Black Friday, Cyber MondayPosted on .
I ventured out last Friday to do a little holiday shopping – stopping at Walgreens and Best Buy near my parents’ house in Ohio.
At Walgreens I tried to buy Sudafed™. Sudafed is a controlled substance now, so in order to buy it you have to pick up a card in the aisle and then go to the pharmacy where a clerk copies your driver’s license. I noticed that the card for Sudafed was buried on the bottom shelf, beneath something called Wal-phed™. Wal-phed is identical to Sudafed in every way, down to the packaging, the red coloring on the pills, and the font on the box (it also says “compare to Sudafed” in bold red letters in case this wasn’t obvious). I picked Sudafed anyway, only to find it was sold out. However, it was my good fortune that Wal-phed was in stock. The smiling pharmacist told me that it “is identical to Sudafed AND two dollars cheaper”. I had a moment of concern for McNeill Healthcare – they spend a lot of money marketing Sudafed only to be thwarted at retail.
After I bought Wal-phed I crossed the street to Best Buy. Some people camped out overnight at Best Buy in anticipation of “Door Buster Black Friday”. I arrived too late for the festivities, but I wrote down the prices from the in-store circular – $89.99 for an Apple TV, $89.99 for a Cannon Powershot A3300, and $199.99 for a Playstation 3 bundle – with the plan of trying to match them online.
It turns out that the Playstation 3 deal was really good. I couldn’t find it anywhere, including at Best Buy (it was sold out). That was a victory for the Door Busters. However, I was able to match everything else online. And Amazon offered free shipping and no sales tax for Ohio residents.
Looking over my shopping list I had a moment of concern for Best Buy – will people still camp out in the parking lot when they realize that they can get the same deal online?
This highlights the major question in retail today, “Who owns the consumer?”. Is it the product manufacturer? Is it the retailer who merchandises the product? Or is it the eCommerce provider that fulfills demand?
Increasingly, the answer is the eCommerce provider.
In the US, the eCommerce market is growing ten times faster than the broader retail market. Research analysts expect that online purchases will reach parity to in-store purchases in ten years, which means that we are in the middle of a trillion dollar shift in consumption. This is aided by mobile devices, demographic changes (“Millennials” gaining purchasing power), and the lower cost of operating online marketplaces.
Digital marketing is the work horse behind this shift. You can measure every step of the purchase funnel, using a combination of affiliate marketing, search, display, and email. You also have new marketing tools like BazaarVoice (reviews), Certona (product comparisons), and Elicit (site search) to drive conversions. Online merchants are now spending over 10% of gross retail sales on digital marketing, which is measured against a hard ROI. There is no equivalent to that in the offline world.
The notion of owning the customer is foreign to many traditional retailers, and it is virtually unknown to product manufacturers. But it is the only barrier to entry in retail. The companies that figure this out will win as the world shifts from Black Friday to Cyber Monday.
Ian is a co-founder and partner at Greycroft Partners in New York City. He has been a venture capitalist since 2001.
Posted on 6:34 pm November 28, 2011.
My prediction for the future of retail: the physical store becomes a glorified showroom, subsidized by the brands themselves, with low inventory / few products. You can “buy it now” for a premium and walk out of the store with the item. Or you can scan with your mobile phone and have it arrive at your door four days later.
Posted on 3:38 am December 1, 2011.
Sudafed is a controlled substance. Why have they changed that?
Posted on 4:43 am December 1, 2011.
Sudafed was a controlled substance, why it is still in the market.
Posted on 2:35 pm December 1, 2011.
People used Sudafed to make Methamphetamines @Charlotte74
Posted on 12:06 pm December 3, 2011.
Yes I agree, Playstation 3 is really trending… I have mine from online.