Nowhere is the retail sector more fiercely fought than in the UK. The total value of retail sales topped £358bn in 2016 – a third of the nation’s entire consumer spending. Around 2.8m people are employed by the sector.
The combination of Brexit-related economic uncertainty and the sheer number of brands fighting for attention means UK retailers face what PwC calls “one of the most competitive environments in decades”.
Such intense competition is simply driving up customer expectations. According to Retail Economics data, High Street sales rose by 2.1% in July, year-on-year, while online grew by 17.3%. In contrast, consumer confidence levels showed their sharpest drop in 21 years, falling eight points to -12. The public may be buying, but they’re not entire happy about it.
The leading few
According to the IBM 2017 Customer Experience Index, the contrast between increased sales and diminishing confidence is creating a chasm between the brands that lead and those that lag behind.
Generating around 30,000 individual data points about more than 500 retail brands worldwide, IBM’s study highlights that only 3% of retailers are deemed to be CX leaders in their relative markets. In contrast, 39% are seen to be ‘falling behind’ or lagging.
What’s more, the same research states that the gulf exists due to inferiority across a plethora of core areas - digital experience, mobile experience, personalisation, store experience, physical and digital integration, supply chain and social media.
With a seismic undertaking for the laggards looking to turn their fortunes around, we spoke to IBM’s retail business development executive, James Lovell and enterprise retail leader Jonathan Glencross about the tasks that those outside of the 3% should be tackling first.
1. Analysing and applying insights from consumer data
The 2017 Customer Experience Index states that leaders in the sector are those that best “harvest, analyse and apply insights from consumer data more effectively to enhance the customer’s shopping experience”.
Indeed, the leaders’ average score for providing relevant and timely content that generates a meaningful brand interaction is 3.8 times higher than that of the laggards.
“I think retail leaders are really starting to take data strategy seriously and have put in place proper customer data strategies. They may not be perfect yet, but the leaders have acknowledged that,” says James Lovell.
“They've got a customer data strategy and they’re looking at where and how customers are interacting with them and then using that data effectively across the entire customer journey.
“Laggards have really got to start thinking about putting a customer data strategy in place. It doesn't necessarily have to pool all data together in one central repository, but they have got to acknowledge where customer data exists and start to get that customer data to talk to one another as such. There will be data held in various silos, whether in the organisation or an agency or whatever. They've got to understand where the data exists and look to use that more effectively, to start to play catch up with some of the leaders.”
Jonathan Glencross states that laggards in the sector are often those that lack discipline around data: “To catch up with the leaders, laggards need to build a policy around collecting data responsibly as a central tenet for understanding their clients.”
For those that are already doing this, the benefits lie in being able to paint more detailed pictures of their different customer personas.
“Where we used to have personas of there are only two types or three types of client, we're starting to see a level of personalisation that has evolved to around ten categories of customer,” he adds.
“The likes of New Look and Arcadia now have different personas with full names and they understand the lifestyle, they understand the fashion, they understand where they shop, what time they shop. So, they're starting to build a much more detailed profile. It's not quite down to a market of one, but it's a more segregated community, which means they can make that interaction more meaningful.”
2. Customising experiences
“Leaders are much better at providing customisable experiences,” according to IBM’s research. Indeed, leaders enable customers to maintain the integrity and accuracy of a wide range of data within customer preference centres, scoring 6.6 times higher than laggards in this capability.
As Lovell states, this is about acknowledging that customers have to be in control of the experience they now have with retail brands.
“Customisable experience is definitely something that is becoming more apparent. Today’s consumers want to customise their experiences across all channels of interaction.
“Leading brands are changing the rhetoric. They’re saying, ‘OK instead of just giving basic preferences on how you want to do business with us, take that to another level and really say to us how you want to shop with us, which channels you want to interact with us through’. This is enhancing the experience because it’s on the customer’s terms. They’re able to dictate whether they’re contacted via Facebook, Twitter, email, even chatbot. It’s providing far more control than simply giving everything up to the retailer across all channels.”
Glencross gives the example of myWaitrose, the loyalty scheme that allows customers to ‘pick their own offers’ rather than having them assigned based on assumption. Whilst a relatively simple concept, it is one that clearly acknowledges the lengths retail leaders should go in order to put their customers in control of the relationship.
“It’s something laggards don’t do. Just expressing preferences about how and when they shop, for example, or what method of contact communication they want to have. Just simple ways of starting that journey. Then perhaps moving into asking the customer to maintain their data in some small way, just to make it more relevant, more accurate.
“Have they gone on a different diet, have they gone on different style or fashion, have they got an event coming up? That type of preference might help. If they like certain cloths or certain colours, etc. Ultimately it’s about improving experience.”
3. Creating convenience and flexibility
IBM’s research states that “leaders provide a much more flexible and convenient experience” than laggards.
Within the 2017 Customer Experience Index, leaders’ scores are 8.2 times higher than laggards when it comes to providing accurate inventory data across channels. Home delivery is another area where leaders outperform, with 96% achieving a very good or excellent score compared to only 9% of laggards, driven mainly by the ability to allow customers to select preferred delivery days and timeslots.
On this point, Glencross states laggards must find ways to speed up innovation across the supply chain.
“With things like mobile, we're finding new technologies, new suppliers, new companies in these spaces, which are, by their nature, more agile, more purpose-built for one application and don't try to do loads of different things.
“The whole mantra now is fail fast, try many times. Being first to market, first to offer that experience to your customers. One of the key statements in the report is that ‘the last great experience your customer had with you is the benchmark for every other experience they have’. I think that sums up how building that experience and being first to market and being quick allows you to get ahead of your competition. That sets the benchmark for others to follow.
“We've seen that in some of the home delivery areas in particular, or some of the pick-up from store options, some retailers are allowing customers to pick up within the hour of placing the order online. That type of interaction is only possible through having highly agile systems, through the use of mobile technologies, and customers who are very mobile savvy and plugged into their phone the whole time.”
Lovell says the ability to collect and analyse data in the supply chain is an area that is widening the gap between those that lead and those that lag, and that it is often something that is engrained in staff at both the coalface as well as the back office.
“If you look at Marks & Spencer as an example, they’re trying to get that inventory visibility at store level. Every item they sell has got an RFID tag attached to it from the minute it leaves the factory. Ultimately, people can fill an order and know exactly where it is in the journey to the customer. That is going to give you a competitive advantage as it's a level of visibility that the customer themselves is growing to expect as they become more time poor and less loyal to brands.”
4. Improving customer communications
As the Customer Experience Index states, “leaders support customer-to-customer communications”. 64% of leaders allow customers to view ratings, reviews, and/or other consumer-generated content in three channels, to be exact; whereas only 4% of laggards provide access in just two channels.
“We’ve seen leading retailers recently trying to come up with more ways of accessing social data and using it to drive interactions on a real-time basis. We've also seen things like gamification, where we trying to drive more engagement at a deeper level. Something that's very similar to the Pokemon strategy. Is that an option for retailers? Can they put some gamification into it? Can they put some competitive nature in there? Can they have groups of their customers talking to each other through such a platform and enjoying a shared experience?
“These are questions that need to be asked – around interactions between retail and customer and customer-to-customer. I think the power is now about customers speaking to each other and sharing reviews or social comment or using that shared app with either family, friends, and other people with like-minded requirements for their shopping.”
And as Lovell explains, leading in retail is becoming as much as about understanding the idea of community as it is about channelling products to the right segments.
“I'm road cyclist and a runner. I've got my preferred retailer for sourcing my cycling and running gear. But at the moment, the only way that they reward me is based on spend level, and I spend sufficiently with them to get a 12% discount.
“That's all well and good, but they've given away unnecessary margin to me. What they don't know about me is my cycling profile compared with my running profile. When do I ride my bike, when do I go out for a run, where do I go, how far do I go? If this retailer were, for instance, partnered with a popular cycling and running forum and data logging app that I was a potential user of, then you can see there’s then scope for understanding a little more about my requirements for the products they sell. Ultimately that’s going to lead to a better relationship between me and that particular retailer as they’ll be able to better befit my needs and learn from a community of like-minded customers.”