Understanding Omnichannel Shoppers Through Receipt Mining

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\"Direct-to-consumer\"Back in the day—and we mean the mythical, halcyon days of small-town America— shopkeepers were among the core, central figures in a community. Their prestige came from their well-recognized knowledge of the truths surrounding any given family. The shopkeeper knew who was short of cash, who ran late on their “layaway” plans, who scrimped and who squandered.

A successful shopkeeper did two things. First, he held his tongue. No one would trust a man who spread family secrets across town. If you were low on money and it was time to feed the baby, you wanted to deal with someone who would sell you things on the cuff, and not tell a soul. Second, he marketed to his customers based upon this secret knowledge. He knew when payday came, and when the crops failed. He knew when the kids were growing out of their clothes, and when Dad had drunk up the money in the cookie jar. He timed his offerings and personalized his approach, showing the inexpensive cloth to the struggling poor, displaying swaths of middling quality to the middle class, and offering the beautiful and pricey fabrics only to the truly wealthy or the pretentious hopefuls. Those days are gone forever…or not.

In today’s retail world, we tend to think of the consumer as the one with the power. Certainly there’s some truth to that. The digital world is an endless trail of price comparison engines, customer reviews, and social media sites for voicing dissatisfaction. But the real power— the ability to derive sales and loyalty from knowledge—has remained with retailers with the rise of the Web. The digital-only shopkeepers of recent history, armed with recommendation engines, email lists, dynamic pricing and the like, have become the modern version of the apron-clad, all-knowing man behind the counter of the general store of old.

But this too shall pass.

Disrupting the Disruptors

Today, an entirely new group is making moves to assume the role of the omniscient shopkeeper. Manufacturers have recognized the power of knowing their customers and selling to them directly. The direct-to-consumer movement has altered the very nature of how brands reach consumers.

Heavily centered in consumer packaged goods (CPG) (P&G, Kraft’s), fresh food (Good Eggs, Graze, Farmigo, etc.) travel-related loyalty programs (Starwood Hotels, FuelRewards, etc.) and apparel and accessories (Warby Parker, Everlane, Bonobos, et al.), the direct-to-consumer (DTC) innovators have inspired fear and envy from both competitors and traditional retailers.

Those emotions seem to be clouding the judgement of many a player in the shopping world. But The NPD Group, which has business relationships with retailers, manufacturers and millions of consumers, has an unusually clear line of sight. And things have grown even clearer since the debut of our Checkout Tracking service, through which we mine data from the receipts (both online and from brick-and-mortar stores) of millions of consumers. And what we’re seeing looks more like opportunity than danger, for both retailers and manufacturers who can put emotion aside and embrace the data. To see what we see, and to understand what it means for your business, we need to tell you a bit about how Checkout Tracking works.

Save Your Receipts

We collect Checkout Tracking data in partnership with our technology partner, Slice Intelligence. It’s based on the millions of receipts sent to us by consumers. Those receipts yield detailed, item-level data about individual consumers across stores, across all retail segments, covering both online and brick-and-mortar, and over time.

Just think about that for a second: transaction- level detail across all retailers, across all channels and all time, at the individual buyer level. That, of course, is the Holy Grail of DTC. And now it’s available even to manufacturers and retailers who haven’t collected it themselves. Checkout Tracking can tell retailers if their most loyal customers are cheating on them by shopping at competitors once they leave the store. It can tell manufacturers what else customers buy when they picked up their products in-store rather than on the manufacturer’s ecommerce site, and even what they likely had for lunch on the drive home. More importantly, it can illuminate how often buyers of DTC brands buy rival DTC brands, and how often they shop at other retail establishments.

For example:
A direct-to-consumer apparel brand that sells from both a branded website and its own retail outlets wanted to know where else its customers shopped for men’s pants. With the help of Checkout Tracking data, the brand learned that its customers did less than one third (28%) of their pants shopping with the brand itself. Where else did customers buy pants? They devoted 21% of share of wallet to three Big Box retailers and 4% to a rival DTC brand!

The apparel brand learned something else valuable—and it’s not particularly good news for traditional retailers. Even though the DTC brand’s customers were shopping at big box retailers, they were doing so at a much lower rate than the rest of the population, and actually indexed quite low at big box retailers and department stores compared to non-customers. Rather, its customers indexed higher than the general population with five rival DTC manufacturers.

Another direct-to-consumer apparel brand with both real-world and online operations wanted to know where else its customers shopped for children’s apparel. With the help of Checkout Tracking data, the brand learned that its customers only did 9 percent of their children’s apparel shopping with the brand itself. They mostly shopped for kids apparel at discount department stores, with more than half of wallet dedicated to four of the larger brick-and-mortar players.

Similarly to the men’s brand above, the children’s apparel brand learned that its customers over-indexed at rival DTC brands apparel compared to noncustomers. And despite a substantial share of wallet devoted to two of the larger Big Box retailers, customers actually under-indexed at these stores compared to the rest of the population.

Getting to Know You

What The NPD Group has learned from the manufacturers who work with Checkout Tracking data has proven illuminating … and points to a future for DTC that is far less doom-and-gloom for traditional retailers than the conventional wisdom would suggest. Among the most interesting things we’ve seen:

  • Many manufacturers are driven by a need to understand the consumer, not necessarily to sell to them directly without a middleman.
  • Many companies express a commitment to creating and enacting a DTC strategy, either through retailers or on their own, but have only a limited sense of what that would entail.
  • The more sophisticated manufacturers have recognized a need for persona analysis, segmentation and the like. Previous efforts in these areas, done on a high level using demographic information, are now seen as having been inadequate and conducted too infrequently.
  • A very high percentage of manufacturers who operate ecommerce sites say they do so primarily to collect data about customers. Such sites aren’t aimed at replacing traditional channels. For such manufacturers, selling through retailers is expected to be the primary revenue source for the foreseeable future.

It would seem that established manufacturers – those companies that make the brands that fill the shelves of retail operations across the country – aren’t so much interested in changing their business as they are in improving it. They’re not so much interested in eliminating the middleman as they are in getting closer to consumers. This suggests that the future of DTC will consist of retailers and manufacturers forming partnerships tied to understanding the consumers of specific brands. That’s going to require a level of intelligence sharing that’s well beyond what retailers and manufacturers have at their disposal today—but the advantages of such cooperation seem overwhelming.

With the exception of a handful of truly innovative companies in areas ripe for disruption (we’re looking at you, Warby Parker), DTC is unlikely to become something that only manufacturers or only retailers do well. These partnerships will step in as the new, all-knowing shopkeepers of the future.

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