Retail Experience Changes in the Past Year
It is abundantly clear that there have been huge shifts in shopping behavior and retail experience in the past year. With greater focus on safety, customers wish to minimize their face-to-face contact by reducing their visits to bricks-and-mortar retail stores. The US, in particular, saw a 23% collapse in retail sales starting in March and April 2020. Despite this, there was a significant recovery during the following three months with purchases that consumers had initially deferred. A far greater proportion of those purchases, however, were made online. This caused a blight of store closures and retail job losses. Many of the world’s largest retailers are making significant structural business changes in response to new customer behaviors driven by changes in what is now important to them.
How Global Retail Businesses have Adjusted
Amazon continued to expand, with second quarter results up 40% up on last year. Reflecting its continual growth in sales, Amazon’s Chief Financial Officer Brian Olsavsky recently expressed their greatest challenge extremely simply by stating, “We’ve run out of space.” For Amazon warehousing, systems and increased shipping costs are key challenges, especially in maintaining their Prime customers’ expectations for delivery in one to two days. Consequently, Amazon is making major investments worldwide in warehousing, staff, and logistics.
Walmart has also weathered the pandemic well with results 7.5% up on 2019. Its “Walmart+” subscription service offers consumers delivery with no additional charges, aside from their monthly or annual subscription fee, which is competitively priced at a similar level to Amazon Prime. During the pandemic, Walmart’s focus has been on keeping costs to its customers low, knowing that saving money is paramount as consumers face economic uncertainty. At the same time, Walmart has sold off weaker elements of its retail business which are unable to match its overall performance, such as most of its underperforming UK Asda operation, which sold for $8.8 billion.
Outside of grocery, IKEA had to temporarily close 75% of its stores during the peak of the pandemic and has seen its annual sales reduce by 4% for its financial year ending in August 2020. Despite this, IKEA announced that they would open 50 new stores in 2020. The majority of these will be smaller stores located in city centers and higher traffic locations. IKEA’s online sales are 50% up year-on-year, but IKEA is investing in diversifying its physical store presence with new services, including kitchen planning studios, delivery, and furniture assembly and rental.
Similarly, Inditex, the world’s largest clothing retailer suffered from store closures during the peak of the pandemic, with April 2020 sales worldwide only 28% of the previous year and second quarter sales down 31%. With online sales soaring (up 74% from February to the end of July 2020) Inditex has focused on an omnichannel strategy with advances in inventory management making use of store stock to fill online orders.
What Happens Now for Retail Experience?
In addition to press reports of major structural changes, investments and divestments by large retailers, there are new syndicated research studies outlining the changes in consumer demand impacting different sectors of retail. There remains, however, a nagging doubt for many in retail that such studies at best can help us understand the past and current behavior of customers, but how do they help us predict what is going to happen moving forward?
This is a crucial question for many, since changes to number of stores, staffing levels, distribution, and online presence are all success critical decisions with large capital implications. To add further complexity, countries and regions with differing COVID-19 levels of impact, vaccination, and public health safety have varying restrictions. This influences customers’ behavior in different ways. These influences are constantly changing in response to the progress of the pandemic, combined with both local and national politics.
At the corporate level, there are large strategic questions to be tackled. At the store level, the requirement to respond to the local markets for each outlet and optimize store performance matter most.
Whilst thinking about all this, it is important to reflect that today’s customers are omnichannel consumers, who use multiple devices and channels to shop. Their activity includes visiting physical stores, online stores, review sites, information sites and social media using their smartphone, PC, laptop, and tablet, often switching between 4 or 5 different devices in the purchase journey. Making a final purchase may combine both store visits and simultaneous online research to secure the best price and terms.
The Data Behind Shopping Experiences
For many customers, stores are still important to reduce shipping fees, get the product more quickly, or experience the product as part of their purchase decision. Every action that consumers take in their purchase journey creates a data footprint. These footprint interactions, or “customer touchpoints,” create large amounts of both structured and unstructured data, capturing how customers are behaving. As we move to a more and more connected future, the ability to collect and analyze this data will play a large part in determining the successes and failures of retailers moving forward. This goes hand-in-hand with their ability to understand what is really driving the changing behavior of customers.
To address any of these questions, therefore, requires an understanding of not only the current behavior of customers, but also what is driving their behavior, and what is now most important to them.
How Can OSG Help Your Business’s Retail Experience?
With all this in mind, OSG can help retailers in three specific ways:
- Our unique behavioral analytics technology enables you to understand the “why” behind your customers’ behavior. Our methodology shows what is important to them with greater accuracy than any other approach.
- Using our o360 technology, we can track your customers’ shopping behavior, both online and offline to understand their complete journeys. This encompasses consideration of their initial needs right through to purchase, usage, and recommendation.
- Our RetailX 360 technology brings all your customer touchpoint data together using advanced predictive analytics. We can monitor your entire retail operation and make optimized recommendations for each individual store to improve. In turn, this will lead to increased store revenue and profitability based on their individual market conditions and performance.
To understand more about how OSG can help you fully utilize all your customer data sources and use predictive analytics to model retail experience and predict customer behavior, click the button below to leave your contact information.