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Context: Adapting to a changing customer base

Understanding customers is essential for successful retailing but, as Penelope Ody explains, digital technology and changing demographics are presenting new challenges

Online customers, we are often told, expect rapid service, convenience, free delivery and easy returns. They are demanding, impatient, wedded to social media and increasingly shop via their smartphones. Most etailers have built their websites to match this profile but is this really an accurate description of consumers’ behaviour or needs?

Traditionally, retailers have tended to focus ranges and marketing on the perceived product preferences of high-spending consumer segments: younger age-groups buying the latest fashions; the 25-plus setting up home and looking for furnishings; new mums with expansive (and expensive) needs for babies and toddlers; and so on. However, as retailers are now discovering to their cost, such traditional targeting no longer guarantees sales.

The 18-24s may still be interested in fashion but the proportion of the population in this demographic is diminishing and, in many locations, they’re also very short of cash. Unemployment among the under-25s averages around 15% across the EU, but it’s more than twice that in Italy and Spain and almost three times as much in Greece (43.2%). Even seemingly affluent France has a youth unemployment figure of one in five (20.4%), so it is hardly surprising that one survey found that 57% of millennials actively compare prices in-store, or that those websites offering low-price ‘disposable’ fashions are so popular with this age group.

As for those 20-somethings wanting to move into their own home, it is not only in the UK that this age group struggles to get on the housing ladder. Italy has its bamboccioni – a generation of ‘big babies’ in their 20s and 30s who cannot afford to rent or buy, so still live with their parents. A report earlier this year by Caritas Europa highlighted the same problem in Portugal, where the majority of young adults remain in the parental home, often well into their 30s, due to a lack of cash.

While the young do not conform to traditional life-stage behaviour, neither do older age groups. The time-pressed ‘sandwich generation’ in their 50s are no longer empty nesters but now have adult children still living at home, as well as ageing parents to care for. And those ‘silver surfers’ past retirement age aren’t always using the internet to buy products, since their homes are already full of too much stuff after the boom decades of mass consumption. Instead, they are finding new experiences such as exotic holidays, sky-diving or a foraging course.

When any of these disparate consumer groups buy, they certainly expect good service, competitive prices and minimal delivery costs, but they also want products that are distinctive, possibly highly personalised, or with some other additional spin. Among leading retailers in this Dimension, Nike offers “inspiration and innovation”, Gucci promises to “redefine modern luxury”, while Zalando plans to put personalisation at the heart of its business and “to ultimately offer 23m different Zalandos for our more than 23m different customers in Europe.”

Retailing has always involved understanding customers but today, those customers’ preferences and needs are changing faster than ever before. Digital technology is one key driver for that change, but so too are demographics. Understanding how, when and on what today’s consumer segments wish to spend their money is something every retailer must strive to achieve if they want to stay in business and to stay ahead.

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