Going back to basics
How can a retailer win and retain customer loyalty in today’s environment when the impact of e-retail is becoming more pronounced and reshaping shopper behaviour?
In a recent conference on e-commerce organised by Dynamic CIO, there were more CIOs from brick and mortar retailers than from the world of e-retail. Everyone was concerned about understanding the impact of the rapidly evolving world of e-retail. Interestingly, there were some good pointers to how traditional retailers can effectively use technology themselves to build their competitive advantage.
Modern trade in India has steadily grown in the last 20 years to capture 8-10% of all retail trade. However, in the last few years, e-retailers have taken over about two per cent of spend themselves. That maybe two percent of overall retail, but if you look at that two per cent alongside the 8-10%, that’s 20-25% of what modern trade could have captured.
Of the various topics explored in the sessions, two areas are of significant relevance: firstly, how can a retailer win and retain customer loyalty in today’s environment and, secondly, the extent of overhaul required to ensure that these gains are sustainable. In this article, we will look at the first topic.
Why are you a fickle shopper?
Most people have their favourite store for most categories of purchases. These could be based on location, satisfaction or trust, or a combination of these factors. Why then would they shift to ordering online? The popular view is that it is primarily driven by discounts offered by the cash burning e-retailers. However, a study of online shopper behaviour conducted by Nielsen showed that the top three reasons for a person buying online in India are: advertising, peer influence and recommendations. The other, and less significant, reasons include attractive discounts, convenience and access to a full range.
What are your strengths?
The world of e-retail has some powerful advantages. E-retailers can study every single customer, every single time they visit. This is an awesome capability. It allows e-retailers to go deep into understanding their customers’ collective and individual buying behaviours. They can tailor their offerings pretty much on a one-on-one basis. At least, that’s the theory. In reality this is hard to do, but they will get there.
Does this mean brick-and-mortar retail is doomed? Not really. It is important to remember two things. First, the common image of online shoppers jumping from one website to another comparing prices and choosing the lowest one is not that common in reality. Nielsen has also shown that 50% of shoppers stick to their favourite online retailer. People with larger spends, who are more valuable to any retailer, tend to have less time to deal with a variety of websites. Shopper behaviour is likely to be similar, irrespective of whether they are going online or offline. The second important factor to keep in mind is that traditional brick-and-mortar retailers have a significant advantage. They are already known and trusted by shoppers. There is a history of trust, an understanding and an immediacy of touch and feel that cannot be offered online, at least for now!
In the past, modern trade was a novelty and offered new value to shoppers. There was dramatically improved display, more range and shoppers could take their time. However, with time and increase in numbers, what was a superiority in the past has become a norm. What new customer facing innovations have been done in the past few years? Not much, really. To get to the next level of attractiveness for a customer, it is necessary to bring about change and to do that, it doesn’t make sense to blindly copy an e-retailer, but to use insights from studying how people shop.
Know thy shopper
IIn best utilising these two insights, an excellent point was made by Ashish Jhalani, of e-Tail India, who referred to the concept of exploiting “micro opportunities”. These are small opportunities in the shopping journey where, if a change is made, it makes it easier for the shopper. For example, putting accessories alongside dresses and shirts and not tucked away in a separate corner. Trying out a new satay paste? Are the sticks that go with it nearby? Make it easier for the new and experimental shopper – they are most of your growth.
The traditional model of studying shopper behaviour in the store around the corner was a stout gentleman sitting behind the counter near the entrance of the store. He would collect payments, but also keep an eye on customers in the store and the staff . If a customer were searching for something and muttering, he would ask them what they were looking for and help them. In all this observation and interventions, the owner had a very good idea of the needs and buying behaviour of his customers, down to the level of each individual.
Matching that is hard in today’s retail formats. The level of staff engagement or, for that matter, even having the staff around long enough to recognise regular customers is a challenge. However, it does not have to be everyone. Just a few of the senior staff , supported with basic statistics and with appropriate feedback processes could make a big difference to sales and customer loyalty.
Help your customer
Technology can play a big role to help brick-and mortar retailers, as the e-commerce retailers have shown. They measure everything. What items did you view? How long did you view it? Did you come back to see it again? Is it in your wish list or your shopping cart?
Additionally, brick and mortar retailers can have an appropriate online presence, to complement what they do in stores. Attempting to do a pure play online retail model would be a challenge. World over, the omnichannel model is much talked about but is still somewhat hazy – nowhere near standardised. This is a good thing, for in times like this a smart player can get ahead. Once a new idea becomes standard, all relative advantage is lost.
It makes sense, therefore, to stick to (or restart to) focus on your customers and in attracting new customers. Understand their buying needs and helping to shape their buying behaviour. For example, a grocer knows that shopping for monthly provisions is very different from buying weekly groceries. For the weekly purchase, suggesting personalised new offerings for snacks just the day before your customer visits or menu ideas can help with coming up with something new each week.
In today’s world, buying online has cachet. Brick and mortar retail needs to give customers something to feel special about. If it can give them bragging rights with others, the chances are they will stay loyal and continue to do business with you.
Like most change, it is best done incrementally, but in quick iterations. Small changes done rapidly are easier to absorb, both by customers and by your own staff . This would be an easier, less risky way to using technology to building a barrier to exit.
The author is Partner & Managing Director – Indian Operations, CGN & Associates India Pvt Ltd