Customers have higher expectations than ever for retailers – particularly online.
An overwhelming 79%of consumers across 17 countries believe retailers should be looking to elevate their shopping experience further. That’s according to Klarna’s Shopping Pulse 2023 report.
What’s more, 62% think the overall shopping experience is better in-store. A similar sentiment can be found in Coveo’s recent report where 93% of US and UK consumers said they expect the online shopping experience to be better than in-store. Yet, 91% said they encounter issues when buying online.
Clearly, there is a gap between what consumers think the online and omnichannel experience should be and what retailers are providing now.
With the digital world moving so fast, it can be hard for retailers to keep up with the trends that are shaping customers’ expectations.
So, what should they be paying attention to?
Omnichannel is Retail
There is no escaping the fact that consumers want omnichannel retail. They want to be able to move between online and offline channels easily for different shopping journeys – or even as part of a single purchase.
A massive 66% of consumers globally said they feel happiest with a hybrid of both in-store and online shopping experiences, in a survey by Bazaarvoice Inc last year. Klarna also found that a seamless transition between online and offline retail is one of the most desired innovations by consumers.
What’s more, omnichannel is key to retailers’ financial success. A 2022 global survey by Lightspeed found that merchants offering retail both online and in-store celebrated the largest year-over-year revenue growth.
However, the ability of retailers to offer these omnichannel customer experiences is still lacking.
A survey of UK retailers by M-Cube found that 86% believe having a strong in-store omnichannel strategy is important for success. But in a survey by Deposco and Retail Dive, 64% of retailers said they aren’t satisfied with their omnichannel fulfilment performance.
Retailers need to invest in solutions that enable them to bring together the different parts of their business and to share information that can enhance the customer experience.
For example, Incisiv’s Omnichannel Customer Service Index found that while 91% of customer service agents have in-depth knowledge of product, only 34% can provide a personalised experience.
Likewise, 95% of customer service agents can help with payment methods, but only 4% have access to cart information. This limits their ability to support consumers throughout their entire buying journey. A joined-up approach will enable customers to be treated like individuals however they’ve shopping.
Tech is Enabling New Shopping Experiences
As technologies like augmented reality, virtual reality and livestreaming become more commonplace, customers expect retailers to make use of them to improve the customer experience.
In particular, AR, VR and livestreaming/video are all ways to plug the gap between what consumers see on a screen when they buy online and the actual product they receive. The more retailers can make sure that the product lives up to expectations, the more they can reduce their returns costs.
Snap, the leader in AR experiences and creator of Snapchat, notes that 88% of consumers said they are more confident in their purchases when using AR tools, in a survey last year.
Research from Snap also shows that 55% of UK consumers say that shopping is their top reason for engaging with AR. Yet, 94% of brands still think they mainly use it for ‘fun’.
This means there’s a huge opportunity for retailers who invest in AR try-ons and other experiences. These don’t have to be limited to mobile and desktop retail either. Recently, Coach offered a pop-up AR experience at its New York store which let customers use an AR mirror in-store or within the storefront itself to virtually try on the brand’s Tabby bag.
Virtual reality, meanwhile, faces slower progress due to the need for specialist equipment and associated expense. However, some brands are seeing success through specific in-store services using VR, such as interior design visualisation.
Shoppable livestream video is also continuing to grow. The US livestream e-commerce market will reach $31.7 billion by the end of 2023, according to Coresight Research and Bambuser. This is nearly three times the size it was in 2021.
This opens the doors for retailers to sell to consumers outside of normal operating hours, with the potential to use existing assets, such as retail stores, as mini studios.
However, retailers shouldn’t overlook the value of getting the basics of the digital customer experience right – and continually improving them. Despite all the new technologies out there, frictionless payments are the most wanted innovation by consumers globally – both online and in-store (Klarna).
Bells and whistles are nice, but it’s important that brands don’t lose sight of the fact that a straightforward, convenient shopping experience is the main thing consumers are looking for.
Marketplaces are Becoming a Consumer Go-to
Marketplaces are taking an increasingly powerful role in the online shopping experience.
Globally, 18% of shopping journeys start with online marketplaces, according to Klarna’s report. But that number jumps to 36% in countries like the US and UK. That is almost the same as the percentage of journeys that start with a search engine (34% in the US and 39% in the UK).
Mirakl also found that consumers globally conduct 46% of their online shopping through marketplaces in its 2023 report. What’s more, 60% of consumers said they wish more of their favourite retailers had online marketplaces, which suggests a strong appetite for this type of e-commerce.
The marketplace model is also moving beyond the likes of Amazon, which tries to cover as many product categories as possible, to more niche and sector-specific services. This is likely a response to the fact that traditional marketplaces often have an overwhelmingly large product range which can make it more difficult for consumers to find the item that best suits their needs.
For example, marketplaces Poshmark, Fashionphile, and Vestiaire Collective specialise in second-hand luxury goods. They use expert authentication as a point of differentiation, giving consumers confidence that what they are buying is the real thing.
Whatnot is a new marketplace focused on toys and collectibles, built around livestreaming. GOAT and StockX are dedicated to sneaker culture and the resale of limited edition and hard to find sneakers.
Marketplaces are also evolving faster than some retailer websites. Japan-based online marketplace Mercari is piloting a new customer service chatbot – Merchat AI – which is based on generative AI ChatGPT. The chatbot will provide personalised product recommendations, with Mercari saying that the interaction will be similar to talking to store staff.
In the US, e-com marketplace Newegg is also using ChatGPT to help consumers choose products. The company is also experimenting with using the tech to support customer service, website content and email communications.
Consumers want Personalisation
Retail is no longer about one-size-fits-all experiences.
As the volume of retailers, brands, and products available to consumers continues to expand rapidly, shoppers are looking for personalised recommendations to help them narrow down the options.
They also expect retailers to put the information they have about the consumer to good use through personalised experiences and customer service.
In Klarna’s Shopping Pulse report, personalised service and product recommendations were the second most wanted innovation by consumers globally.
It was the same story in Twilio’s recent State of Consumer Engagement Report where 66% of UK consumers said they will quit a brand if their experience isn’t personalised.
The problem is that the reality of retailers’ personalised experiences do not match up with what they think they are offering. Almost half (46%) of brands in Twilio’s survey believe that they are doing an excellent job of providing personalisation, but just 15% of consumers agree.
Retailers who get personalisation right not only win in terms of customer loyalty, but also their bottom line. Twilio reported that 57% of consumers say they will spend more on a brand that personalises experiences.
Meanwhile, a recent global Salesforce survey reported that 65% of consumers say they will stay loyal if the company offers a more personalised experience. It was the same story in Twilio’s survey where 86% of consumers said that personalised experiences increase their loyalty to specific brands.
Retailers Need to Invest in Consumer Trust
The problem with personalisation is that a lot of it depends on customer data. But consumers aren’t necessarily keen to hand that information over to retailers.
In a recent CI&T survey of US consumers, 58% said they believe data sharing is necessary for brands to provide a personalised experience. However, 87% of respondents want to be asked for their permission to collect personal data first.
While 82% of global brands are still reliant on third-party data for their marketing strategies, according to Twilio, 64% of UK consumers would prefer brands use only first-party data to personalise their experiences.
It’s not that consumers are completely against the idea of sharing information with brands. In the US, 82% of consumers said they would share some type of personal data for a better customer experience, in a survey by PwC.
The issue is that consumers don’t trust retailers as much as brands might think. Businesses need to invest in data security and be transparent about what information they are collecting, why and how it will be used. Salesforce’s global survey found that 76% of consumers say that companies that provide data security will encourage their loyalty.
Consumers need to see the benefit in sharing their details, rather than feeling forced to do so. Brands also need to shift their strategies away from third-party data in preparation for a ‘cookie-free’ online world.
AI-Powered Retail is Growing
The use of artificial intelligence in retail is not new. But the increasing sophistication of the technology, thanks to the exponential growth of generative AI platforms like ChatGPT, is opening up entirely new possibilities.
Recently, Klarna partnered with ChatGPT creator OpenAI to create a plugin that gives users personalised shopping recommendations. Carrefour has added a ChatGPT-based chatbot called Hopla to its e-commerce site to help recommend products to shoppers based on their needs. Meanwhile, Google is experimenting with a generative AI virtual clothing try-on solution that can automatically adapt the image of an item to fit different models.
This is just the tip of the iceberg as retailers get to grips with what the latest AI technologies can do.
Some are already seeing results from incorporating more AI into their businesses. In the last two years, IKEA’s Billie AI chatbot has managed 47% of customer queries directed to call centres which has freed up human staff to support more complex enquiries or provide interior design services.
However, consumers seem on the fence still about generative AI tech. In a survey of US consumers by Smarty, 76% said they understand AI is being used to help them shop online, and 42% have used a chatbot or virtual assistant to make a purchase.
But many also reported having a negative experience with the technology. Additionally, 35% of consumers said they remain sceptical about it.
Similar mixed feelings also arose in a recent US consumer survey by SurveyMonkey. 65% of respondents said they would be comfortable using AI to help with retail-related tasks such as ordering food or beverages, and 59% would be comfortable using AI to assist in returning an item.
On the other hand, 56% said they have negative feelings about companies using AI as part of the customer experience. And a massive nine out of 10 said they prefer humans to AI for customer service, as they are better able to understand their needs, explain things better, and are less likely to frustrate.
Retailers will need to carefully balance the human and the artificial in their future customer interactions to ensure they get the right mix of efficiency and frictionless.
