5 Lessons Retail Can Learn From Media’s Disruption

Remember how influential traditional media used to be before the Internet splintered the landscape? Retail is experiencing a parallel shakeup. But it doesn’t have to start from scratch in figuring out a new path.

5 Lessons Retail Can Learn From Media’s Disruption

by Todd Wasserman

Posted on 11-24-2017

This article is part of CMO.com’s December series about 2018 predictions and trends. Click here for more.

The Harvard Business Review once observed that as supermarket chains consolidated, they were able to force the likes of Procter & Gamble to pay them if they wanted to showcase new products. Retailers also used their heft to coerce suppliers to take part in promotional programs.

That was 20-plus years ago. How times have changed.

Now Amazon rules the retail roost with an alternate platform that has disrupted an entire industry. Some 43% of all online retail sales flows through Amazon, and half of all shopping searches start there.

Compare that path to that of another major industry: media. Remember how influential the three major TV networks used to be?

We all know what happened there. Same for newspapers. The Internet came along and splintered the landscape. Then Facebook entered the picture, loosening media’s hold even further. The social network’s power even prompted major publishers, including The New York Times and The Atlantic, to give its content away for free.

The parallels between retail and media are clear. “Certainly on our end, the role of a new platform and a new type of competitor who is private-equity-backed and digital-first, all of those things feel pretty similar,” said David Rubin, SVP, audience and brand, for The New York Times.

Well, the Times seems to have figured it out. And so can retailers that take a page—or five—from the lessons media companies have learned from disruption to their industry.

Lesson 1: Build DTC Relationships And Become Lifestyle Brands

The New York Times used to be just a news outlet. These days, however, it’s a lifestyle brand with a digital store that sells $55 sweatshirts and $115 tote bags. That evolution has been going on for some time, back to when the newspaper started offering content beyond news that directly addressed readers’ full range of interests.

“What we figured out is that our brand is really about understanding the world,” Rubin said.

Defining its brand helped the Times to amass 2.5 million digital subscriptions. That number includes users of its cooking and crossword apps—further demonstrating its lifestyle brand approach.

Some nontraditional retailers have been doing the same, blazing a new path for so-called direct-to-consumer (DTC) offerings that allow them to forge closer relationships with customers. Two examples: the Dollar Shave Club, which nabbed about 5% of the market by selling directly; and Blue Bottle Coffee, which, with a healthy subscription business, managed to create what the Washington Post called “the coffee world’s closest thing to a designer brand.”

Proof of their success? Unilever paid $1 billion last year for the Dollar Shave Club, while Nestlé recently paid about $700 million for a controlling interest in Blue Bottle Coffee.

Lesson 2: Exclusivity Pays Dividends

In the early days of the Internet, most newspapers gave away their content for free. Many have since instituted paywalls, though a recent analysis by the Columbia Journalism Review found that 10 of the top 25 newspapers don’t have them. The remaining 15 often have “leaky” paywalls that let users access some stories for free.

The biggest proponent of “hard” paywalls—read: no free reads—is The Wall Street Journal, which has amassed close to 1 million paid subscribers. (Of note, the WSJ softened that stance a bit last year.) For retailers, the parallel is to offer exclusive products rather than exclusive information.

Of course, department stores have been trying this approach for a few years. Macy’s and Nordstrom have benefited greatly by offering exclusives, said Sucharita Mulpuru, an analyst with Forrester. “If they hadn’t, they wouldn’t even be where they are now,” she added.

HSN, a nontraditional retailer that is now part of QVC, has also logged growth that outpaces the rest of the industry, thanks to exclusive product offerings. Another retailer that thrives by doing so is Trader Joe’s. The chain sells twice as much per square foot as Whole Foods in part because 80% of its items can’t be bought anywhere else. Trader Joe’s also makes a bigger margin off of its private-label offerings.

Lesson 3: Don’t Traffic In Commodity Items

For news organizations, re-reporting breaking news from other news organizations might offer page views, but it also can tarnish the brand when done too often. That’s why the Times of London, for one, swore off breaking news last year.

“Readers don’t come to us for breaking news; they can go to the BBC and Twitter for that, which are free,” said Alan Hunter, The Times’ head of digital, in an interview with Digiday.

Similarly, The Economist doesn’t traffic in breaking news either, yet it’s growing quickly and with the intention of doubling its circulation profits by 2021. For retailers, the lesson is that specialization can be a better approach than trying to appeal to a broader, Amazon-bound audience.

For instance, one of the most successful new retailers now is Wayfair, which has decided to own online ordering for high-end furniture. Other specialized retailers that are thriving include Chewy.com (which sells dog food online) and Gelson’s Markets (upscale groceries).

Lesson 4: Control Your Data

One frustration publishers have had with Facebook’s Instant Articles publishing tool is that the company doesn’t provide much user data. That has limited publishers’ ability to track their own readers.

Facebook relented a bit in July by offering a bit more data about how Instant Article stories performed within the Facebook app versus on the mobile web, but the bigger point is this: Like other marketers, publishers have found that the first-party data they glean from their sites can help them tailor their offerings.

For example, USAToday’s data platform, Grandstand, lets the company measure hover time, attention quality, and interaction rate. That helps the publisher experiment with everything from the font to the imagery in ads to find the best formula.

Retailers have also been frustrated with Facebook about the lack of data they receive from their advertising. At the same time, many are still trying to consolidate all of their consumer data from various sources in order to use the intelligence in an effective way, such as personalization, according to Bob Phibbs, a retail consultant known as The Retail Doctor.

“You end up with a generic, ‘Hey, customer, come in and see our new golf pants,’ and you’re like, ‘I don’t even play golf,’” he told CMO.com. “The perception is that we should be able to do that by now.”

New retailers, such as Bonobos, do a much better job with their first-party data, Phibbs told CMO.com. Ashley Stewart also uses data about where its online customers came from to decide where to put new stores, Phibbs said.

“You’ve got to be sophisticated,” he added. “I don’t think when we think of brick-and-mortar retailers that we think of sophistication.”

Lesson 5: Exploit Weaknesses

Despite Facebook’s dominance, some media companies have had success offering what Facebook is not good at. For instance, Twitter exploits the fact that Facebook is generally not the best source of breaking news. Snapchat’s niche with teens is the result of embracing privacy and letting consumers send and post information to social media without leaving a permanent record.

Likewise, Amazon is great for ordering many items, but it’s not as good for specialty products. If you’re shopping for a bicycle, for instance, Amazon might have plenty of inventory, but without an informed sales associate, it can be hard to determine exactly which bike is for you. That’s where a specialized retailer can make its move.

“Wayfair and Houzz are doing well in spaces where Amazon hasn’t invested as heavily,” Mulpuru said. “The home space has a lot of fragmented players, and that’s the space that’s up for grabs.”

Brick-and-mortar retailers also can offer more of a human touch. Consumer electronics retailer Best Buy has managed to thrive despite Amazon because it offers great customer service. As media companies have learned with Facebook, it’s foolhardy to take on a colossus like that directly. “You can’t out-Amazon Amazon,” Phibbs said. “Do a better job of being you.”

Topics: Retail, Experience Cloud, Insights Inspiration, Digital Transformation, Trends & Research, CMO by Adobe