Glynn Davis is one of the UK’s most knowledgeable and experienced retail journalists, founder of Retail Insider, and Ecommerce Age’s monthly columnist.
Over recent years the major supermarkets have gradually been removing sweets and unhealthy snacks from the area around their checkouts after coming under pressure from the government and other groups accusing them of contributing to the nation’s obesity problem. Enforceable restrictions are also on the way via the HFSS (high fat, salt and sugar) legislation.
This highlights the power of impulse purchases, which have been calculated as reaching a value of $5,400 on average per person each year in the US as people make at least one such purchase every day, according to Ombori Grid. It also found that for some products (I’m thinking sweets and unhealthy snacks here) impulse purchases make up 80% of sales.
As much as 80% of all these sales are undertaken when a customer can see and feel a product. Whereas it has been proven that consumers will buy any type of product without the need to feel and touch it – i.e. buy online – the stats suggest digital channels are a pretty poor driver of impulse purchases, which make up a significant percentage of total retail sales.
We’ve had the widespread use of recommendation engines suggesting ‘other customers who bought this item also liked these products…’ as pioneered by Amazon. Although they have been effective at driving some incremental sales I’d argue they remain pretty blunt instruments when compared with the high potential for impulse purchases that exists within the physical store environment.
Even Amazon has recognised this – otherwise why would it be experimenting with its quirky 4-star stores, which includes two units in the UK. These outlets stock a range of items that are rated 4 stars or above by shoppers on its website. The sheer randomness of the range means these stores are purely about impulse purchases. Is Amazon using these stores as learning posts from which it can feed insight into its online business?
Elsewhere various other operators are leveraging their physical space for driving maximum impulse purchases. Among them is the experimental Situ Live store at Westfield London that acts as a showcase for a changing mix of brands. It is all about discovery and enables shoppers to play with the goods on show in order to help generate those unexpected interactions that ultimately inspire transactions.
These elements of impulse and discovery are also now writ large within some of the newly-designed stores from major retailers including Walmart in the US and IKEA. Michelle Fenstermaker, strategy director for Landor & Fitch, who led the design work on the new Walmart stores, says: “E-commerce does a great job of getting people to the products they need pretty quickly. But it fails to dial-up on inspiration, especially in some of the more discretionary categories. It’s important that a store experience does both.”
She adds that “even if they come in for groceries but spend 10 extra minutes exploring, they can get a real emotional connection from that interaction”, which I translate into a high potential for being tempted into making an impulse purchase.
It’s a similar ‘inspirational’ objective that IKEA is looking to inject into its first small-format store, which opens in Hammersmith at the end of February. The idea is to inspire shoppers and to then prompt a purchase of an item that in many cases won’t even be in stock but will be available to buy online at the customers’ leisure or for collection at the store later in the day. Amazon uses. This interplay between impulse purchase-driving stores and digital channels is recognised as the way to go for IKEA and many other retailers and is the same model used by Amazon at its 4-star stores.
One of the most exciting areas of retail over recent years has been the emergence and increasing adoption of artificial intelligence (AI) technology, which among its myriad potential implementations within the sector is the ability to intelligently recommend goods to customers. Using an array of data points and finely tuned algorithms the idea is to almost know what shoppers want before they know it themselves. The optimum impulse model we could say. Another new area is ‘shoppable marketing’ where it takes the customer only one click to move from an online ad to a purchase.
While progress is undoubtedly being made the fact is impulse purchases still remain so firmly wedded to the physical retail world. There is a lot more work to be done before impulse and discovery become a truly integral part of the e-commerce environment.