It’s no secret that impulse purchases are a CPG mainstay under siege. Pressure to offer better-for-you indulgences, the rise of self-checkout, and shoppers too distracted by phones to notice product displays in the checkout line—these are just a few of the reasons industry insiders are exploring the future of impulse purchasing.
In this article, we’ll explore seven ways brands and retailers can prompt unplanned purchases, with a focus on the online channel.
First, a little background
Impulse purchasing is huge. By some estimates, it accounts for between 30 and 50 percent of offline purchases. And while typical “on the fly” items such as candy bars and batteries are physically small, the profits are big. The checkout area typically comprises 1 percent of the supermarket’s merchandising space, but accounts for 4 percent of the profits.
Brick-and-mortar stores continue to try to drive impulse purchases with primary aisle placement, and with secondary placement on clip strips, end caps and point of sale displays. But how do they face the challenge of enticing a consumer base that increasingly interacts with brands and retailers online, and one that is undergoing a fundamental change in how it shops for and purchases merchandise?
The rise of Amazon spear fishers
One reason the online channel is so difficult for impulse purchases is because of the “spear fishing” dynamic that dominates the way people buy from Amazon. Think of them as hunters standing in shallow waters, each with a spear, knowing exactly what they’re looking for.
Bezos himself has said that Amazon is not in the business of selling stuff, but rather, of helping people buy. The implication is that people know what they want—Amazon just helps them find it and makes it easy for them to purchase. However, in an impulse-oriented category in which prompting is key, it’s not so easy in Amazon’s platform to provide prompts for items not directly related to what the buyer is looking for.
In other words, when a shopper on Amazon searches for candy, Amazon can readily display related items. But if the shopper didn’t search for candy, Amazon may not be able to easily display the other products the shopper is looking for.
Add to that the underlying psychology of impulse purchasing—the desire for instant gratification, which isn’t available when you have to wait for delivery of an online purchase—and you begin to see why many industry experts have a mixed outlook.
Full basket grocery, but limited opportunities
Let’s look for a minute at online grocers that have a local presence, whether it’s delivery or click and collect. This category includes AmazonFresh, which offers not only shelf-stable products, but chilled and frozen products as well.
At Amazon.com, where the spear fishers are shopping, the average order size has fewer than two items. But average orders for the full basket grocery players tend to be in the 20- to 30-item range, sometimes larger. However, even though shoppers are building a full basket, the flow of their online shopping experience has fewer secondary and impulse merchandising display opportunities than a traditional brick-and-mortar store. There simply isn’t the opportunity for the retailer to hang a clip strip in the aisle or through a merchandise rack up at checkout. For the full basket online grocery players, the challenge is simple: They may have only two or three secondary placement opportunities, whereas in a brick and mortar store, they might have 15.
What to do?
For brands and retailers, it’s a multi-billion-dollar challenge.
Here are seven ways to meet it—online:
1. Full basket minimum order size
One potential approach for online grocers would be to use impulse items to help shoppers meet minimum order requirements. For example, a shopper might need to buy $35 worth of goods to meet free shipping hurdles. For an order just short of $35, the shopper might be prompted with impulse items that would put them over the minimum.
2. Larger pack sizes
Larger packs can be particularly effective for Amazon, where there’s more pressure on individual items to be economically viable. By selling larger quantities in fewer transactions, impulse shifts from the purchase itself to the opportunities for consumption. So, rather than buying smaller packs, the shopper buys bigger packs, but less frequently. It’s the difference between buying a pack with 80 pieces of gum instead of 12 or 16.
The economics are good for Amazon, because they’re able to offset the cost of shipping with a higher average price point. It also means that shoppers aren’t buying for immediate consumption, but may instead be buying for consumption in the office, the car, and any other environment where they’re likely to consume the product.
3. Click and Collect
The growth of click-and-collect is leading some brands to explore the potential for impulse merchandise display at the collection point. Whether in-store, at automated lockers, or at off-site pick-up points, the idea is that shoppers would be given an opportunity to add to their order at the point of collection.
However, there is resistance among retailers to add friction at the collection point. That’s because shoppers have typically already paid before they pick up their orders, so the transaction is already complete. Asking the shopper to initiate and complete a second transaction may add too much complexity for both retailer and shopper.
But as frictionless payment technologies improve and are more widely adopted, it may be possible to simplify these secondary transactions using tools like Apple Pay. And there may be opportunity for brands that are willing to fund and manage the process.
4. Buy buttons
Buy buttons are designed for “distributed commerce” – the idea of enabling a frictionless purchase anywhere a brand is encountered in both digital and physical environments. Buy buttons in digital environments include shoppable ads or on social media like Twitter and Pinterest.
Buy buttons have some maturing to do. Shoppers haven’t had time to become familiar with the dynamic of buying through a buy button, and there are so many different approaches to buy buttons that as a result, they haven’t become widely adopted. People don’t fully get it…yet.
Longer term, though, it’s going to happen. Look for there to be standardization and more shopper education.
5. Coupons sent to mobile phones in-aisle or en route
Timely delivery of coupons and offers can increase the number of impulse opportunities, not only at checkout, but in every area of the store. Here’s what Bonin Bough, chief media and ecommerce officer at Mondelez International had to say in Harvard Business Review’s blog:
“By using location and behavior-based cues, savvy brands can reach consumers when and where it matters most. This could take the form of a mobile-based deal on gum mapped to a consumer’s daily commute (a time when people will most likely be chewing gum), or delivering a coupon for chocolate to a consumer’s phone while they’re in the checkout line, engrossed in their phone instead of looking at product displays.”
6. Amazon Dash buttons
Amazon’s Dash buttons are branded, physical buy buttons that can be placed in kitchens, laundry areas or any other place around the home or office where someone might be prompted to replenish a depleted product supply—like snacks and confection items in the breakroom at work, or detergent for the washing machine in the basement.
So if you want to re-order those Ice Breakers or that Orbit gum for your office mates, use your Dash button. There are now about 30 brands participating in the program, with more expected to join.
This is a big idea, since it makes the purchase frictionless at the precise moment someone thinks about buying. If brands succeed in persuading shoppers to install a Dash button, they’ve won at a Recursive Moment of Truth – a single decision point that has the potential to drive loyalty and significant lifetime value.
These Recursive Moments of Truth also hold the potential for Amazon and other retailers to not only resupply consumers, but to actually anticipate their needs. As Peter Larsen, Amazon VP of devices, states, “You can see a scenario where, at 4 o’clock this afternoon, a lightbulb arrives at my door and I say, ‘Why is this here?’ And 30 minutes later our lightbulb goes out. And that’s because Amazon knows that your lightbulb was about to run out.”
7. Make impulse shoppers your prime target
An eCommerce retailer should be able to identify which shoppers habitually add items to their cart at the last minute, often when the customer is already at checkout. The site can then specifically target these impulse customers with prompts, while at the same time, foregoing the opportunity to provide prompts (and hence distractions) to non-impulsive shoppers.
Of course, the impulse buying landscape is undergoing rapid change. Retailers and brands continue to adapt, both offline and online, to sustain the impulse purchases so critical to the bottom line.
And there is precedence for overcoming these challenges. The emergence of “pay at the pump” in the gas and convenience channel put pressure on store operators and brands to lure shoppers into the store. The removal of tobacco in some chain drug outlets put pressure on the front-end. But with shopper insight and thoughtful strategy, these challenges have been overcome—as will be the challenge of impulse merchandising online.