findings inspire you to closely evaluate your marketing priorities for the rest of the year, including the upcoming holiday shopping season. We look forward to diving into a deeper conversations about the results of this survey with you at CommerceNext, July 31-August 1 in New York City. Dont forget to check out our CommerceNext blog as we get closer to the big event for real-time updates on the speakers and the full agenda.3 TABLE OF CONTENTS LETTER FROM COMMERCENEXT EXECUTIVE SUMMARY METHODOLOGY PART I: THE CHANGING LANDSCAPE OF DIGITAL COMMERCE Page 2 Page 4 Page 6 Page 8 PART II: THE CHASM BETWEEN DIGITAL-FIRST DTC RETAILERS AND TRADITIONAL BRANDS Page 18 PART III: AN EYE TO THE FUTURE: MARKETING INVESTMENTS FOR THE 2019 HOLIDAY SEASON Page 274 EXECUTIVE SUMMARY Digital retail marketers today face an endless number of priorities and initiatives when it comes to investing in the technologies, channels and strategies to grow their businesses. Every year, the debate rages on: marketers know that the emphasis should be on acquiring new customers, but how much focus should be on retaining the ones they have? And while all ecommerce marketers agree that personalization is the key to attracting and retaining customers, what are the right tools to enhance personalization? Investment decisions are never easy, and marketers are feeling the pressure like never before to make the right choices, execute quickly and show results. In fact, 30% of our survey respondents admitted that “executing quickly enough on marketing initiatives” was a top barrier to achieving their ecommerce marketing goals in 2018, and 42% expect this to be a barrier in 2019. A 2017 survey of U.S. marketers by Walker Sands Communications and Chief Marketing Technologists found that 29% of respondents believed their company had not invested the right amount in marketing tech in 2016. 1This CommerceNext survey, sponsored by Oracle Customer Experience (CX) Cloud, was conducted to provide a benchmark by which digital retailers can compare their investment levels and product priorities to those of their peers. The results reveal how the new generation of digital-first DTC brands are leading a shift with more investment in acquisition marketing, as well as technologies like AI-driven personalization and customer data platforms. The report provides valuable information, gleaned from senior marketers at the worlds top-performing brands, to help inform technology decision-making in 2019 and beyond. It also provides a comparison between how traditional retailers with both ecommerce websites and physical stores are approaching investments compared to their digital-first DTC counterparts. 5 KEY LEARNINGS INCLUDE: Comparing 2018 to 2019, ecommerce marketing budgets are on the rise across all retail business models; however, digital-first DTC brands are increasing budgets at a higher rate. In 2018, 81% of ecommerce marketers cited acquisition marketing as their top priority. Satisfied with the results of their investments, marketers are spending even more on acquisition in 2019. Most marketers are not satisfied with their efforts to create a single view of the customer and personalize the customer experience. In 2019, the top innovation investment priority for all ecommerce marketers, regardless of business model, is in customer data platforms. Digital-first DTC brands are approaching marketing spending differently than traditional retailers with brick-and-mortar locations. For example, DTC brands are passing over the use of promotions in favor of other channels such as programmatic TV to attract new customers. For the 2019 holiday season, brands across the board are increasing their investment in technology to enable personalization, such as AI and customer data platforms. Digital native brands are earmarking more budget for these investments than their traditional retail competitors. This holiday retail season is projected to be even bigger for ecommerce brands than last year. As we head into the 2019 holiday shopping season, use this benchmark report to evaluate your investment priorities and make adjustments as needed. 6 METHODOLOGY The breakdown of respondents by annual online revenue. $50 million to $99 million Less than $10 million $10 million to $49 million $500 million+ $100 million to $499 million 19% 22% 8% 26% 25% Our 12-question online survey polled 100 digital retail senior leaders. Of the 100 participants, three were selected for follow-up interviews that examined in more detail the impact of investments on their 2019 marketing plan. RESPONDENTS BY REVENUE7 RETAIL BUSINESS MODEL OF RESPONDENTS The breakdown of how these retailers sell to consumers: RESPONDENTS BY TITLE Head of Ecommerce/Ecommerce Leader Chief Marketing Officer/Head of Marketing Marketing Director/Marketing Leader Chief Digital Officer Other * 31% 20% 19% 9% 7% *Other includes such titles as Head of Data however, brands still need to master the fundamentals. Successful personalization starts with reliable, holistic customer data that is accessible to the marketer. Across the board, ecommerce marketers are not satisfied with their efforts to create a single view of the customer and personalize the customer experience. Charlie Cole, Chief Digital Officer of the Tumi + Samsonite brands, reflects on his experience of creating a unified view of the customer. “Weve done a great job on personalization with people we know, using first-party data on existing customers. The thing were still exploring is how to execute on marketing to people we dont know, with second or third-party data. Our next evolution at Samsonite is to graduate to a phase where there are 100 different versions of our website depending on who lands there. Personalization will help us get there.” Charlie Cole Chief Digital Officer, Tumi + Samsonite Given this struggle to achieve a unified view of the customer, its no surprise that in 2019, the top two innovation investment priorities for all ecommerce marketers, regardless of business model, is in customer data platforms and personalization technology. We found that 65% of respondents have increased budget in 2019 on customer data platforms (CDP) and 52% are increasing investment in personalization technology:13 Q: How will your marketing department invest in each of the emerging technologies listed below in 2019 compared to 2018? Decrease in investment Same level of investment Increase in investment No investment 1% 2% 2% 2% 3% 3% 25% 22% 22% 17% 30% 35% 22% 17% 65% 45% 52% 34% 47% 16% 13% 15% 9% 31% 24% 47% 20% 49% 62% 63% 1% 2% 2% 2% 3% 3% 5% Customer data platform Chatbots executing quickly enough on marketing initiatives (30%); the inability to get a unified view of the customer (27%), and aging technology systems (23%). Q: In 2018, what were your greatest barriers to achieving your ecommerce marketing goals? Managing integrations of technology solutions across the marketing stack 39% Executing quickly enough on marketing initiatives 30% Inability to get a unified view of the customer 27% Aging technology systems 23% Finding and retaining top talent 22% Org structure misalignment 19% Lack of consistency across customer touchpoints 19% Achieving profitability in scale 18% Securing budget approval from the C-suite 15% Managing omnichannel marketing initiatives 9% Attribution 7% Managing mobile ecommerce 5% Determining ROI on technology investments 21% THE NEED FOR SPEED: MARKETERS NEED TO EXECUTE FASTER AND INTEGRATE THEIR TECH STACK