Understanding the Changing Retail Customer

February 18, 2016

Is it college retail that is changing, or is it our customer? The college experience is traditionally one of the first times retailers get the pleasure of welcoming changing markets coming into their own, shopping-wise. We are on the front lines of getting the next generation of shoppers with their own disposable income, and with that comes the understanding of their buying habits and motivations. However, this is a short-lived love affair; and far from investing in our customers to make a lifetime brand advocate, we are in and out of their lives anywhere from two to six years. We hope to hold onto the alumni, but the cash is in textbooks, and our customers only need them for so long. It means we constantly have to be ready for the next generation of buyers, anticipating their changing expectations.

Encountering generations on the cusp of being understood has always been a challenge in any industry; however, understanding the changing buying habits of students goes a long way in allowing retail stores to adjust and react in time to reap benefits. Having conducted the Annual Student Survey for the past ten years, Nebraska Book Company (NBC) has a particular insight into college students, their buying habits, and their expectations of us as an industry. This has helped us in choosing products to develop and areas of business to concentrate on. Sometimes we are too slow on the draw, or sometimes we think we’ve hit the nail on the head only to find a trend went the opposite of projections and plateaued earlier than expected in a life cycle. But more often than not, we are ready and waiting, ahead of the curve.

Let’s look at digital. Digital textbooks currently comprise 9% of all textbook volume. This is up from 5% two years ago; but starting in 2008 when we first started tracking digital, there was an expectation that digital would explode and replace the traditional textbook. With current students, we find they don’t really prefer digital books over traditional books. When asked, they say they would only obtain 27% of their books digitally if all titles were available to them. And currently, digital books continue to be read mostly on a computer or laptop, not on a tablet or smartphone, which is also the opposite of where we saw the trend heading.

In addition, research shows that digital books appear to be more of an impulse buy rather than a planned purchase. Students don’t go looking for them. Rather, they find them along the way. Most digital textbooks are being obtained via online bookstores (34%), online publishers’ sites (29%), and college bookstores (18%). And online sales are driven primarily by three considerations: convenience, availability of titles, and price.

But what about the upcoming generation and their preference for digital delivery? These are the ones who so far have remained nameless. They’ve been dubbed “Homelanders,” born after 9/11, “the Plurals” because of their diversity, or the “App Generation” as they have no concept of life prior to the internet.  Is this the group of buyers who will take digital from being marginal to mainstream?

And what about rentals as a method for getting course materials into students’ hands? Rentals started appearing as a preferred way to receive textbook materials in 2013—this is when over 25% of students began obtaining textbook rentals. This transformed the industry by spring of 2015 when renting (either exclusively or split with purchases) became almost 50% of the student’s shopping basket. Although rentals continue to rise in prevalence, it is important to note that relatively few students (14%) rent books exclusively. Textbook renters also tend to be textbook buyers. In fact, the proportion of students who both rent and buy has been increasing steadily over time. One fact that has changed the face of textbook shopping is that freshmen are now coming to campus aware of the rental process and know they have options; in previous studies, there has been a marked learning curve.

Rental is one area where eCommerce doesn’t win. Students continue to prefer renting at the bookstore versus renting online—39% prefer to rent online. In fact, students continue to say that they prefer to rent at the bookstore than to rent online. They like being able to return the book if they need to, not having to ship the book back, and being able to inspect the book before renting.

Currently, students state that they expect a book to rent for about two-thirds of its sales price, but the reality shows that the price is actually about 60% of the purchase price (used). Where does this expectation come from and how can we delve deeper into the reasons behind these preconceived notions? This is where more research is needed, including focus groups, so we can take pervasive trends throughout the industry and find answers to more qualitative questions.

Another area in which we can do a better job preparing is comparison shopping. Price-comparison shopping, both online and in-store, is where the college retail industry is being blindsided. Showrooming is a way of life with consumers—making their precious dollars stretch as far as they can go.  In fact, students spent about 2.6 hours on average shopping for textbooks last fall. This amount of time is consistent with previous fall seasons. Students spend about double the amount of time shopping online as they do in the bookstore. This is where a store’s omni-channel presence comes in. Are you consistent both online and in-store with your messaging, your pricing, your availability? Consumers expect and have more confidence in retailers who are both online and brick and mortar. The credibility of an online-only storefront takes years and thousands of digital marketing dollars; 55% of online shoppers would prefer to buy from merchants with a physical store presence over an online-only retailer. Two-thirds of online shoppers are “web-rooming” and intend to purchase in-store or through a competitive website.

About one student in five comes to the college bookstore but leaves without buying textbooks there.  Approximately 27% never come to the bookstore during the shopping process. What can you do to make them stay? What can you do to turn traffic into a filled cart and a transaction?

What about the opposite scenario? The fall Crux survey found that 37% of students research which books to buy online and then buy them in the bookstore. You may say that’s okay—we lose them online and we get them in-store, or vice versa; but that is under the premise that it was your online store being researched and your brick and mortar where the purchase is made.

The best bet for any retailer is never to let a customer leave your store without a purchase and never let them leave your online site without checking out. At your physical location, you should have bounce-back coupons offered at the register. Digitally, you have the benefit of the ability to serve visitors ads after they leave your site. How? By using cookies (digital tracking), which are placed on visitors browser when visiting your site so you can digitally follow them and present them with offers to entice them to come back and finish their transactions. Are these tactics you are using now? If your answer is no, why not?

But perhaps the bigger question overall is how to use all this information to change the way the industry is serving the college campus population now.

Millennials are becoming older, with the first wave entering the workforce ten years ago.  As we’ve all made an effort to understand the millennial generation, a new generation is popping up. And in five to 10 years, the textbook industry needs to be ready to accommodate this new group’s preferences and needs. Unlike Millennials, Plurals, or Homelanders, did not experience the trend of receiving participation trophies, nor were they constantly told how special and unique they are. The people in this new generation have been actually treated as special, benefitting from having their individual needs catered to in every area of their life. This includes meeting special diet needs, introducing IEPs in the classroom, teachers understanding and implementing changes in teaching styles based on specific types of learners (visual, auditory, kinesthetic, and read-write), DVR-ing their favorite shows and on-demand television. The way the world is customized to meet their needs is limitless.  These youngsters are used to, and looking for, custom-tailored experiences in all aspects of their lives.

If we thought Millennials were savvy or had high expectations, we have only seen the tip of the iceberg. This next group will require anticipation on our industry’s part and will shift the way we do business like no other generation before it. They will come to the marketplace demanding high levels of customization and personalized experiences and will not have the patience to deal with anything less. Being prepared for this will require predictive modeling, an understanding of the digital world, and the knowledge of how to take each person’s digital footprint and use it to create an experience that is tailored just for her…and for him…and also for that person over there. But this needs to be done in a scalable way. Where to get started is the challenge we are tackling at NBC, exploring and developing products and services that will keep us, and our customers, ahead of the curve yet again.

With the new digital age and the upcoming Plurals who are becoming masters of it, it is important that retailers understand the idea of integrated marketing. You are reaching your audience not only through your signage, ads, and campus outreach but also as students are purchasing their books more and more often online. This means you need a digital footprint as well. This past spring, new questions were asked in the Crux survey about online ads and their effectiveness. As the generations born after the invention of the computer gets older, their expectation is to be served ads specifically tailored to their preferences; whereas older generations may see this as a nuisance, younger generations see this as a convenient, customized experience. What we are looking to understand is how does this expectation of a tailored online experience pairs together with the search for textbooks.

The most updated results from the Spring 2016 Crux report will be available to clients at our Spectrum 2016 Conference in Lincoln, NE, April 11–14. John Geraci from Crux will be reporting on the new data and how the trends are shifting and there will be breakout sessions on specific topics found in the article above. More information about Spectrum can be found HERE.

SOURCE: Crux Data, Retail’s Main Event: Brick & Mortar vs. Online, RetailNext, How Proximity Marketing Is Driving Retail Sales, Forbes.

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