Technology has changed the way retail is presented to its customers, so what do brands need to do to keep their customers happy?
The changing retail landscape
The ubiquity of mobile technology has been a long time coming. According to IMDA’s surveys, individuals who use the internet have risen from 59% in 2006 to 84% in 2016. This movement toward a digitally-infused lifestyle, where a person is perpetually connected, and using the internet, forms the impetus for numerous digital transformation initiatives we currently see across the business landscape. Besides the rise of e-commerce companies like Amazon and Lazada, even traditional industries like banking and insurance are changing the way they interact with customers through revamped internet portals, mobile apps, and now, even chat bots.
Brick-and-mortar retailers are no exception. With the steady rise in online shoppers from 36% in 2008, to 57% in 2013, and increasing competition from both local and global e-commerce companies, traditional retailers are increasingly adopting these technologies in order to defend their market share. Typically, this involves the development of an app or the introduction of an online store.
However, is merely providing an additional channel for customers to interact with sufficient? Whilst the potential benefits of digitisation, such as higher sales volumes are clear, companies who embark on this, would generally face a different set of challenges that they would have to contend with.
The change in customer expectations - Knowing what you want and wanting it now
Expectations in the online space quite often differs offline. With the ability to instantly access information, entertainment and even communication with loved ones within a couple of swipes, customers are now honed to expect instant gratification. Customers used to messaging their friends and getting immediate responses, may find it hard to accept digital replies that take 3 to 5 working days. This could be a reasonable response time for traditional snail mail, the expectation may not be so for online correspondences.
This demand for speed was seen in the launch of Amazon Prime Now in Singapore last year. During its debut, an overwhelming number of customers seized the opportunity receive their purchased goods in just 2-hours. Unfortunately, their high expectations quickly turned into disappointment when Amazon was unable to deliver on their promise due to teething issues.
Companies who adopt digital channels, would need to be mindful of rising expectations fuelled by the need for instant gratification, or risk customer dissatisfaction and aborted transactions.
The omni-channel customer – Isn’t it just the same store?
If traditional retailers start to offer online stores, they should be aware that customers see both online and offline stores as one big store. From our observations, our research shows customers do not necessarily distinguish between the two. For example, if loyalty programmes are offered, customers expect the benefits to apply to both channels. If collection is available at the physical stores, there is an expectation that the process to not only be fuss free, but staff at the store should allow for order changes, perhaps to another size, where needed.
Whilst such expectations may seem almost mundane from a customer’s standpoint, providing a fully integrated omni-channel approach to customer experience could prove extremely challenging for businesses. Systems wise, an integrated supply chain management system would have to be in place so that both online and offline stores are giving an accurate view of product availability to customers. Staff would also need to be trained to understand processes and policies for both platforms so that they would be able to adequately resolve any customer queries or request. Customers expect a seamless experience across touchpoints making the challenge to integrate imperative.
Competing on different drivers of satisfaction
Businesses who move online would have to compete in areas they may not be completely familiar with. In our recent 2017 study of the Retail sector, attributes that drive satisfaction and loyalty for traditional retailers tend to be staff oriented. These include factors such as staff availability, knowledge and helpfulness. Unsurprisingly, for e-commerce platforms, attributes related to areas such as product comparison, information, indication of special requests, and feedback channels were key differentiators.
Whilst both set of attributes revolve around the underlying theme of providing customers what they need so that they can make a purchase, how they are manifested differs drastically due to the different platforms. Traditional retailers who move online would need to learn to compete on a different set of differentiators. Potentially, this in turn, would require different hardware, processes and skills which require time and resources to build. Given these considerations, traditional retailers who may not be confident of building up such capabilities should partner with established e-commerce platforms who are aligned with their brand image and value proposition.
Leveraging on technology
Despite these challenges, technology can be extremely useful in improving customer engagement and loyalty regardless of the touchpoint they prefer to interact with. In terms of customer experience, companies can leverage on the use of customer data and feedback to understand their interactions across the customer journey. Post-transaction feedback through SMS or periodical email surveys could be integrated with customer data to better understand pain points which they can target improvement efforts on.
In terms of customer engagement, customer data and analytics could be used to create greater loyalty. Whilst online, web analytics could be used to improve the online customer experience, as more customers make their purchases online, companies with an online presence would find themselves with an increasingly larger volume of data about their behaviour. This can be utilised to their benefit on several different levels to create more meaningful engagements. ASOS, for example, gives targeted advice on sizing based on a customer’s previous purchase. Web banners and emailers could display products which customers are more likely to be interested in, as opposed to random promotional items on offer.
A similar level of engagement could be created offline. Companies should equip service staff with mobile devices which help them to understand a customer’s past purchases and preferences, and using recommender engines, to also leverage on data to suggest much more targeted offerings. Data from both online and offline interactions could be further integrated to provide customers an even more seamless experience regardless of which touchpoint they choose to interact with. Rather than treat each customer interaction as unrelated episodes, companies can use technology to build deeper and more personal relationships with their customers, thereby raising customer engagement, and ultimately, loyalty.
Serving the omni-channel customer – A step in the right direction
Whilst the challenges are real, providing customers with an omni-channel platform appear to be a step in the right direction. In our study of the retail sector, we noticed that department store customers who shopped at both physical stores and their online sites, tend to be more satisfied, and show more loyalty, whilst also spending more than those who shopped only at the physical store. Interestingly, when compared to e-commerce players, these omni-channel department store customers also tend to be more loyal. Evidently, providing customers with an omni-channel platform to shop, appears to be the right direction.
This current digitally-infused lifestyle, would lead to more customers preferring to shop both at brick-and-mortar shops and online. Offering merely just a physical store to serve customers may not be sufficient going forward. Whilst the challenges to go omni-channel for traditional retailers are real, the opportunity to create deeper and meaningful relationships with customers through the technology should not be overlooked.
The views expressed in this column are the author's own and do not necessarily reflect this publication's view, and this article is not edited by Singapore Business Review. The author was not remunerated for this article.
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Chen Yongchang is Head of Research and Consulting at the Institute of Service Excellence at Singapore Management University.
Yongchang has worked for ISE since 2014, and has consistently contributed to ISE’s research arm with his passion for understanding and deriving strategic insights from research data across a wide range of industries. As Head of Research and Consulting, Yongchang provides leadership to the ISE Research and Consulting team through oversight on research design, insights and analytics of all ISE research projects and initiatives.
Yongchang holds a Masters of Science in Applied Economics from the School of Economics and a Bachelor of Business Management for the Lee Kong Chian School of Business from Singapore Management University. Prior to joining ISE, he worked in a research capacity across a range of industries including Banking and Healthcare. He specialises in customer advocacy metrics and predictive analysis for strategic decision-making.