Retail SMBs are more poised than their counterparts in other verticals to adopt sophisticated digital advertising and marketing. This is clearly shown by BIA/Kelsey’s Local Commerce Monitor ™ (Wave 18) survey of small businesses.

Retail SMBs are already highly oriented to digital media, with plans to spend 43 percent of their total ad budget on digital media in the next 12 months*. They rank social media marketing, SEM/SEO and email marketing as their top priorities for advertising and promotion in the next 12 months*.

There are multiple signals in the LCM data that we think point to big expansion into digital by Retail SMBs:

— They’re experienced in maintaining customer lists, with 71 percent having maintained a customer list for over a year. With 61 percent of their customer lists  in digital form, they’re well positioned to move into marketing automation services like CRM (where they’re still at a low utilization level of 21 percent).

— They’re big users of ecommerce, with 90 percent reporting ecommerce sales.

— They’re highly satisfied with the mobile advertising they’ve done so far, reporting high ROIs — although usage of mobile advertising and marketing is still modest.

— They’re big on customer loyalty programs, which are used by 43 percent of SMB retailers. Since only 30 percent of these programs have been digitized, we believe this too represents another growth opportunity.

— They’ve registered an interest in many advertising and marketing services, particularly ecommerce services, online satisfaction surveys, email marketing, and online leads management.

In sum, we believe local retailers will be upping their digital game on multiple fronts in the near term. Since they’re such a staple of their communities, this shift will reinforce the broad and rapid digitization of daily life.

*The 12 month period following the Local Commerce Monitor Wave 18 survey, conduced in Q3, 2014.

These were a few of the top-level findings of the latest cut of LCM 18, focusing on SMBs in the Retail vertical. Clients of BIA/Kelsey can access this report through our client portal. The report is also available for purchase, and more information on the LCM survey is here.

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Local is front and center in the next phase of ecommerce opening up, said eBAY VP of Marketplaces Jody Ford during a keynote address Dec. 10 at Leading in Local: Interactive Local Media in San Francisco. Ford said the past several years have been about online service, inventory and convenience and have necessarily favored online sites such as Amazon. But a new era of commerce that is consumer driven and technology enabled will blur the lines between online and offline.

“That is local,” said Ford. “There will be more retail change in the next three years than in the past twenty years.” And it will necessarily favor “platform” companies such as eBay, which Ford boasts has “the largest group of closed loop transactions in the world served by eBay, eBay Enterprises and PayPal.”

“My job is to remove friction from connecting buyers and sellers,” he said. In fact, eBay “sits in the middle between utility sites such as Amazon and Walmart, and social shopping sites such as Etsy, Pinterest and Fab,” he said.

The company’s next steps include such efforts as same day, scheduled delivery via eBay Now, which is supported by eBay’s recent acquisition of the Shutl courier service. eBay Now has been rolled out in the Bay Area, Chicago and parts of New York City. Dallas and London are next.

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Groupon’s transformation from a daily deals company to a multi-channel shopping promotions and e-commerce portal continue with its launch today of Freebies, a new program that groups together online coupons, promo codes. sales, giveaways and samples.

More than 5,500 brands are said to be participating. Retailers taking part with special offers in the initial launch include Macy’s, Nordstrom, Best Buy, American Eagle and Sephora. The effort is focused on the U.S., with international expansion expected in 2014.

The new effort pits Groupon against other providers such as ValPak, Gannett’s ShopLocal, Wanderful Media’s Find&Save, and adds to other Groupon branded efforts, including Groupon Local (local deals and offers), Groupon Getaways (travel) and Groupon Goods (electronics and other products). Groupon also offers Breadcrumb for B2B merchant payments, promotions and services.

Freebies is an interesting and ambitious application. By extending beyond daily deals and moving towards a shopping mall approach, Groupon has focused on becoming a more heavily trafficked site. The challenge will be to convince consumers to think of Groupon when they are researching their shopping choices. In this case, the eyeballs (help to) win.

Groupon VP Sean Smyth and Wanderful Media CEO Ben Smith are speaking at Leading in Local: Interactive Local Media Dec. 10-12 in San Francisco. You can register here.

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Unlike other media, radio advertising is quite diverse, generating 10% or more of its advertising from five different verticals. Retail (18%), Financial/Insurance (17%), Restaurants (14.5%), Automotive (14%), and Technology (10%) accounted for almost 3/4 of advertising on radio in 2012.

Diving into the top vertical, Retail, warehouse clubs and supercenters accounted for the largest share of retail advertising, 22.7%, just as it was in other media I’ve discussed, such as newspaper and direct mail.

Three out of eleven subcategories accounted for a combined 67% of the advertising spend in the financial/insurance category: commercial banking, securities brokerage and auto insurance.

Media Ad View Plus breaks the restaurant category into seven subcategories. Three of these subcategories accounted for 83.5% of advertising revenue in this category for radio: full-service restaurants, supermarkets and other grocery stores (not including convenience stores) and quick-service/fast food restaurants.

For automotive, auto dealers and manufacturers accounted for nearly 77% of the category’s advertising spending, much as it did for television and newspaper.

In the Technology category, the wired telecommunications carriers and wireless telecommunications carriers (except satellite) accounted for a combined 72% of the advertising spend in the category.

BIA/Kelsey projects radio advertising revenue to increase at a compound annual growth rate (CAGR) of 2.85% from 2012 through 2017. In 2017, radio advertising is projected to reach nearly $16.9 billion, representing 11.4% of total advertising spend for the year. Retail, financial/insurance, restaurants, automotive and technology are expected to remain the top categories for radio advertising spending in 2017.

More information on Media Ad View Plus is available here.

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In a previous blog post, I mentioned that newspaper was the medium of choice for real estate advertising in 2012. However, while newspaper accounted for 27.7% of real estate advertising spend, the real estate vertical accounted for only 2.5% of newspaper advertising revenue. Retail (23.5%) and automotive (16%) were actually the largest vertical categories advertising with newspapers in 2012, according to BIA/Kelsey’s Media Ad View Plus.

Approximately 22% of the retail advertising revenue going to newspapers came from one of the 28 retail subcategories broken out in Media Ad View Plus: warehouse clubs and supercenters. For automotive, more than 77% of the advertising revenue going to newspapers came from automotive dealers and manufacturers. This isn’t surprising, as both warehouse clubs/supercenters and automotive dealers/manufacturers have the highest spend in their respective categories across all media.

BIA/Kelsey projects that newspaper advertising revenue will continue falling, reaching $21.3 billion in 2013, a loss of 5.4%. By 2017, BIA/Kelsey expects newspaper’s share of total advertising spend to have continued to decline, falling to just under 12% of total advertising spend. Newspaper advertising revenues are expected to fall from $22.5 billion to $17.8 billion, a compound annual growth rate (CAGR) of negative 4.7%. This projection places newspaper in third place in advertising spend, behind direct mail and television, but just ahead of radio and online.

With advertising revenue dropping, newspapers are looking for alternative sources of revenue. “Digital pay plans are being adopted at 450 of the country’s 1,380 dailies and appear to be working not just at The New York Times but also at small and mid-sized papers. Twinned with print subscription and single-copy price increases, the digital paywall movement has circulation revenues holding steady or rising. Together with the other new revenue streams, these added circulation revenues are rebalancing the industry’s portfolio from its historic over-dependence on advertising,” says The Pew Research Center’s Project for Excellence in Journalism’s State of the News Media in 2013 report.

BIA/Kelsey projects that in 2012, online represented 13.8% of newspaper’s advertising revenue. This is expected to increase to 20.5% in 2017.

More information on Media Ad View Plus is available here.

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According to BIA/Kelsey’s Media Ad View Plus more than 43 percent, or $10.7 billion, of retail advertising dollars went to direct mail in 2012. That $10.7 billion represents 30 percent of direct mail’s total ad spending. Furthermore, BIA/Kelsey doesn’t expect that to change much by 2017, where retail is still projected to spend 43 percent, or $12.3 million, on direct mail.

2012 Retail Ad Spending by Media

So what types of retailers are spending money on direct mail? The largest spending retail specialty is warehouse clubs and supercenters, with $2.35 billion in spending on direct mail in 2012. This is more than double its closest competitor, discount department stores, which spent $1.1 billion.

What attracts retailers to direct mail over other media? According to direct mail companies, unlike ads on radio, television and newspapers, which go out to everyone in the market, direct mail can be targeted to a particular location or demographic, providing a better ROI. This could be valuable to brick-and-mortar retailers with fixed locations. Not everyone subscribes to a newspaper, watches TV, listens to the radio, or owns a computer or smartphone, but everyone gets mail.

The National Federation of Independent Business (NFIB) says that direct mail is an old-school marketing method that still works for small businesses. “Direct mail can be an effective part of any marketing campaign. Yes, email, Facebook and even Twitter work for some small businesses, but that doesn’t mean tried and true methods like direct mail should go by the wayside.”

According to BIA/Kelsey’s Media Ad View Plus, overall direct mail accounted for nearly $35.8 billion out of a total $132.2 billion in U.S. advertising dollars. That’s a whopping 27.1 percent of total advertising dollars, making it by far the largest media category. Newspapers, the next largest medium, accounted for 17.1 percent of total advertising dollars in 2012, followed by television in third place with 15.7 percent.

BIA/Kelsey expects this to change somewhat by 2017, with direct mail still on top with 25.1 percent of total advertising dollars, followed by television with 15.1 percent, with newspapers falling to third with 11.9 percent.

More information on Media Ad View Plus is available here.

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I am here in Boston having just finished giving a lunchtime talk on mobile commerce to the Outdoor Industry Association, gathered here for its annual Rendezvous conference, which has drawn more than 350 outdoor retailers and manufacturers.

They are offering a yoga class tomorrow at 6 a.m., but unfortunately I have a plane to catch.

I devoted most of the talk to “showrooming” — using a retail store to touch and feel merchandise before buying it (for less money) online.

The mobile device is of course key to showrooming for scanning barcodes in the store to ensure that a better price can be had on Amazon or some other online outlet.

The OIA audience was reasonably familiar with the topic. However as outdoor retailers, they are probably in the second wave of impact from the trend — clothing and consumer electronics have already felt the pinch.

Comscore’s Jennifer Vlahavas spoke before me and emptied a cornucopia of data on online shopping behavior. One of her many insights was that showrooming will impact all retail categories that share one common trait — the comparability of merchandise. Given that definition, the outdoor retailers are clearly vulnerable. A North Face parka is a North Face parka.

One of my core observations, borrowed from my colleague Mike Boland, is that the ROBO paradigm has been completely flipped. ROBO originally stood for research online, shop offline, but the trend has clearly reversed, enabled largely by the burgeoning smart phone population.

Here were my key takeaways:

Reacting defensively to showrooming is counterproductive

May as well embrace the trend – it’s here to stay

Many popular countermeasures – unique inventory, in-store pick up, enhanced EQ – are helpful but insufficient

Critical to give tangible rewards for in store purchase behavior – via deals, points, card-based loyalty

Beyond Loyalty – using data to predict behavior of in store consumer and direct offers in real time

* Reacting defensively to showrooming is counterproductive.

* May as well embrace the trend – it’s here to stay.

* Many popular countermeasures – unique inventory, in-store pick up, enhanced EQ (entertainment quotient)– are helpful but insufficient.

* Critical to give tangible rewards for in store purchase behavior – via deals, points, card-based loyalty.

* What is beyond loyalty? Using data to predict behavior of in store consumer and direct offers to them in real time.

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Sometimes you see something so compelling you just know it’s the start of something big. The 7-iCollection iPhone app recently launched by Green Tomato for 7-Eleven Hong Kong fits that bill.

Simply put, it uses the phones “augmented reality” feature (if you haven’t seen this, the easiest way to understand it is look at “Monocle” within the Yelp app) to collect items hidden in 7-Eleven stores. So the user walks into a store, holds up his/her phone until a “collectible” (in this case teddy bear) shows up, and then captures it by jiggling the phone. You can then exchange items with your friends, and once you get a complete collection, receive a prize.

This is the modern-day version of the Pepsi bottle cap promo of my youth, where each had an NFL team helmet and you got some huge prize if you collected all 28 (the NFL of the late 1970s). We all bought Pepsi whenever we could and traded with our friends in a mad pursuit.  Pretty soon it turned out all of us had 27 teams and none could get his hands on that elusive Baltimore Colts (before Peyton Manning) cap — rumor was that only five of those were made in the entire country.   Some Pepsi marketer should get a gold star — this campaign is still remembered by at least one kid 30 years later.

The power of campaigns like this 7-Eleven Hong Kong implementation may be similar:

— Most important, it’s fun and addictive, and so will drive downloads and usage. This isn’t another “store locator” app; instead it gives the user a real payoff for downloading it.

— It drives traffic to multiple locations.

— The Collectibles/Prizes can be tied into whatever a retailer is trying to push.

— Collaboration among friends builds brand awareness.

— Users download the marketer’s app (e.g. 7-Eleven), not a third-party app like Foursquare or Gowalla.

— And unlike the Pepsi version of the 1970s, the retailer has the option to promote additional products/coupons through the app.

Certainly there will be many iterations/improvements on this concept — but for marketers interested in location-based campaigns, this is surely an approach worth considering. This app might just be a little glimpse into the future.

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Tobias Dengel is CEO of WillowTree Apps Inc., a mobile applications developer. He is also BIA/Kelsey’s new technical editor and will be posting regularly on mobile-related topics. The views he expresses are his own and do not necessarily reflect those of BIA/Kelsey.

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