The Power of One

shutterstock_93965347Consumer Insights from MasterCard Advisors

The digital age has brought a shift in power from retailers to consumers unlike anything known before. Each consumer is now a market segment of one. Within the next five years every retailer will learn to win consumer business and sustain loyalty by understanding behavior as it’s reflected in what consumers buy, the experiences they covet, the networks they leverage and their attitudes regarding data usage, price and convenience.

The year is 2020. Isabel, a 35-year-old professional, opens her tablet. First stop is her home screen, from which she controls her universe. She has her favorite brands, her product wish list with the prices she’s prepared to pay (information she has shared with those same favorite brands) and an easy-to-manage dashboard defining what the outside world sees about her. Certain brands she trusts enough to share quite a lot about herself. These favorites, of course, know the most about Isabel, so that she can get exactly what she wants from them. [Read more...]

Selling Luxury: Going Beyond In-Store Experiences to Inner Experience

brooksbrothersLuxury Retailers Alert: The Aspirant Shopper Is Back, and Ready for School.

Five years ago, the luxury sector took a nasty hit.The prevailing message at the onset of the Great Recession to high-net-worth consumers was, “just because you can flaunt it doesn’t mean you should.” And the message to the aspirant luxury buyer was, “you shouldn’t have been buying this in the first place.” So we tightened our belts, made do with less, and witnessed unprecedented levels of discounting – up to 70% – which became the luxury retailer’s main tactic for getting customers back into the store.

The post-crash disappearance of aspiring luxury shoppers has been well documented, but now there’s evidence that this segment of consumers is back – both because of increasing demand and because of what retailers are doing to attract them. The most attuned marketers are discovering there’s a new, younger face to the aspirant shopper – Millennials (those born in the 1980s and ’90s) who love high-end goods. And one of the most effective ways to reach this capricious audience is by schooling them on how to live the luxurious life. [Read more...]

Getting a Return on Post-Holiday Returns

As a merchant, you’ve watched holiday shopping seasons come and go, and you’re well aware that in the last few years, consumer spending behavior has been through radical changes. It’s been a slow recovery since the precipitous drop in holiday spending in 2008. The excessive pre-holiday stocking of inventory and concomitant mad spending seem to be bygones.

Savvy retailer that you are, you’ve become very smart at balancing inventory with sales, and you’ve planned inventory very carefully this season. You’ve made well-informed estimates of consumers demand for the upcoming holiday season. According to industry analysts, this year’s second quarter saw the slowest inventory growth in the U.S. since 2009, and in light of that, you probably don’t have huge concerns about overstocking. Nevertheless, when you placed those orders into your suppliers’ line months ago, the world was a different place.

Which gets us to this point  one thing that hasn’t changed, and it’s almost as certain as death and taxes, is that there will still be a flurry of post-holiday returns and exchanges coming back through your doors come December 26th. How will you handle them?

As you’ve kept your stock lean and mean this year, there’s already a much more highly specialized collection of merchandise coming back than in previous years. While in prior years, these returns have always stretched your customer service goodwill to its limits, this year, and in this uncertain economy, you’re a little concerned about how to handle returned merchandise. [Read more...]

Multichannel Breakthrough: Segmentation Powers Insights into the Empowered Shopper

The Robin ReportAs with all new approaches, the best innovations in the digital marketplace occur not as a result of reinventing the wheel, but by integrating and retooling existing assets. Things become truly exciting for the merchant in the combination of insights derived from spending behavior with insights derived from transaction analysis—in time as well as virtual space. By including the insights from real-time transaction data, behavioral models of different segments of e-shoppers can help to extrapolate that a device that has clicked on these specific links is likely to make purchases in certain market sectors within a specified period of time. At MasterCard, we are creating a breakthrough for merchants in segmentation by bringing our own enormous anonymized data set to bear on the task of identifying shopper segment behaviors. By applying insights on spending behavior to our partners’ online populations using common geo-demographics, our partners are able to identify online shoppers with a high propensity to spend in a given industry in the next 30 days. [Read more...]

How Analytics Can Help A Stores-Within-A-Store Strategy Succeed

The Robin Report - big boxThe past several years have been rough on most retailers across all categories and levels. Some of the savviest merchants have responded to the challenging environment with a “stores-within-the-store” strategy, in which individual brands lease space and bring their own boutiques within the walls of a larger store, helping to turn that large space into a sort of mini-mall.

There has been increasing excitement about this model, and it is starting to be deployed widely in range of stores. The model is usually a specialty brand leasing space within a department store. Though primarily seen in department stores like Macy’s and JC Penney, big-box retailers – both general, like Walmart and Target, and specialty, like Best Buy – have been using it as well.

The increasing popularity of stores-within-stores strategy isn’t hard to understand; the hope is that the outside brand will both drive traffic into the store and provide revenue through the rent they pay for the otherwise under-utilized floor space they occupy. Yet the model is not a panacea, and merchants need to approach it with a dose of caution and an even larger measure of analysis of purchase behaviors.

An effective stores-within-a-store strategy depends on synergy – both between the outside brand (or brands) and the host merchant, first of all, and also among the various boutiques collectively. The goal is for the various outlets to work together to create a compelling and unified shopping experience for the consumer, thus creating the kind of overall brand experience that results in more customers, and more purchases per customer. [Read more...]

How to Get a Bigger Share of Foreign Visitors’ Wallets

The current economy poses challenges for all merchants, but stresses on brick and mortar stores are particularly heightened. The wave of closures that accompanied the Great Recession was only the start of a protracted move for chains to reduce their excess amounts of retail square footage; according to many retail analysts, America remains significantly “over-stored.” At the same time, the rapid and steady rise of e-commerce makes for greater displacement, with increasing numbers of Americans preferring to do their shopping from their homes or offices, or even from their phones. Brick and mortar stores, it seems, are left to duke it out for their share of an at-best limited domestic pie.

Fortunately, that domestic pie is not all there is. Foreign tourists and business travelers have been finding America to be the Golden Land — of shopping, anyway — and overwhelmingly they are not doing that shopping online but in person, in brick and mortar stores. What this means is that merchants can leverage cross-border spending to drive U.S. domestic sales as well as share growth, if they can find a way to target and keep those foreign customers. Key to building a cross-border strategy is an understanding of where to focus merchant efforts. That is, merchants must now put the same kind of effort into identifying and understanding their foreign customers as they do their shoppers here at home. [Read more...]

What Do You Get When You Cross Luxury Spend with Discount Buying? Affinity Plays!

It’s commonly assumed that the creeping social stratification that’s widely written about crosses over to the retail sector, with the higher-end consumer shopping exclusively at luxury retail outlets and the lower-income buyer shopping at discount stores.

In fact, our analysis of anonymized transaction data at an aggregated level is painting quite a different picture. This aggregated data consists of segments of anonymized transactions with similar spending patterns, matched against categories of retailers.

Not only do high-end shoppers tend to “cross the street,” buying designer clothing at a luxury department store, but spending on school supplies and household goods at a low-end department store or eating at a quick-serve restaurant; but over a six-month period in 2011, in our analysis of aggregated transactions at 20 high-end brands, we found that a remarkably consistent portion of spend by regular shoppers at high-end stores was at discounters. A number of factors may be driving this. [Read more...]

As The Housing Recession Winds Down, Furniture Pureplays Can Benefit from New Analytical Tools

Consumer Insights From MasterCard Advisors

Despite the sluggishness of the so-called recovery, industry experts are predicting a pickup in the housing market early next year. This will have broad implications for retailers of furniture, furnishings, and other home items. How retailers can prepare for this opportunity is a favorite topic for the data collectors and analysts at MasterCard Advisors, the merchant services arm of MasterCard. Here are some ways in which furniture retailers, who’ve gotten pummeled in this recession, can capitalize when the upswing occurs.

While sluggishness in the housing market and changes in the retail environment are leaving furniture merchants feeling besieged, one development is showing great promise as a powerful tool for remaining competitive.  The increased use of cards and electronic payment has led to an explosion in the amount of data now available that that can be analyzed to better understand consumer preferences.  A recent study by MasterCard Worldwide showed that the data warehouses at the cutting edge of this development are managing over 100 terabytes of information, and are seeing those numbers grow by 20 billion transactions, every year. [Read more...]

Now You See It, Now You Don’t

The Increasing Allure of the Pop-Up Store

Consumer Insights from Mastercard Advisors

Last November, Hermes did it in West London. This spring, Apple (AAPL) did it in Austin. And in October, Brides did it in downtown Manhattan. That’s right, they opened pop-up stores, the temporary retail settings that once were almost synonymous with cheap Halloween costumes.

The Robin Report - Now you see it...In fact, pop-up stores are a growing phenomenon across the spectrum, from eBay (EBAY) to Liberty of London, and from mass-market retailers like Target (TGT) to fashion labels such as Kate Spade. Last holiday season Toys ‘R’ Us (TYJ) had over six times as many pop-up stores as in 2009; their holiday pop-up stores alone required 10,000 hires. And their popularity isn’t limited to the big name chains. They can be as important to small independent businesses without the capital for a site of their own as to major retailers, looking to explore a new market or meet the demands of a seasonal rush.

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Timely Data, Timely Strategies

High-Speed Economic Data for the Fast-Paced Ever-Changing Retail Industry

Insights From MasterCard Advisors SpendingPulse

Retail is by nature a forward-looking business. You decide now what you’ll be selling next season; then you get ready today for tomorrow’s needs. Inventory, marketing, and sales decisions are based on predictions and forecasts. One way merchants approach this is by combining a measure of where the economy is today with an understanding of upcoming trends. That’s why it is critical that retailers get the best data they can — their business depends upon it. They watch their own sales and store traffic, read the government and industry reports, survey their own customers, and follow broader consumer research. Many of these traditional sources of information take a while to compile and deliver to the market, but in a fairly stable economy, taking this approach has until now been the best way to move forward.

But one of the big lessons from the recent economic turmoil is that consumers can rapidly and significantly change their spending behaviors based on fast-moving economic news. In the wake of the market collapse and subsequent recession, we have seen consumers turn their spending behaviors on a dime. As a result, retailers have found that it is no longer sufficient to manage to the previous month’s results; merchant strategies must be based on the most current consumer behaviors allowing them to be more nimble in responding to changing consumer behavior. They also need a better understanding of demand cycles so that they can take some of the guesswork out of provisioning for the future.

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The Daily Battle for Consumer Loyalty

New Consumer Intelligence Tools for Tough Economic Times

Insights From MasterCard Advisors Merchant Solutions

In this tough economic environment, every retailer knows how critical maintaining customer loyalty is to being successful. As money has gotten tighter, consumers have become increasingly willing to shop around, breaking their traditional shopping patterns in the search for value. Digital media, social networking and the smartphone have also changed the face of retailing forever. When a shopper can find out about a new product, compare prices, or follow a blog about fashion trends – all in the time it takes for her to walk from the parking lot to the mall entrance – then nothing can be taken for granted about where she will shop once she enters the mall. The net outcome of these two trends is that customer loyalty has become a more and more precious commodity in the modern retail landscape.

The Robin ReportTo manage customer loyalty effectively, of course, you must first be able to measure it precisely and consistently over time. A robust loyalty metric needs to do more than simply monitor the value of your customers’ spending at your stores or website – it needs to help you to understand how much those same customers are also spending with your competitors. [Read more...]

What, Where, How and Why They Buy

The Robin ReportThe changes that have hit retailers and service merchants in the past two years have only intensified the foundational need to maximize revenues, improve operational efficiencies, and forge brands that continue to attract and retain customers. Making decisions in this rapidly changing marketplace requires high-resolution insights. Putting new strategies into practice profitably requires deeply informed marketing capabilities.

MasterCard (MA) Advisors Merchant Solutions offers US merchants in the retail, dining, travel, and entertainment industry categories access to a broad range of information, analytics, and targeted marketing solutions.

What Makes Advisors Merchant Solutions Different?  Robust Data.

Advisors Merchant Solutions information, analytics, behavioral segmentation, and modeling capabilities are based on quantitative insights derived from billions of identified transactions processed each year from the 340 million MasterCard-branded credit, charge, and debit cards issued in the United States. Our information products provide a view of overall spending activity, including estimates for spending via other payment forms. Significant investment in cleansing and organizing this data has created a unique data platform— reflecting actual spend behaviors. And because the platform is refreshed with new data every single day, it is always up-to-date.

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