For many brands or retailers, the second half of the year tends to focus around the promotional planning for the holidays. With COVID-19, it’s shifted the way we retailers, CPG, manufactures and wholesalers think about the physical store experience and shifting to an online experience.
Jeff Herrera, CMO at Annex Cloud catches up with Jordan Knapp, Head of Market Development at Shopify Plus about takeaways from the past four months and how reliability, inventory planning, and fulfillment capabilities will be key for the upcoming holiday season.
Plus, what can we learn from Target’s mission to not strive for perfection but to rather focus on trust and communication.
Jordan, good afternoon.
Good afternoon Jeff, great to see you.
It's great to see you. Thanks so much for making the time. We've done several of our Annex Cloud Market Movers video chats, and thought you would be perfect for this as you've got quite a rich history in digital commerce and marketing. And I thought it would be great to kind of bring us together and learn more about kind of what's the state of the state with Shopify plus. Shopify plus is one of the most premium based e-commerce platform, very high profile, lots of great merchants, lots of success. But as you know, we've had a lot of uncertainty over the last few months. We've seemed to try and come out of it, slowly but surely we're coming out of it. It'd be great for us to chat a little bit about things like customer retention, looking at the customer experience, some of the opportunities that we've learned from coming out of this difficult period in Q2, and then focusing more on the back half of the year and looking at opportunities that brands and retailers should embrace.
That'd be very important, and then we'll talk a lot about customer retention, a little bit of acquisition. But really we think that there's a huge opportunity around customer retention and want to get your thoughts on that.
Wonderful. That sounds perfect.
So why don't we just catch up a little bit and look about understanding the opportunities that we've learned from coming out of the pandemic, right? We still have a long way to go, but the initial shock of the pandemic is over. So I'm curious to get your perspective because you're knee-deep, you're in the weeds on all market element on Shopify plus as well as the overall commerce landscape. What are some of those customer retention opportunities that brands and retailers should embrace as we go into the back half of the year that you guys have learned coming out of this initial shock period? Provide some color and some perspective on that, if you would please.
So I mean, it's definitely ... I feel like the world of e-commerce and digital transformation has changed. We've seen more change in a four-month period than we've seen in the prior year or two even. And it just keeps coming faster. And one of them, I'm a data geek, one of the things I find just fascinating during these times, as unfortunate as they are, is just the quantity of information that almost everybody's putting out there. So everybody from the customer experience platforms to analytics tools to marketplace connectors. Everybody out there is showing, growing, accelerating, and decelerating trends. Of course, we're seeing some fascinating trends within Shopify, but segments that historically had not performed well online or seen dramatic movements to online sales.
So electronics marketplaces and folks ... furniture sales have always been difficult because of the last mile delivery and freight and you want to see how the product looks in your home. Furniture sales have skyrocketed since March and we're starting to see what ... I don't think many of these, I think something's changed in the buyer behavior and we're not going back. And it doesn't mean there's not going to be another form of normal, this hysteria is going to subside. But I think just almost everybody, every brand that we talk to now that's never really thought of a direct to consumer e-commerce strategy, is now trying to figure out how to set up their suppliers, their franchises, their distribution networks, their retailers with almost like a retail network. So it's been, yeah. It's yeah, it's been a very transformational period.
Have you seen, when the initial shock took place and everybody just sort of paused, everybody stopped! There was a lot of uncertainty. Nobody knew how deep, how wide this would go. Are you seeing now a kind of shift in that mentality after the initial shock period? Are you seeing brands and retailers now sort of saying, "Okay, this is the world we live in."
"It's up to us," right? "To do the right thing." Sure there has to be some recalibration of priorities, budget, resources, right? All those things have to happen now because things change at the drop of a hat to your point, but are you seeing a more positive outlook in terms of, "Okay, we're accepting what took place and now, right? We got to batten down the hatches and we got to spend where it makes sense. And we got to drive to a successful conclusion." Are you seeing more of that take place where people now understand that "Hey, we still have to spend? We still have to connect with our customers. We still have to keep our customers and we still have to grow this business." Are you seeing a lot more of that now because people have accepted it?
Yeah. And I think, I mean I had a fascinating conversation this morning with a large consumer products company and the vast majority of their sales have always been through physical retail stores. So they're looking at ... they recognize they can't disrupt their existing channels. They don't want to double down on their direct to consumer messaging so they're really providing strategies and a program that they're putting in place to enable their independent retailers to get online more easily.
So that's one of the things that I think has been fascinating is everyone from people who sell swimming pools are all of a sudden interested in, even if it's for just lead capture, they're interested in all of a sudden having these electronic experiences and the manufacturers, the wholesalers, and the brands are really looking to enable their existing networks. And I think at first there was a flurry. It was like, "What can we do in the next two weeks?" And now everybody's already, "Alright, so if we put together a four, six-month strategy." They're sort of accepting that we don't know what the future looks like and the potential for disruption may be greater. So if nothing else, this is an insurance policy, but I think a lot of especially brands, consumer products, manufacturers, folks who do not ... like there's been a lot of ... there's been supply chain disruption and there's been distributor disruption.
And I think that's ... and also, I think it's created a greater emphasis we'll talk to you later on customer acquisition costs and lifetime value. It's far more, it's far easier to retain a customer than it is to attract a customer, especially if you have a repeat buyer. So really doubling down on those existing merchants and figuring out whether it's, what do they want? Do they want content? Do they want engagement? Do they want exclusive products? How do you ensure you maintain that customer and potentially even transition them from a physical store experience to an online experience?
Yeah, let's talk about it. Let's just move right into kind of that customer retention discussion. That's a great segue. So we, at Annex Cloud, looking at ways in which we can proactively, and I know Shopify plus does a great job of this too. How are we proactively supporting prospects, clients, and brands and retailers with regard to a very sound makes sense strategy. And we've always said that we think that brands and retailers should be laser-focused, right? On customer retention.
We think that having the ability to have the right engagement, the right customer experience across every touchpoint in that customer journey, where loyalty is a critical part of that customer touchpoint that keeps people and customers engaged and keeps them seeing value. And I'll come back to that word value in a second.
But that's kind of where we've been. And that's the purpose of why we wanted to highlight a lot of the market movers conversations, is to make sure that brands and retailers see a lot of different perspectives around customer retention and loyalty and what makes sense. So having the ability to really segment their most valuable and profitable customers, having the right customer engagement strategy to do that. I heard the other day around this kind of customer obsession model.
It's right into that. Right? Who's going to win and then who's going to not win. And customer obsession in these difficult economic times is really important. Right? I think those are the ways in which you're going to get people to say, "I trust you," right? "You're communicating with me. You make me feel valued. I want to continue to place my bet with you as opposed to somebody else, despite the current economy." So that's been what we've been doing. Right? And I'm curious to get from your perspective how you're talking to brands and retailers as well about making sure that you are dedicated. We'll talk about that too in a second, if you have these prioritized resources, customer retention really needs to be one of them. There are all of the ways in which you can do that. Share your thoughts on that, please.
Brand engagement is everything. Whether it's a customer loyalty program, whether it's someone going to check their point status, whether you're having ... I love the concept of buyer's clubs. So increasingly I've seen more and more merchants rolling out these buyers clubs and like the value is multifold. So first obviously you're making someone feel special because they get early access and they may be able to purchase products that would normally get sold out. But the concept of our buyer’s club also allows you to really test if you know your core market is represented by the folks in that buyer's club. Well, then why are you going to put in an order for 30,000 shirts or 20,000 shirts, test it with 500 as an exclusive drop with those initial folks.
And then I think content is king. Of course, you have to be on social media and you have to be on you need to, obviously, you want to have an Instagram presence. And it's really about just having a dialogue with your customers. So, traditionally I think there's always been way too much emphasis on conversion rates. Like who cares? Like if you do 20 times the traffic, but you're only doing 20% more of the sales, it really means that folks care about your message and they want to engage with it. And paper search prices going up, it's probably not going down. Even with all this disruption, the cost of Facebook ads, Google ads, whatever it is. Buying a new customer costs something, retaining the customer might cost you just a really good article or 10% off that next purchase or some sort of really creative engagement.
And it's an art, which is tough. And that's why I think some of the smaller brands are doing better than the big brands is it's really ... there's not a science to it. Customer retention is something that takes a degree of finesse and there's no better way to understand what your customer wants then by simply asking them.
Yeah, that's a really good point. And sadly, an example of that is J.Crew, for example. Right? J.Crew, unfortunately, filed for bankruptcy, and it was clear loyalty is not just the issue. Right? They had other issues, but loyalty was certainly a factor and they didn't have enough loyal customers, enough repeat frequent shoppers that would come back and buy from the brand. And that had, unfortunately, a detrimental impact on J. Crew not having enough loyal customers and it hurt them in a big way. So that's what we're talking about.
In fact, I want to give you a quote that I wanted to get your perspective on. So our client MacKenzie-Childs, we've been talking a lot about all of our clients, just like you guys are right? Making sure they get all the support and help they need with our services, our advanced loyalty solutions. But one of the things that we learned from their CMO Larry Shaw, and this is his quote and he gave us permission, bless his heart, to use this quote because he was so happy with the outcomes that he was seeing on the business despite the challenges. He said, "Look. If we had to cut down to two to three services that we pay for, loyalty would be the one that we would keep."
And that's coming from a client who's in the weeds, trying to make the most of a very difficult economic situation, and most importantly, set them up for success. That's credible in the fact that here's a client who really understands the importance of connecting with your, to your point, the engagement side, content real value, and making sure that they retain their most valuable customers. Because when things go uncertain, and there has never been any more uncertainty than what we've experienced, these are the customers that are going to get you through the tough times and help you accelerate as you get through the easier times. Right?
Yeah. Yeah. And I mean it's so, it's not so simple. It's complex, but if it's customer acquisition cost and lifetime value unless you can get that customer acquisition cost down to very minimal, which sometimes with the right Instagram strategy or sponsorship with the right influencers, you may be able to get customer acquisition costs generally. But nothing's more, there's no lesser marketing cost than retaining the merchants that you have. So an investment in loyalty, and investment in loyalty programs, point programs, exclusive content, really building better off engaging with those merchants. That's really what's ... I think especially now that's what keeps the brand, that's what's going to keep the brands afloat versus those that turn. And I think that the barriers to creating a brand, partially to Shopify, I think have never been ... the barriers to creating a brand has probably never been lower.
Getting products fulfilled has never been easier, getting products, there are supply chain issues at the moment, but generally, pre-COVID getting product manufactured was never easier. Of course, now we're running into some challenges, but in order for you to protect your brand has to ... in a world where it's an ocean of inventory and anyone can slap a label on anything, what are the barriers to your end? Your product's got to be so differentiating that someone else can't replicate it or you better have a darn good brand strategy.
Yeah, for sure. The last thing I wanted to talk to you about too is how ... first of all, I was on a call this morning, an NRF calls listening to the Target chairman and CEO. And his name was Brian Cornell and I wanted to look at a couple of things that I took away from that call, right? There were things that he isolated as to how they're going to move forward, right? How Target is successfully moving forward and they've had a great performance track record coming out of the initial shock. And some of that has to do with the essentials, right? And nonessential is not being the major draw here, but the essentials around the things you got to have. Medical supplies, you got to have toilet paper, you got to have those sorts of essential goods. Right? And that made them a good target. Cleaning supplies, all that good stuff. But what I liked most about his comments as he said, "Look, there are a few things we're going to focus on in order to keep winning." One was, especially in these difficult economic times, we got to focus on value. We buy to make sure that our Target guests are seeing the incredible value and continue to see the value, Trust. Trust was critical. Communication, to your point. Right? The content, the ongoing communication, customer service, being able to establish trust and communication is going to be important. But the other thing I thought that was really hard-hitting was, "We're not striving for perfection right now. That's not what we're doing. We're going to adjust and we're going to iterate." And so as you think about Q4, which is right around the corner. Right? The peak season, the holiday season, where there's a lot of opportunities for brands and retailers to capture some of the things that they might have lost in Q2 from the financial shock of the pandemic, how are you guys thinking through about what does this Q4 holiday season need to look like in order for brands and retailers to be successful and come out swinging come 2021?
Yeah. And obviously there are lots of segments of retail, especially apparel and others that it's like you're in red until the holiday season. So this year has never been more important. And I think obviously a holiday campaign needs to take the legacy and existing customers in mind first and foremost, of course. And I think given ... I think both supplier and distributor issues are going to be common this holiday season. So I've noticed definitely a trend just shopping on random sites online, things are supposed to be there in two days or not. They're not in four. So I think that focusing ... reliability is going to be very, very important I think this holiday season. And making sure that you've got ample, not excessive, but you have ample inventory for the products. So inventory planning is going to be extremely important. Having a 3PL or having fulfillment capabilities that are reliable and can scale to meet your needs.
And then having, it's probably never been ... we've seen trends change. And I think it's important for us to differentiate between those that were just the burst versus those that are going to be sustaining. And I think we're going to see segments online that were not traditionally online continuing to perform well or even better in the future online. The initial burst and hoarding of certain types of home goods and things like that will subside. So I think the numbers ... it's going to be fascinating to watch over the next couple of months, as things hopefully start to open up, what starts to subside and what doesn't? But for any segments of retail that a merchant is in, I would be really focused on the next couple quarters, or well the next couple of months, to see how you might want to pivot your holiday strategy accordingly.
And it's not ... engagement is everything. So if you can build engagement before the holiday season and invest early versus waiting. Too often it's like the week before the holiday campaign and the messaging stops. None of us want to see Christmas ads in June, but there are ways that you could be preemptively paying for or taking actions to create more traffic in those months before the competition does.
Yeah. So just it's different, right? It's different. It's more important than ever. Make those investments now. Right? As much as you can and take informed prioritization and risk and make sure you give it 100% to make it the Q4. You can't just, it's not going to be the same as we're used to having the Q4. It's much different now.
And you need to ... now is the time to iterate. Like you might find if you're seeing anomalies in categories that are selling versus previously, all of a sudden you've got certain types of home. Like all of a sudden barstools are going off, are just going wild and you normally sell home goods. You've now got the next couple of months to see where you should be investing your marketing dollars or investing your landing pages for ... should you be focused? Is barstools the hot category.
I don't know. So now is the time to test and iterate to get the analytics-ready while you're preparing for your campaigns and you can't be afraid to pivot when the time comes or even test and iterate in the midst of a holiday campaign. But it's the analytics and research and the prep work that I think that we do know that sometimes we forget about so.
For sure. Well listen, I got to say, thank you so much. This is great. We got to do this again. Very fun, appreciate that. So people, people out there who are going to look at this and they're going to see you. They can find you on LinkedIn and they can also go to Shopify plus's website, look at all the content, look at all the posts. Right? There's a lot of great case studies on there, a lot of thought leadership. Those are probably the main ways in which to connect with Shopify. And you're available on LinkedIn, is that fair?
Yeah. Yeah. Feel free to hit me up on LinkedIn. Shopify, if you have more questions on Shopify plus just fill out the form. We'll reach out to you promptly and ... yeah no, I really enjoyed this conversation and yeah, I hope we get a chance to do it again in the future.
Excellent. Thanks so much. Have a great rest of the week. You take care, okay?
Thanks, Jeff. Take care.
CMO, Annex Cloud
Head of Market Development, Shopify Plus
Since 2010, Annex Cloud has provided industry leading loyalty solutions to more than 250 leading brands and retailers, including Jenni Kayne, Hewlett-Packard, Bed Bath & Beyond, e.l.f. Cosmetics, Olympus, Sugarfina, Mizuno, MacKenzie-Childs, VF Corp., with the ability to engage tens of millions of their customers one-to-one at scale.
The Annex Cloud platform provides fully integrated Customer Loyalty, Referral Marketing, and User Generated Content (UGC) solutions that seamlessly work together to optimize the customer journey and deliver a unified customer experience that is designed to accelerate revenue growth, retain valuable customers, increase average order values (AOV) and drive repeat order frequency.
We're the new enterprise. Shopify Plus launched in 2014 to give hypergrowth businesses a customizable enterprise solution, without the high cost of time, money, and development. Our scalable, powerful platform supports 1,000,000+ businesses across all Shopify—from startups on Shopify to Fortune 500s on Shopify Plus.
To learn more about ShopifyPlus, visit shopify.com/plus