As the cost-of-living rises, and the UK sees energy bills, food shopping and petrol expenses soar, consumers are changing their spending habits in response. Recent findings from Toluna’s Global Consumer Barometer Study showed that more than half of people (51%) believe they’ll be worse off financially in the next three months and are planning to scale back on spending.
According to IMRG, consumers are indeed scaling back on online shopping, spending 8.7% less in May this year than they did in May 2021. The British Retail Consortium (BRC) also found total retail sales in May declined by 1.1% compared with last year. However, it’s not all bad news for merchants.
Although many consumers are likely to cut back on spending, not all will forego shopping altogether, even when it comes to non-essential items. Some areas of retail still show strong performance; IMRG reported that apparel sales continued to rise in May 2022, by 14%, along with website traffic rates (8%). When shoppers do choose to spend, it’s expected they will rightfully become more selective about the companies they choose to do business with.
Shoppers are making more conscious purchasing choices and taking more time to complete their purchases. They will invest their money online and in-store with companies they trust — companies that prioritise the total customer experience, demonstrate supply chain sustainability, invest in loyalty programs, and offer superior customer service.
Despite the worsening economic crisis, there is a light at the end of the tunnel for retailers. By listening to ever-changing consumer demands, there are steps businesses can take to not only maintain operational resilience, but to flourish now and in the future. By focusing their efforts in the following areas, merchants can maintain high customer lifetime value and protect their revenue.
Improve Personalisation and the Broader Customer Experience
Succeeding in today’s competitive digital environment requires retailers to meet customers where they are, bringing the service options and personalisation they expect. The current situation presents an opportunity for merchants to differentiate themselves by optimising every step of the buying journey – from pre-purchase to checkout to post-purchase – which will encourage repeat business.
According to McKinsey’s Next in Personalization 2021 Report, 71% of consumers expect businesses to deliver personalised interactions, and 76% get frustrated if that doesn’t happen. When looking at the top business priorities for the year ahead, a new study shows businesses rank improving customer experience (85%) and delivering more personalised experiences (73%) the highest, with poor online customer experience leading to lost sales, damaged brand perception, and vulnerability to competitors. Post-pandemic, we saw British retailer ASOS dial up its highly sophisticated personalisation strategy; using AI, it offers style recommendations based on the customer’s own shopping habits and alternatives for saved sold-out items. This level of personalisation and differentiation is vitally important during a difficult time for retailers, who are increasingly unable to undercut competitors on price. Instead, they must focus on building trust with the consumer and appealing to their unique preferences. Delivering this level of personalization increases the need for merchants to know who’s behind every purchase with precise accuracy. In the current economic climate, it’s critical that merchants aren’t inadvertently denying legitimate customers and their purchases, and instead capitalise on every new customer by offering a seamless experience. Turning away legitimate customers has more of a negative impact than the cost of one single transaction; it could turn away a customer for life. Research shows 40% of customers who are falsely declined will purchase from the competition instead. Consumers will be looking, beyond price, for a trustworthy merchant that delivers right through the buying journey.
Offer A Differentiated Digital Journey
Most consumers nowadays have sky-high expectations when shopping online. They want generous loyalty programs, convenient delivery options like specific-day delivery and buy online, pick up in store (BOPIS), and fuss-free returns. A UK survey found 81% of shoppers would avoid ordering from an online retailer if they saw issues with their return process, and 89% say ease of returns is now a top priority.
Further research from IMRG showed greater demand for convenient delivery options, such as rapid delivery turnarounds and frequent delivery notifications, with 50% of UK consumers willing to abandon a cart if they weren’t presented with options that suited their needs.Retailers who get these processes right will reap the most consumer loyalty and those who miss the mark will see their bottom line impacted. However, meeting these consumer expectations widens the surface area for fraud and abuse. One challenge merchants face is how to balance the desire and competitive pressure to meet customer demands, including fast shipping and easy returns, with the risk of digital commerce fraud or the abuse of benefits such as free returns. In reality, there is a way to deliver both, but it requires knowing and trusting every good user at the start of every interaction. Using automated, machine learning technology to enable this trust, merchants can deliver a digital buyer’s journey that provides high value, competitive benefits like free shipping, and simultaneously combat fraudulent and abusive buyers in real time.
With loyalty programs, delivery options, and returns policies now a point of differentiation for brands, retailers must be prepared to invest in the full journey to both attract and retain customers, without putting themselves at risk.
Create a Frictionless Experience
According to a recent survey, 88% of UK shoppers will abandon their purchase if they encounter any sort of payment friction. Gaps in decisioning across the digital commerce funnel can leave revenue on the table, and alienate legitimate customers whose transactions are falsely declined.
Whether it’s a peak shopping period, an economic slowdown or the introduction of new regulations such as PSD2, merchants should always stay nimble to minimise friction in the buying journey, maximise conversions and protect revenue.
Digital commerce is here to stay, even in the current climate. But merchants must put in the effort to meet changing consumer expectations and build trust with their customers. This means delivering a differentiated digital journey with improved, frictionless experiences.
Aaron Begner, EMEA General Manager, Forter