The Changing Retail Landscape
By Chris Gates
Figures for the end of 2012 reflect how consumers’ purchasing behaviour is changing in line with new technologies. According to recent trade results, we have seen that the biggest winners on the high street are those retailers that found new ways to offer customers a personalised, multi-channel experience. For example, House of Fraser saw a 48% increase in like-for-like sales online over the Christmas period contributing to an overall 6.3% like-for-like uplift, and the Next online and catalogue directory business surged by 11.2%. This was set against a backdrop of squeezed consumer spending with the British Retail Consortium (BRC) reporting just a 1.5% year-on-year rise in sales for December, despite internet shopping showing annual growth of almost 18% as consumers sought online bargains.
We recently completed a survey of 1,000 UK consumers aged between 18 and 55+ regarding their purchasing habits. Our survey, the search for the ‘Shopping Particle’ (the term used to describe the exact moment in every retail transaction when the customer makes the decision to buy a particular product, whether online or in-store, at a particular price and from a particular retailer), revealed that, in fact, consumers haven’t fallen out of love with the British high street. Incredibly, 65% of Britons surveyed still prefer to shop in-store, rather than online. The retail sector has clearly been having a difficult time recently, but our research shows that in-store shopping still plays a crucial role in the modern shopping journey. Technological advances, from QR codes and Wi-fi in the store itself, to social media and contactless payment, are transforming the way that businesses interact with consumers. In today’s digital age, retailers are able to employ a variety of methods to survive high street competition and engage with customers across the interactive power channels. This is proven to be the key to increasing sales and boosting customer loyalty.
How can retailers compete in the changing retail landscape?
Organisations must ensure they have the right information available to inform retail strategies. Valuable retail data is often locked in customer, transactional or supply chain systems but retailers can thrive when this data is structured, up-to-date, accessible and presented in a way that actually supports the critical business decisions being taken. We recommend that retailers introduce tools to overcome information challenges and cut through data complexities to deliver a holistic view of the organisation and enable businesses to spot patterns in customer behaviour. Next generation retailers must be able to gather a unified view of customers in order to target the right markets with the most relevant products and promotions. By monitoring all sales channels of customer and brand interaction, retailers will be able to design targeted campaigns that reflect consumers’ preferences. Ensuring a seamless purchasing journey will enforce the consumer’s perception of the brand, improve customer loyalty and therefore reputation.
In order to remain competitive, retailers need to discover new ways to capture customer attention. With the advent of new technologies, brands can transform the in-store experience and increase brand interactivity. A great example of this is Ikea’s new interactive catalogue that enables browsers to wave their smartphones over pages and see what is behind cabinet doors, access further product information and digital how-to-videos. An increasing number of retailers are also looking at assisted selling and customer apps to aid their in-store experience. Organisations can leverage the power of technology for long-term gain and adapt strategies so customers are targeted with timely and relevant campaigns, encouraging brand engagement to increase sales.
It has recently been reported that one in five premises now stands empty across the UK. Another way for retailers to encourage brand interaction is to take advantage of these empty spaces on the high street by opening up pop-up shops. Pop-up shops enable retailers to trade in new markets during key selling periods, to target existing and new customers in a fresh and innovative way and take advantage of an increased footfall, without the large costs associated with a permanent presence of a high street store.
In store experience
One of the main challenges that many retailers struggle with is identifying how to convince customers to complete a purchase. The actual in-store experience is key to minimising the risk of loss of purchases. Retailers also need to develop experiences that meet customers’ demands upon entering the store to meet their individual needs. Our research revealed that 86% of customers will walk out of a store if a product is not in stock or if customer service is poor. In addition, more than half of all customers want to receive personalised offers, and younger female shoppers especially want technologies that will save time, such as self-checkouts or contactless payment, which 22% of shoppers in London have already used. By having information on consumers’ preferences available, retailers can create personalised shopping journeys designed to provide information that informs crucial, final purchasing decisions.
Retailers should incorporate s-commerce in a multi channel approach.The explosion of social channels, such as Facebook, Pintrest and Twitter, means today’s consumers are connected, empowered and leading a social revolution. Consumers are interacting with brands in new ways – from blogging about their retail experience and tweeting customer service teams to pinning the latest products to wish lists. In addition, consumers are doing this through a variety of devices, twenty-four-seven and with increasing selectiveness. As a result, social media has started to dramatically alter and consumers are holding the power more than ever before. Retailers are beginning to realise that social networks are where their most loyal customers interact with the brand. For example, ASOS – the e-commerce provider, has developed campaigns deliberately designed to engage social customers by offering those that ‘follow’ or ‘like’ the brand, exclusive offers and access to online sales. This approach effectively rewards customers that go online to recommend products, discounts and offers to their networks.
Brands have always known consumers have the power of recommendation among their friends, but a new age of ‘word-of-mouth marketing’ is emerging and as such, the retail industry will develop a raft of fresh ways to encourage consumers to act as brand ambassadors to spread the right messages. S-commerce offers brands a unique opportunity to get to know their customers and, by monitoring the channels consumers are using to engage with the brand when they are online and the content they are promoting to their networks, retailers can gather important information about a customer’s preferences. It is then possible to incorporate this information into a multi-channel approach so retailers can target customers with the correct information, through their preferred channel at the optimum moment in time. The rise of social media offers retailers a valuable opportunity to connect with their customers, get to know what they want to help generate conversations and develop relationships with them.
Keeping consumers engaged with the brand in the buying lifecycle
Year-on-year trade results and recent insolvencies have meant that many retailers have faced a bleak start to 2013. It is essential for brands to develop a strong understanding of consumers’ shopping preferences and embrace technology within the sector even more. Organisations will survive the changing industry and compete in the tough market if they employ innovation and develop in their multi-channel approach to embrace the technological changes in the active digital climate of today. The recent trade news shows that, only by understanding the subtle differences in shoppers spending patterns on a daily basis, can retailers optimise the shopping experience and ensure that consumers remain engaged in the buying lifecycle.
Chris Gates is Director of Retail at Hitachi Consulting UK. An award winning retail IT executive, Chris has a demonstrable track record of delivering transformative initiatives across multiple retailers; 12 years working client side and now building a successful retail consulting practice. Adept at translating business strategy and process to IT, shaping innovative solutions and leading business change & IT programmes and teams. He builds long term client and partner relationships through honest & engaging approach.