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The reimagining of retail and what it means for marketers

30-second summary:

  • Periscope By McKinsey survey in the US, UK, France and Germany, shows retail and we market to consumers is changing
  • The pandemic has created a shock to loyalty with up to a third of consumers switching to “caring” retailers and brands
  • Some behavior changes during COVID-19 will stick and others will not. Marketers need to understand how their customers are evolving
  • Retailers need to deliver on their omnichannel promises if they are to succeed in the future
  • Customers want hyperlocal and personalized experiences both in store and online.

As the response and recovery to the COVID-19 pandemic continues, it has become clear that the crisis has ushered in a new reality for consumers and retail sector.

The blow has been swift and vast, upending lives and livelihoods and upsetting economies. Some of the most dramatic effects have been to consumer behavior—how people buy, what they buy, and where they buy it.

Colleagues at McKinsey revealed that, in a matter of 90 days, we vaulted forward ten years in US ecommerce penetration, with similar effects being seen across the globe.

Immersed almost exclusively in the immediacy, convenience, availability and safety of digital experiences during lockdown, consumers reset their expectations and preferences, and forced retailers to change their trajectory, priorities, and operating model.

Yet even as an economic downturn has put increased pressure on retailers, this generation- shaping event has opened up entirely new fronts in the competition for customers.

McKinsey research has shown that in past recessions, companies that invest in and deliver superior customer experience during a downturn emerge far stronger than their peers once the economy rebounds, producing shareholder returns three times larger than average.

Three retail trends are clear for the months ahead

Ecommerce spending has surged during the shutdowns, as the appetite for digital and contactless ways of shopping has intensified.

To better understand how the changes taking place in consumer behavior and priorities might impact retailers and the approaches taken by marketers charged with promoting those brands, Periscope By McKinsey surveyed more than 2,500 consumers in the US, the UK, France, and Germany to understand how consumer behavior is changing.

Conducted both prior to and during the shutdowns, it looked at what changed and what trends will likely stick in the coming months. The subsequent report “Retail reimagined: The new era for customer experience” shows several core themes have become evident among consumers.

The shock to loyalty

Rather than sticking to familiar patterns and brands, consumers have embraced change amid great uncertainty. In the four countries surveyed, 40 percent of consumers said they tried new brands or made purchases with a new retailer between March and June 2020.

Loyalty was particularly vulnerable in the US, where 46 percent of consumers made the switch, followed by 44 percent of their UK counterparts.

Consumers’ top reasons for making the switch across all four markets included competitive pricing and empathetic retailers that support their employees during the pandemic with initiatives such as increasing wages, giving extra sick leave, or paying for lost wages.

  • Switched due to competitive pricing: US—51 percent; UK—48 percent; Germany—41 percent; France—36 percent
  • Switched to a “caring” retailer or brand: In the US and France, almost a third of consumers (27 percent and 26 percent) cited this as a reason for switching brands while 19 percent of UK and 17 percent of German shoppers considered this important

Redefined convenience and safety

New concerns such as safety and hygiene are now top of mind.

More than 50 percent of respondents say they want stores to follow guidelines to help keep shoppers and employees safe, such as the installation of plexiglass at the checkout, the use of masks, and availability of hand sanitizers, while 59 percent say it’s important for stores not to be too crowded.

Also, frictionless experience is now even more important. Consumers being able to find what they’re looking for quickly and easily has increased in importance in every country (by 14 percent in the UK, 11 percent in the US, 10 percent in Germany, and 7 percent in France) since March, and was ranked among their top three browsing priorities.

This ability was especially valued by 65 percent of US consumers, 59 percent of UK consumers, 52 percent of German consumers, and 47 percent of French consumers.

Additionally, 52 percent of shoppers questioned in early June stated that fast checkout was an important part of a great purchasing experience.

The flight to online

Whether it’s digital tools such as screen browsing, easy mobile payments, or ordering online with seamless curbside or in-store pickup, shoppers clearly want technology to elevate their in-store experience. The flight to digital and increased customer expectations have created new challenges for how retailers serve their customers.

Yet, in the first run of our survey, more than 35 percent of shoppers reported zero exposure to even the most talked-about or basic in-store technologies such as digital screen browsing and mobile or contactless payments.

In the second run of the research in June, consumers were then asked which forms of communication/experience they would like to see offered by retailers in the near future.

The top three findings in each market revealed a clear difference in cultural preferences:

  • US: mobile payments—30 percent; mobile app orders—28 percent; apps to scan barcodes—25 percent
  • UK: mobile app orders—34 percent; mobile payments—28 percent; self-identification at terminal—24 percent
  • Germany: mobile payments—29 percent; self-identification at terminal—21 percent; apps to scan barcodes—20 percent
  • France: mobile payments—22 percent; mobile app orders—21 percent; digital shelf labels for info—21 percent

The new era for customer experience

As leaders plot how they will bounce back, they also need to look beyond the immediate challenges and issues. Now is the time to engage in critical long-term planning to quickly recover revenue and accelerate future growth.

Key considerations for marketers include:

Rebooting loyalty online

With customers eager to try other brands and stores, this is a once-in-a-generation chance for retailers to recapture and win back customers. To create dynamic loyalty programs:

  • Develop an underlying consumer-loyalty strategy that transcends the “earn and burn” discount programs of the past. Programs that balance monetary rewards with experiential offerings designed to make consumers feel special and recognized (such as exclusive events, early access, unique discoveries) can provide real value and appeal to a consumer’s head and heart.
  • Pursue partnerships with other consumer brands to develop a joint loyalty ecosystem around a unifying customer value proposition. Footwear retailer DSW, for example, partnered with grocery chain Hy-Vee to sell shoes at the grocer’s extensive network of locations, giving the footwear retailer additional customers and Hy-Vee an opportunity for incremental sales.

Deliver on omnichannel ambitions

This is a real moment not only of changing loyalties and a shifting leaderboard, but an opportunity to really connect with consumers in new ways as they reformulate their habits and decision journeys.

  • Companies need a complete understanding of which new, COVID-19-era habits will stick and which won’t, and for what segments. The surge in online shopping, for instance, is likely to spur a sustained increase in buy online/pickup in-store options—roughly half of consumers who used this option during the shutdown say they intend to keep using it.
  • Deliver hyperlocal and personalized experiences—both in store and online. This requires a deep and granular understanding of the customer and their decision journey—from zip code to zip code, and category by category—to quickly identify and predict where demand is going to surge or not. As consumers navigate new routines, retailers and brands have a unique opportunity to meet this demand with the right targeting, messaging, content, and customer promise. During the shutdown, between 12 and 21 percent of survey respondents said they switched to brands that sent them relevant messages or promotions in their preferred channel.

Retail re-imagined

While disruption and fierce competition are certainly nothing new for retailers, the pace and intensity of COVID-19-related change and their effect on consumers is unprecedented.

This is a pivotal time where we’re seeing not only changing loyalties and a shifting leader board, but an opportunity to really connect with consumers in new ways as they reformulate their habits and decision journeys.

As retail leaders plot how they will bounce back, they also need to look beyond the immediate challenges and issues. In parallel to quickly recovering revenue, it is critical to engage in long-term planning and accelerate future growth.

Retailers and their marketers need to be able to move at speed, and those able to will be well-positioned to take advantage of a re-imagined world of retail when the recovery comes.

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Reblogged 3 months ago from www.clickz.com

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