There is a gap growing between customer expectations and the customer experience that they receive – and retailers are in danger of falling into it.
Many seem to have been caught off guard by the speed of change, not just in the emergence of new trends and technologies, but also in consumer uptake of these. It means that retailer customer experiences are all too often disappointing and frustrating for shoppers – whether instore, online, or on any of the other channels provided by the brand.
Case in point – in a survey of retail organisations by Deposco and Retail Dive, 87% of retailers say they know omnichannel fulfilment is important, but 64% aren’t satisfied with their performance.
It seems that even when retailers know expectations are shifting, they can’t quite close the gaps in their own customer experience.
So, which trends should retailers be paying attention to if they want to understand customer expectations right now?
The Cost-of-Living Challenge
Life is expensive currently. Across the globe, consumers are finding that their wallets are under pressure from rising bills, high inflation, and price increases. And the retail sector is feeling the impact.
EY’s recent Future Consumer Index surveyed more than 21,000 consumers across 27 countries. A massive 94% said that rising living costs are a concern. Similarly, PwC’s global survey found that 96% of consumers intend to adopt cost-saving behaviours over the next six months.
A Barclays survey of 2,000 UK consumers in March found that 68% are looking at ways to reduce their weekly spending. Just under half (49%) are cutting back on luxuries and treats and 48% are buying more from budget and value ranges. McKinsey & Co found a similar story in the US where 80% of consumers said they are trading down when shopping.
For some consumers, cost-of-living pressures will mean a return to more in-store shopping. Although there is a lingering perception that the online marketplace giants like Amazon have the lowest prices, many discount and lower cost retailers have no e-commerce offering. This is one way that they keep their prices lower.
Buying in-store can also make it easier to keep track of purchases and reduce spend by choosing cheaper alternatives as all the options are immediately visible at the shelf.
At the same time, luxury and premium brands continue to do well as they maintain their aspirational nature. According to Bain & Co, a massive 95% of luxury brands in the US and Europe generated positive growth in 2022. Savills also reported an 77% increase in luxury store openings in Europe in 2022.
Loyalty Isn’t Guaranteed
Customer loyalty is also being challenged. Value is the name of the game currently – however the individual customer interprets that – which means shoppers are increasingly switching who they buy with if they see better deals or prices.
Only 17% of consumers said they will keep shopping with the brands they trust, regardless of price, in a global survey by Mirakl. And 43% revealed they have already stopped shopping with a specific retailer because of increasing prices.
It’s not just the cost-of-living crisis that is causing this shift in brand loyalty though. A 2022 study of UK and US Gen Z consumers found that 62% say they investigate other options before making a purchase – despite having a favourite brand. Over 50% of Gen Zers who say they have a favourite brand also say they would switch to another brand if they were cheaper or of higher quality.
Clearly, brands can’t expect customers to keep coming back based on their name alone. The overall customer experience matters more than ever when consumers are deciding where to spend their time and money. This includes helping customers to get better results from what they buy and treating consumers as individuals through personalised interactions.
Brands that can’t compete with discounters when it comes to price should focus on communicating the overall value of their brand, such as quality, range, convenience, exclusivity, sustainability, and authenticity. Notably, 75% of US shoppers would spend more money with retailers they feel are authentic, according to a survey by Ascendia. Seventy percent also said authenticity made them more loyal.
Sales Aren’t Always Final
Shopping has long been a form of entertainment and enjoyment for consumers. This hasn’t gone away even if they have less spare money to spend. In a survey of UK consumers and retailers by Advanced Supply Chain Group (ASCG), 60% of consumers admitted to using retail therapy to escape the doom and gloom of rising living costs.
This means that retailers – particularly on the e-commerce side – can’t rely on sales being final. Consumers are leaning into returns policies to keep ordering products that they want, try them on at home, and then return them for a refund. ASCG reported that 63% of retailers are experiencing an increase in the number of items being sent back.
Some customers may be placing orders with the knowledge that they won’t be keeping anything in order to get the pleasure of having the items arrive and trying them out. Some may be ordering more than usual so that they can try different options to make the right choice before sending the rest back.
In ASCG’s survey, 42% of consumers say they’re more likely to return items due to financial pressures. The question of ‘do I really need it’ is now harder for consumers to ignore. Some shoppers may also find that their situation shifts between placing an order and receiving it, resulting in them returning more goods.
From a customer experience perspective, retailers are having to try to balance consumers’ desire for robust returns policies with their own bottom line. Some ways to mitigate large volumes of returns include charging for returns, limiting the use of buy-now-pay-later and other flexible payment schemes, and blacklisting customers who return too many items, but retailers can risk alienating customers by being too heavy handed.
Sustainability Isn’t Going Anywhere
Sustainability has been on the consumer agenda for a while. But it’s at times like these, when budgets are squeezed, that customer priorities become clear. Asendia reported that price is the key consideration for UK consumers (56%), followed by value for money (55%), based on a 2023 consumers survey.
The truth is that for some shoppers sustainability is fundamentally at odds with the low prices they want. In some cases, customers physically don’t have the money for anything other than fast fashion or value groceries – even if they’re concerned about sustainability. Others engage in non-sustainable ‘vice’ shopping practices to take part in trends and receive items faster.
Interestingly, the cost-of-living crisis is driving consumers towards sustainable shopping because many money-saving consumer behaviours are also environmentally friendly ones. For example, second-hand sales, particularly for clothing, continue to rise. Online marketplaces like ebay, Vinted and Depop are helping to fuel this trend.
Even luxury retail is embracing resale. Again, specialist e-commerce marketplaces like the Vestiaire Collective are leading the way, but some luxury brands are now offering their own resale services. This in turn is making luxury more accessible for some consumers.
Rental is also becoming more common for special events and one-off occasions. The charge is being led by online start-ups, but high street brands are now starting to dip their toe in. This includes H&M’s Regent Street store.
Additionally, consumers are trying to extract maximum value from the things they do buy, which means wasting less – and potentially buying less in the first place. This is also fuelling interest in repair services. EY’s global Consumer Index found that 67% of consumers would prefer to repair rather than replace items.
With brands like Levi’s, Uniqlo and Golden Goose launching in-store repair and customisation services, the customer relationship may be beginning to shift away from constant purchases to the lifespan of a product.
It’s also important to remember that even when consumers aren’t choosing the most environmentally friendly options, they still want and expect brands to be tackling the sustainability challenge.
A key part of the customer experience going forward will be for brands to be transparent about how they do business and the steps they are taking to reduce their negative impact. Consumers don’t necessarily expect brands to have perfect solutions right from the start but to demonstrate that they are taking real action to improve.
In-store Service Needs Investment
Consumers have returned to physical retail stores following the global coronavirus pandemic, but their expectations have become higher as well. A survey of US consumers by Theatro found that 41% feel their in-store shopping experiences are “less enjoyable” than they were before the pandemic.
Many cited issues with staff as a key reason for this with 29% complaining about difficult or rude staff and 24% about unknowledgeable or unhelpful staff. Given that the physical store lends itself perfectly towards service, which can be limited online, it shows that retailers need to invest in training and supporting staff to deliver excellent customer experiences.
This is particularly vital given that many retailers are using their physical stores as a stage for entertainment and loyalty-led experiences. In-store activities, events and community spaces only add up to a great customer experience if they are properly managed and run.
Retailers with physical stores also need to remember that these act as a giant billboard for their brand. These real-world footprints are a limited commodity – there simply aren’t enough stores in the world for every brand to have one. This helps to build awareness and support marketing, but the flipside is that what happens in the store can disproportionately colour the way consumers feel about a brand, even if they have an e-commerce presence as well.
A bad experience in person can often feel more impactful to customers because it’s physically happening as well as emotionally. There isn’t the distance that a customer might have with e-commerce and digital interactions, which are often frustrating in a different way.
Don’t miss Part 2 where we look at the tech and e-commerce trends influencing customer experience expectations.
Continue Reading
Changing customer expectations
