‘We are moving into an era of the frivolous being unacceptable and the frugal being cool’ Andy Bond, past CEO Asda, December 12th 2008, The Telegraph
The past predictions of Andy Bond, ex CEO of Asda in 2008 are still true in 2012 where we are seeing and feeling the changes in customer retail and purchase behaviour. This paper will reflect on retailing in this dynamic changing world …
Where are we now?
According to the Office for National Statistics the retail sector ...
- In January 2012 an estimated £24.6 billion was spent in the retail sector, compared with £23.6 billion in January 2011 and £42.1 billion in December 2011
- Shoppers in the UK spent £7.9 billion online during December 2011, the equivalent of £155 per person
- Online sales growing 25% Year On Year – 20% of sales will be on line by 2020
- Supermarkets share of retail sales has risen from 37% to 43% in 5 years
- Consumer spend in 2012 will grow 1.2% - 3rd lowest in 40 years
- 74% of Smartphone shoppers made a purchase as a result of using their Smartphone.
- Of these 76% have purchased in-store, 59% online while only 35% has made a purchase via their Smartphone.
(Source: Google & IPSOS OTX, April 2011)
In addition to the above factors in the retail world, the UK consumer faces another year of falling disposable income as higher fuel and commodity prices push up inflation. According to the Centre for Economics & Business Research family incomes face further squeezing, with the ‘better off’ facing the biggest drop in income in percentage terms. Unemployment, amongst younger consumers aged 16-24 years has risen to over 1 million in the period February-April 2012. The growing older segment … 16.5 million in this age group and growing … are seeing the age of retirement increasing and their future household real incomes falling. Increased media attention to these and other economic & financial issues are reflected in the apparent customer caution in terms of current and future planning of household spending. So our customers appear to have less money … and are more careful about spending it due to economic and political uncertainty both now and in the future.
In recent years there has been an explosion of new marketing channels evolving from television, print and radio to the world of social media outlets such as LinkedIn, Twitter, Pinterest and Facebook. This has created a world of marketing which is changing rapidly. Smart phones appear to be everywhere … to put it into context 7 trillion texts were sent worldwide in 2011!
In the UK, there are now 25 million shopper loyalty cards, informative price comparison websites, coupled with supermarket promotions such as Asda MoneyBack Guarantee and the reemergence of coupons/vouchers, all promotional factors instrumental influencing purchase behaviour. The consumer is demanding more l and relevant customer experiences … and is the first to compliment or complain via social websites if the brand does not meet expectations.
This has resulted in a very different customer … it is now one who is empowered with information and as communication channels are ever changing, they are becoming assertive, smart and self educated, actively searching for information … the customer now wants to be heard with a new voice.
So what do these macro environmental factors signify for the future of retail …?
Where are we going?
Our customers are operating across an ever proliferating range of channels be they online, offline, social or mobile, and organisations need to make their products and services available across these channels. The emergence of differing communication channels have increased all the points of contact by retailers with their customers e.g. phone, email, e-commerce, websites, social networking, emails and occasionally mail responses. Retailers need to be aware of where their customers are and provide them with a seamless customer experience whatever the channel of delivery ... this is multichannel customer engagement ... in what is now being called an ‘omnichannel’ customer engagement environment.
For this reason it is important the customer retail experience needs to be consistent and aligned with the brand, constant auditing of the experience, operating model, service and brand values need to be maintained to interest new customers, keep existing customers and grow the customer base, thus achieving a return on investment.
The merging of the bricks & mortar shopping and ecommerce does emphasise the need for a consistent brand and customer service message. Brand values need to be reflective in all aspects of the customer journey & customer touch points.
E-commerce is the growth retail form. Amazon is now returning a 34% growth in retail sales, and has achieving this by lized service (low prices, broad assortment, convenience, reliability and a trusted brand). Amazon continues to build relationships with retailer’s e.g. Mamas & Papas website being available via Amazon … meeting the needs of on line ‘mother’ segment. Amazon lockers located in railway stations for the time poor commuter segment who is not home to pick up their Amazon package also customizing their customer needs.
However a one size fits all approach to social media spending will result in a poor use of marketing budgets … it is important to understand the differing segments purchasing on line … what is now being called the Social Media Persona … how do your customers use technology? By multi-tasking? Watching television, reading texts, and searching on their laptop or tablet for your product?
The World Pay Report suggests that on line spending is being driven by younger shoppers, primarily in their 20’s, buying clothes, sports gear and software downloads. Women in their mid 40’s are the second highest spenders but they are more likely to buy financial products or items from department stores. The top three online spending categories for the UK consumers are clothes (36&), food (33%) and money spent with department stores (33%). However, one of the most important aspects of technology is that UK consumers spend 25% of their disposable income online.
Interestingly the growth of smart phones and tablets will further accelerate the trends in purchasing. In 2011 a report by Ofcom, A Nation Addicted to Smartphones 2011, identified over a quarter of adults, 27%, and almost half of teenagers 47% now own a Smartphone which includes devices such as iPhones, Blackberry and android phones. The majority of Smartphone users 81% have their mobile phones switched on all the time even when they are in bed or in the bathroom!
So with all this talk of omnichannels, ecommerce etc … does this mean the demise of the bricks & mortar shopping? According to Planet Retail analysis, the retail sector is going undergoing a seismic shift – the future being fewer, more profitable stores combined with a strong digital presence. It is the engagement of customers driving long term loyalty which will be key in 2012. This makes sense when considering that the purchase decision process has shifted somewhat …
- 8 out of 10 consumers research purchases online,
- while 42% research online and then buy online and
- 51% research online and then buy in-store
(Source: Google & IPSOS OTX, September 2010)
It therefore appears that convergence of on line and in store strategies will be a key determinant for the future of retail...
So how do we plan for the future in retail …?
In the retail sector as communication channels continue to evolve … and the customers develop their usage of these channels, it is more important than ever for retailers to focus on traditional marketing strategies in a dynamic market and deliver the right message at the right time to the right consumers. Consistent core brand values must be evident in the multi-channels of promotion and communication and specifically customer service. It is therefore important in this dynamic world to …
- Understand your customer … their customer journey … and the touch points in the customer
journey … from in home surfing the web, social networking influences, purchase points, visiting the store, delivery, online reviews, after sales service … to name but a few
- Understand the online customer … their online behavior, preferences, decision making … thus identifying different needs, wants and expectations from e-commerce
- Design ecommerce based on customer understanding … understand their ... both on and off line … understand differing key similarities & differences in purchase behaviour … developing strategies to meet these needs
- Understand your brand … integrate all channels with the consistent brand values, clear positioning, differentiating from your competitors … ensure all company personnel are consistent in these values, not only customer facing personnel
- Develop customer service based strategy based on the consistent brand values … excellent customer service strategy will differentiate the brand from competitors e.g. Amazon. However all people, process, systems need to be consistent with the brand. it is important that service and style should be designed to deliver consistently to improve customer experience and reduce costs
- Develop a clear audit process of points of contact, customer journey, customer experience … customer voice … the omnichannel customer engagement environment.
In summary, as Andy Bond stated in 2008 ‘it is cool to be frugal’, in 2012 in a rapidly changing retail market this statement still rings true. However the customer now through dynamic technology is empowered with information and as communication channels are ever changing, it could be argued that the new 2012 statement is ‘it’s cool to be frugal and assertive and smart and self educated’ … the customer now wants to be heard.
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