Whitepaper: Understanding Path to Purchase for Television Buyers

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  • Second Moment of Truth: Analyzing the various behaviors and activities that occur after the purchase of a new TV.

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Lessons from Sports Authority, Part 2: Where Consumers and Retailers Go from Here

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In the previous post, we discussed the main reasons for the downfall of Sports Authority, which announced earlier this year that all of its stores would be closed and liquidated. While industry analysts focused on the company’s debt load, InfoScout focused on actual Sports Authority customers.

Using our proprietary mobile apps to capture receipt data and analyze more than 17,000 shopping occasions, as well as a survey of more than 300 Sports Authority customers, we discovered three core drivers behind the company’s demise – high prices, poor selection, and a failure to attract Millennials.

Now that we have a better idea of what went wrong, where will Sports Authority customers take their business? What can retailers do to earn their business?

We’ve Seen This Movie Before

Circuit City was the second largest electronics retailer in the U.S. when it began closing stores in 2008. There were three sets of open arms waiting for Circuit City customers – Walmart (the mass discount retailer), Best Buy (the largest electronics retailer), and Amazon (the emerging online retailer).

Similarly, the key players looking to fill the void left by Sports Authority are mass discount retailers Walmart, Target and Kohl’s, Dick’s Sporting Goods, which is the leading sporting goods retailer, and Amazon, which is now the dominant online retailer. All have the pricing, selection, and Millennial-desired omni-channel capabilities to avoid the pitfalls that doomed Sports Authority.

Where Do Customers Go from Here?

When customers were asked what they purchased from Sports Authority, the top product categories were athletic apparel (64%), footwear (48%) and sports equipment (45%). They were followed by sports team apparel (19%), outdoor gear (16%) and fitness items (15%).

Regardless of product category, the largest percentage of these customers (68%) will now go to other sporting goods stores such as Dick’s Sporting Goods, Academy Sports, and Cabella’s. When asked to choose just one shopping destination, Dick’s Sporting Goods, chosen by 58% of respondents, was the overwhelming winner.

This data is supported by InfoScout’s analysis of actual purchase behavior, which shows Dick’s as the most frequently shopped competitor of Sports Authority. Nearly half (46%) of Sports Authority customers will shop at Amazon, the second highest ranked retailer. Only 37% will go to mass retailers such as Walmart, Target and Kohl’s.

sports authority closing sign

Fifty-three percent of survey respondents completely or somewhat agreed with the following statement: “In about the next five years, there will be no sporting goods retail store locations left because anything you need you can just buy on the internet.” Although we don’t know how accurate consumer crystal balls are, sporting goods product categories are ripe for channel disruption.

For example, brands such as Nike are benefiting from direct-to-consumer strategies. Although Sports Authority customers are or will be shopping at Target.com (40%), Walmart.com (32%) and DicksSportingGoods.com (30%), many are also shopping at brand sites such as Nike.com (36%), UnderArmour.com (20%), Adidas.com (11%) and Lululemon.com (5%).

Customers know that they can go directly to the brand. Strong brands such as Nike have created destinations for customers, both online and in-store, and are looking to rely less upon mass retail distribution channels.

Loyals, Occasionals and Millennials

Our research found that the most loyal Sports Authority customers, those who shopped at Sports Authority at least five times in the past year, are likely to go to retailers such as Dick’s Sporting Goods and Academy Sports.

Occasional customers, those who shopped at Sports Authority fewer than five times in the past year, are shifting more spend online, making Amazon the winner for this group. However, “occasionals” are spending 6% less overall, while spending among “loyals” is down just 1%.

Digging deeper into data related to the all-important Millennials, a group that Sports Authority failed to win, our research shows that Millennial loyals are spending significantly more (23%) at both Amazon and sporting goods stores. The largest increases are at Amazon (8%).

Millennial occasionals are spending 6% less overall, but 5% more at Amazon. As a result, brick-and-mortar retailers should be asking two important questions. First, how can we capture a greater share of Millennials who were occasional Sports Authority shoppers? Second, how can we convert those Millennial occasionals into loyals?

The Final Verdict

The most loyal sporting goods shoppers value the ability to find specific items and the expertise that a specialty retailer can provide. As a result, retailers like Dick’s Sporting Goods and Academy Sports, with their established store footprints, fair pricing and ample selection, are well-positioned to benefit from Sports Authority’s loyal customers.

For more generalized needs, such as apparel and footwear, online channels are likely to continue to grow and thrive. Millennials are headed in this direction. Brick-and-mortar retailers need to deliver a consistently superior shopping experience across all channels to maintain in-store sales and avoid losing online sales to Amazon and brand sites.

Sixty-one percent of survey respondents are sad about the closing of Sports Authority. Thirty-six percent don’t care. Three percent are actually happy about it. However, all of them need alternatives. Some have already found them.

Retailers need to take a hard look at InfoScout data, assess their strategies, bring their “A” game to avoid the same fate as Sports Authority, and successfully adapt to the evolving demands and behaviors of the end consumer.

InfoScout uses proprietary technology and targeted surveys to provide valuable insights into shopper behavior, purchasing decisions and industry trends. Contact us to schedule a free demo and learn how InfoScout can help you build revenue and enhance your brand.

Lessons from Sports Authority, Part 1: What Went Wrong?

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After nearly 30 years as a sports retail powerhouse, Sports Authority will soon cease to exist. Burdened with $1.1 billion in debt, the company filed for bankruptcy protection in March. After failing to secure financial assistance, Sports Authority announced in May that all 463 of its stores would be closed and liquidated by August.

The demise of this once-great retailer begs a simple question. What went wrong?

The company admitted that it had been slow to “react to changing consumer trends.” The crushing debt that Sports Authority has carried since being purchased by a hedge fund 10 years ago surely didn’t help. Various analysts and commentators have weighed in on the matter, pointing to everything from a dull shopping experience to a lack of uniqueness.

InfoScout decided to get the real story from the people whose experiences and perceptions matter most – actual Sports Authority customers.

Using receipt images of actual customer purchase data captured by our proprietary mobile apps, we analyzed more than 17,000 Sports Authority shopping occasions during a 52-week period. We also conducted a survey of more than 300 Sports Authority shoppers.
The problem clearly wasn’t customer service, which is an easy scapegoat when things go south. 56% of survey respondents rated Sports Authority’s customer service as very good or excellent. Only a handful said customer service was fair (8%) or poor (2%).

Our research revealed three primary reasons for Sports Authority’s downfall.

Sports Authority Frustrations@2x

You Want Me to Pay What?

When asked to identify issues or frustrations experienced while shopping at Sports Authority, nearly half (49%) of survey respondents pointed to high prices, which was more than three times higher than the next highest contributing factor. Not only were prices deemed too high, but consumers said coupons didn’t work for the most popular brands, making them virtually useless. Unfortunately, it’s not uncommon for retailers to push out coupons and special offers without ensuring their relevance to shoppers.

Price transparency on the web allows people to compare prices in a matter of seconds. Many shoppers know what they should be paying before they walk into a store. Sports Authority failed in large part because its pricing was not competitive – and its customers knew it.

I Still Haven’t Found What I’m Looking For

30 % of respondents said they were frustrated by merchandising issues, including a lack of desired products or brands (14%), products in the right size (11%), and overall selection (5%).

The reality is that we live in an environment of a rapid convergence of channels, with limitless aisles that can be instantly accessed from our mobile devices. Failing to fully understand and deliver the correct merchandise is a fatal mistake for retailers.

The continued fragmentation of our retail environment, customer tastes and general trends makes the merchandising function more and more complex.

Missing with Millennials

Millennials now represent the largest segment of the U.S. population. According to customer data generated by InfoScout mobile apps, Sports Authority hadn’t done nearly enough to win over Millennials. Among loyal Sports Authority customers – those who shopped at Sports Authority at least five times per year – just 22% were Millennials. Gen Xers (66%) outnumbered Millennials three to one. This was a major miss that clearly had an impact on the company’s bottom line.

InfoScout data and insights clearly show us that high prices, poor selection and the failure to attract Millennials represented a three-headed monster that Sports Authority was unable to overcome. In the next post, we’ll discuss where Sports Authority’s former customers are planning to go for sporting goods and apparel and what can be done to earn their business.