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| A buyer’s market |
  
Posted Date: 06/06/2011
By Ian Wong*
While consumer confidence ratings are high, Australian retailers have not seen a recovery in spending after the global financial crisis. Being frugal is back in fashion for the consumer.
Additionally, the strength of the Australian dollar and the shortage of local online retailing options have seen a growing proportion of local spending lost to overseas online retailers.
It is currently estimated that more than 45 per cent of Australians’ online spending goes offshore.
Trying to address these shifts in consumer behaviour, retailers have discounted heavily to move stock, which has reduced margins to levels that are not sustainable. So what can retailers do for the longer term that will bring customers back into their stores?
Consumers are getting smarter
Retailers need to understand that Australians have become smarter consumers.
They are tech savvy and happily use technology as an integral part of the way they shop. They also use technology to connect and share information with retailers and other consumers. Because of these two abilities, they are informed about the retail experience - both theirs and everybody else’s.
In 2009-10, IBM surveyed more than 35,000 consumers globally, including Australia, to understand how they chose to shop, what shopping methods they preferred and what they would demand from retailers in the future.
The survey, Meeting the Demands of the Smarter Consumer, found that almost three quarters of Australian consumers want to use some type of technology in the shopping process - this includes mobile phones, the web and instore kiosks. These technologies serve different purposes.
Consumers want to use websites, primarily to compare prices, print coupons, and read and write product reviews; instore kiosks to review product features and obtain product information; and mobile phones to locate the nearest store, compare prices and check whether a product is in stock.
They use social networking sites such as Facebook and Twitter to connect with other shoppers, and the opinions of others influence their purchasing decisions. A third of consumers polled, largely Generations Y and Z, said they were likely to follow a retailer on a social network. However, consumers expect some form of value exchange with the retailer in return for following them.
For example, US grocer, Wholefoods, created a mobile phone app that allows shoppers to go on healthy shopping scavenger hunts. As the shoppers accomplish missions, they earn special badges, which they can be posted on Facebook or Twitter for bragging rights with their friends.
Shoppers want individual treatment
Consumers know more clearly than ever before what they want from retailers. Australian shoppers believe that retailers should focus first on offering better promotions and prices; then making product improvements; and finally, providing better customer service.
More specifically, they want personalised promotions and knowledgeable store employees who are willing to help during the shopping process. More than half of Australians surveyed by IBM said they were willing to spend more money with a retailer that addressed these needs.
They expect to be treated as individuals. Consumer expectations have been raised by their experiences shopping online with retailers such as Amazon.com, which analyses both individual and aggregate customer behaviour to create recommendations for each consumer.
Developing a customer unique shopping experience requires insights into shopping needs, behaviours and preferences.
One way to do this is by analysing the unstructured data about consumer preferences found in social media such as Twitter and blogs. Loyalty programs are a good way to capture customer transaction data. Customer behaviour analytics can analyse this transaction data and gain customer insights.
To take full advantage of these insights, retailers need to have a single view of the customer across multiple channels. This will allow them to integrate these insights into all customer-facing processes and deliver proactive, realtime, customer unique shopping experiences.
Implementing a multi-channel strategy
The first stage in this process is creating a multi-channel retail strategy and roadmap that outlines the vision for the customer experience the retailer wants to provide.
This includes the channels that will be offered to customers, cross-channel integration, order fulfilment and returns, and analytics.
Starting to realise this vision will require core systems that give customers a choice of shopping options – an online channel, store checkouts and kiosks and the potential for a mobile shopping channel.
Once the core systems have been implemented, retailers can start to increase customer loyalty and revenue through cross-channel selling and by developing a consistent brand experience across these channels.
With these systems in place, they can use techniques such as integrated product information management, which allows product data to be managed in one place and made available to all channels including online, kiosks, merchandising and stores, or multi-channel order management and fulfilment, which enables consumers to pay online and pick up in store or pay in store and have the product delivered to their home.
Finally, retailers can seek to deliver customer unique shopping experiences as a means to increase revenue.
With a single view of the customer, they can integrate customer behaviour analytics in a closed loop, making better matched and more personalised recommendations each time customers purchase something.
Consumers are looking for retailers that give them what they want, when they want it. A strong, multi-channel retailing strategy will enable retailers to meet this demand.
Retailers that use these smart technologies to develop a closer relationship with their consumers will be rewarded. Conversely, customers are more likely than ever to shift to a new retailer if their existing primary retailers do not provide the experience and rewards they expect.
* Ian Wong is retail and consumer products industry leader at IBM Global Business Services.
“Consumers want to use websites, primarily to compare prices, print coupons, and read and write product reviews; instore kiosks to review product features and obtain product information; and mobile phones to locate the nearest store....”
This feature first appeared in Inside Retailing Magazine. Click here to subscribe. |
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