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Future of retail: Can we be friends?

The meteoric rise of digital combined with economic uncertainty has changed the path to purchase forever, creating a whole new raft of challenges for anyone selling through retail channels. We address these in a series of four blogs entitled “The future of retail”. We now have more information on shopper behavior and interests than ever before. Customers leave a trail of data in the public domain when they shop or buy. We therefore continue our journey by looking at how this data can be used to help retailers better understand their customers and build stronger relationships with them.

Big data offers the opportunity for the creation of an increasingly personalized product suite and service. Our research shows that consumer appetite for such an offer differs by country, with those in emerging markets such as Argentina, Brazil, Romania, Columbia, China, Bulgaria and Mexico more likely to be positive compared to those in more mature markets. We’ve also seen from our FutureBuy research that personalization of service appeals more to younger consumers than older people. More than one half (52%) agreed they like websites making recommendations, compared to 39% of those aged 35 and over. However, young shoppers are just as concerned as older shoppers about the security of their personal information.

Personalization to drive loyalty and long-term sales

Personalization is not about short-term wins, it’s about making shopping easier for customers, building relationships and building sales in the long term. There is no question we are in the early days of using big data as a basis for the creation of personalized products and customer experiences, so examples are few and far between.

What we do see are e-commerce sites using information about customer preferences to encourage them to buy more. Amazon and UK-based grocery retailer Ocado recommend items to buy based on personal preferences. Numerous retailers use retargeting advertising to remind shoppers of websites they’ve visited but not transacted on. Retailers such as Best Buy in the USA use locations services to detect when customers are in store, pushing targeted promotions to their mobile phones. In House of Fraser, Hawes & Curtis and Bentalls in the UK, shoppers can use an app to access a beacon from a mannequin to receive details about the clothes on display – with the option of purchasing through their smartphones.

Other retailers, such as Selfridges and eBay, remind shoppers that their baskets are full but they have not checked out. This may increase sales at a tactical level, but whether it has a positive long-term effect on customer loyalty remains to be seen. Some shoppers perceive such marketing techniques as pushy and react badly to being made to feel they are being coerced into spending more money.

Retailers must consider the importance of the short-term gain of a sale and weigh this up against building longer-term loyalty. Shorter-term sales tactics should be complemented with longer-term loyalty strategies. For instance, businesses can gain the confidence of shoppers by helping them to fulfill their shopping mission. This connects to a broader trend in retail of fulfilling the shopper’s primary mission quickly to maximize opportunities to up- and cross-sell. Personalized retail should therefore be about organizing your retail space and communications around the preferences of your shopper, and this should be viewed as a long-term investment in shopper-friendly marketing.

Security of personal information remains a concern

Our research suggests that many people are concerned about how their personal information is being used online. In fact, more than 50% of shoppers are concerned about this issue across all markets. French and Spanish consumers appear the most concerned, with American, Canadian, Japanese and Australian consumers all expressing some worries. Even in markets such as Brazil, India and China where there is openness to the idea of personalization, consumers are in need of reassurance about the protection of their personal data.

Some retailers and manufacturers are showing customers how they can use their personal data to benefit themselves. For example, energy companies now have the technology to monitor energy usage at household level. This could be perceived as an invasion of privacy. However, the energy companies are showing their customers how to compare their data to similarly sized households and advising them on reducing energy consumption. This strategy does not result in a short-term profit, but it reduces the loss of customers to competitors and builds customer loyalty.FutureofRetail

Interestingly, there is a correlation between the demand for personalization of retail service and concern about security of personal information. The more information shoppers bestow on retailers, the more they want to be sure that it will be used responsibly. Building trust is essential. Loyal shoppers will return in the knowledge that the retailer or brand not only really understands their needs, but will also keep their information protected and secure.

For more information, please contact James Llewellyn at James.Llewellyn@gfk.com.

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