Introduction
In our introductory article, we set out some of the challenges that operators have faced in the UK retail sector including Brexit, the Covid-19 pandemic, and the cost-of-living crisis.
In this article, we look how retailers are focusing on enhancing the customer experience to trying to win back their customer base and regain or consolidate market share.
Today's customer is more discerning and – faced with many different offerings across multiple platforms – retailers must provide a distinctive experience that is consistent across all of their channels in order to engage customers long enough to create a connection and be rewarded with a purchase.
Bricks and mortar revival
With the lockdown restrictions now a spectre, there has been a return – albeit a muted one – to in-store shopping, with increased footfall in shopping centres and the high street. Retail footfall rose 3.3% during 2023 – although this was still down more than 10% on pre-pandemic levels1. Despite this overall reduction in footfall, retailers are still convinced by the value of physical stores, incorporating them into a cohesive omni-channel experience alongside digital offerings. For example, jewellery retailer Pandora is planning to expand on the high street by opening 10 new stores in the UK, and discount retailer, B&M is aiming to open at least 45 UK stores in each of the next two financial years2. The power of the high street is so strong that even pure etailers are converting and opening stores; Sosander is planning a number of UK store openings in 20243.
Retailers are also enhancing their physical shopping experiences, by adding more offerings to the traditional shopping space. For example, Primark opened a Disney Café in its Birmingham store, a Friends-themed Café in Manchester and a 'Tasty by Greggs' Café in its London Oxford Street store. It has also expanded into nail and beauty bars, and barbers in-store. These allow customers new, interactive, and exciting experiences to relax, socialise and have fun in-store, offering a different edge to its competitors and something that an e-tailer will find hard to compete with. Importantly, they also increase dwell time, customer spend and brand loyalty.
Omnichannel focus
Growth and diversification in physical store openings is matched by growth and investment on digital platforms too.
Some large retailers, such as Ikea, have focused on developing a coherent omnichannel strategies when deciding how to expand each of their digital and physical presence. 'Store Visits' is a good example of this, measuring how online ad clicks impact on their stores' physicality. By applying bricks-and-mortar conversion rates and average basket values, they can estimate how store visits are shaped by the use of mobile ads. This is a great example of how data driven marketing strategy can help to deliver exceptional customer services across all platforms.
Another example is how Connected Television ('CTV') is becoming part of large retailers' strategies (such as Walmart and Amazon) in developing their omnichannel offering. CTV enables retailers to utilise digital marketing by placing advertisements in TV and media outlets to target greater numbers of consumers. For example, Walmart's partnership with Roku allows customers to buy Walmart products while on the same Roku channel (without having to change platforms or devices). This is an attractive and engaging approach which can customise advertising for audiences of different demographics and based in different regions. This is a trend which is continuing to grow in 2023, as surveys show that 83% of retailers expect to increase digital ad budgets across multiple channels, and 86% plan to spend more on CTV in 2023 (Why CTV has become central to retailers' marketing strategies – Modern Retail).
And omni-channel goes even further than physical, ecommerce and social – some retailers have headed into the metaverse. For example, Gucci has released digital avatar items and clothing for Roblox, Pokemon Go! And Zepeto, virtual worlds where users can create their own unique Gucci-clad avatars.
A balanced, coherent omni-channel presence is critical in order to deliver the level of customer experience that consumers expect. Retailers must achieve brand-consistency across all omnichannel formats to ensure that they message and interact consistently with the same target audience. Nothing turns consumers off like inauthentic messaging or a disjointed customer experience.
Embracing technological opportunities
Just as physical spaces are diversifying to change 'shopping' into 'experience', so too are online retailers looking to embrace technology to add customer-focused functionality, and fun, to their digital spaces.
Make-up brand, Charlotte Tilbury, became the first retailer to utilise ecommerce functionality from Obsess (ecommerce platform), to allow virtual and "group shopping" together in real time online, to recreate the experience of being in-store. These virtual stores offer interactive and immersive in-store shopping experiences for customers, but from the comfort of their homes. Customers are also able to personalise their shopping experiences using the platform's advantaged technology to find tailored products matching to their own skin tone, facial features and body shape when browsing and shopping. This enables retailers to offer an innovative and personalised service to consumers, with the aim of securing greater levels of customer engagement across different digital spaces.
Digital virtual mirrors use virtual or augmented reality to allow customers to 'try on' different outfit styles, shades and sizes without having to physically change clothes or touch the items. This is another way retailers are using technology to provide a more personalised, immersive shopping experience and better customer engagement, driving brand awareness while gathering valuable customer data, generating personalised offers, and showcasing a wider range of products.
AI has the potential to revolutionise the sector – retailers will be able to harness it to review data to refine their products, boost customer experience and optimise store design. The less-risky and more concrete uses are arguably in supply chain – thanks to predictive analytics retailers can create more accurate forecasting models, letting them price their products and stock the right amounts with confidence. Also, according to McKinsey, "applying AI-driven forecasting to supply chain management...can reduce errors by between 20 and 50 percent – and translate into a reduction in lost sales and product unavailability of up to 65 percent." This can reduce warehousing and administration costs for retailers.
Moreover, technological improvements and the myriad business challenges faced by retailers have rejuvenated loyalty schemes. They have proved to be one of the most effective revenue generators in recent years. As many as 84% of consumers say they're more likely to stick with a brand that offers a loyalty program. 66% of customers say the ability to earn rewards actually changes their spending behaviour4. A great example of this is Starbucks Rewards, which has over 20 million members. On top of delivering convenience to customers with cross-channel account top-up and queue-jump ordering, the program gives members access to free in-store refills on coffee and tea. They also offer a points-based incentive scheme that keeps customers coming back, offering them unique giveaways and discounts as they accrue "stars".5 Loyalty schemes increasingly rely on technology – accessed through an app, facilitating personalised offers and discounts, and sitting across purchases made on all channels.
Summary
Retail is ever evolving and transforming, using modern technologies, to reflect, and maybe anticipate, customer expectations, values, current issues across in-person and digital channels. If retailers do not modernise and implement a strategy to enhance the customer experience strategy, there is a real risk of not remaining as relevant as their competitors and failing to meet customers' expectations.
Footnotes
1. Footfall rises 3% in 2023 despite cost-of-living crisis – The Retail Gazette - 17 January 2024
4. What Is a Loyalty Program? 5 Best Examples - Bold Desk - 27 November 2023
5. 20 Retail Brands with the Best Customer Loyalty Programs – Emarsys - 5th January 2022
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