It’s more difficult than ever for retailers to stand out from their competition. The reason: Internet-based transparency, next-day supply chains, rapid product replication, and low barriers to market entry are rapidly increasing commoditization and driving down per-unit revenues across the retail industry.
As a result, margins tighten, private-label products proliferate, brand loyalty withers, and, inevitably, industry sectors go through a process of brand consolidation. And while consumer electronics (CE) retailers are currently in the “commoditization crosshairs,” almost all retail segments have gone through the process of brand consolidation.
To help retailers overcome these challenges, the Cisco® Internet Business Solutions Group (IBSG) conducted research to study the strategic options available to CE retailers.
Specifically, we looked at device ownership and digital content consumption, the relationship of consumer confidence and knowledge to purchasing behavior, and, most important, whether the application of value-added “orchestration” services could increase revenues.
Orchestration services add value to physical products by creating both “virtual” and “physical” customer experiences that combine aggregation, assembly, and education.
Potential Revenue Increase from Orchestration Services Is $440 Million for a $10 Billion CE Retailer Source: Cisco
To look inside today’s CE market, Cisco IBSG took a unique “dual-lens” approach that analyzes which devices people own and how they use them. Employing this approach, we uncovered an important segment of shoppers who are apt to do more with the devices they currently own—and would purchase more devices and accessories—if they knew what was possible, and how to do it. We call this segment, which is largely ignored by most CE retailers, “learners.” Interestingly, when demographic filters were applied to the data, we found the majority of learners are younger to middle-aged women.
As part of the research, we also tested five orchestration services: (1) learn how to use it, (2) Discovery Zone, (3) device compatibility tracking, (4) remote installation support, and (5) personalized downloads. The study found that orchestration services can help customers learn and gain more value from their electronic devices.
In addition, four of the five concepts received a “delighted” or “excited” response from one-third or more of the survey’s “learner” segment. This is significant since it represents a “cry for help” from the most active consumers in the digital world.
So what’s the bottom line? We calculated that orchestration services can increase revenues for a $10 billion big-box CE retailer by $440 million. The incremental increase in revenue is driven by three variables: (1) a 0.5 percent lift in traffic, (2) a 1 percent boost in customer conversions, and (3) 1.5 percent growth in basket size.
So while the battle rages over whether consumer electronics are in a short-term decline or an extended slump, one thing is clear—orchestration services can go a long way toward settling the debate…which is music to the ears of CE retailers.
To learn more about orchestration services please read: Orchestration Services Increase Revenues for Retailers.