Bentley’s PreparedU Project is dedicated to preparing millennials for success in business and in life. This series provides insights into ways that objective can be accomplished.
You are shaping a new consumer world and, in it, businesses live or die online. No longer can storied brands like Macy’s rely on an established reputation — in fact, it’s the young startups, not the household names, with the edge nowadays.
We know the rise of the Internet and web-based technologies, which you’ve embraced with remarkable enthusiasm, are changing the traditional marketplace. The online retail world is growing rapidly and threatens to render brick and mortar stores obsolete.
From a business perspective, it’s worth considering the significant role human emotion is playing in this reinvention of consumer culture, according to Gregory Hall, associate professor of Natural and Applied Sciences at Bentley University.
The marketplace must take into account how human behavior is affected by the Internet — the cyber-psychology involved, Hall says. People have changed the way they make purchases and relate to products, he explains. Indeed, they have developed an entirely new relationship with business.
“Companies are struggling to adapt to the online world and learn how to grab customers,” says Hall.
Yes, success in business today requires you grasp rational economic theory, he says, but it also means thinking like a psychologist: You must develop insight into how individuals actually behave, which is often irrational.
Attracting customers in the emerging digital culture requires that you incorporate psychological concepts in order to create business models that fit this new habitat, Hall says. Here are a few of the behavioral trends to look out for. People online tend to:
1. Favor the familiar relationship over the new.
In 1994, Jeff Bezos founded what quickly became the flagship model for Internet-based retail companies: Amazon. The public, wary at first, started feeling comfortable about shopping online largely because of Amazon. In 1997, Amazon had 1.5 million customers, according to Statista, an online statistics portal. By 2007, it had 76 million. By 2014, Amazon had 270 million customers.
The business has cultivated an image — and delivered a standard of service — that has won the loyalty of people across the globe. It now has retail sites both here and in Australia, Brazil, Canada, China, France, Germany, India, Ireland, Italy, Japan, Mexico, the Netherlands, the United Kingdom and Spain.
One of the reasons it will be extremely difficult for other online retail companies to catch up with Amazon is psychological, says Hall. People trust in the familiar.
Just recently, Walmart, the world’s largest retailer, announced that it will test a new unlimited shipping service for online shoppers that will be priced below Amazon’s Prime service. Walmart’s online business has seen a slowdown. The company is making a major bid to accelerate its online growth.
The going will be tough. Although Walmart is economically powerful, it’s as a huge disadvantage, according to Hall.
“Walmart is late to the game,” he says. “Human behavior is such that when people begin to shop, they tend to stick with the retailer they start out with unless there is a significant bad experience. And Amazon doesn’t deliver a bad experience. It will be interesting to see what Walmart can do to lure customers away from Amazon.”
2. Favor the clear identity over the complicated.
Nowadays startup companies with no previous history have a psychological advantage, says Hall. If your identity has been created online, you’ll have an easier go of it than long established companies struggling to transition.
For instance, take a closer look at Macy’s, a landmark outlet. Such companies are doing their best to adopt a new identity but retail companies native to the digital age have a clear one from the outset.
“Transitioning from a brick and mortar presence is difficult,” says Hall. “Not very many companies can compete with those that began online.”
Early in 2015, Macy’s launched initiatives to accelerate its growth. Macy’s and Bloomingdale’s adopted polices that signal their admission that people now shop on their phones and computers — the department store outing is bound to become a tradition of the past. Among other things, the corporation turned its attention toward fast delivery of products bought online. Still, what do you think of when you hear Macy’s? Exactly.
In 2014, Cyber Sales Monday sales were up 8.7 percent compared with 2013. That’s a sharp contrast with the mostly bad news for brick-and-mortar stores, which saw about 6 million fewer shoppers the same weekend, with overall spending down about 11 percent, according to the National Retail Federation.
Hall says part of the problem is that older establishments are trying to maintain their traditional identity even as they develop an online presence — but people don’t think of them in an outline kind of way.
3. Favor the adopted innovative over the traditional.
In this digital era, the traditional — as opposed to the innovative — outfits are not likely to make it, says Hall.
“We see that coming,” he says. “Travel agencies are struggling because younger people, and even middle-aged folks, are organizing their own travel arrangements online, using Expedia and so on.
“You see the same thing happening with telephone companies. Younger people don’t buy landlines — they’ve gone completely cellular. I don’t know how the landline telephone companies are going to be able to maintain their business model.”
Hall says the post office is a big loser in the new online environment.
“Most people communicate online,” he explains. “Most people would struggle to tell you the last time they wrote a letter, which is one reason why the postal system is billions of dollars in red ink.”
The downward spiral is stunning. The agency has lost nearly $26 billion over the past three years, former postmaster general Patrick R. Donahoe said in a recent speech at the National Press Club.
When all is said and done, says Hall, this is all good news for the up and coming.
“There is an advantage for young people,” he says. “There is a huge generational split between companies started online and those that have not been. And online is where the opportunities exist.”
Meg Murphy is a freelance writer.