For retailers faced with upcoming generations of digital natives, coping with customer demands and expectations will be challenging. Artificial intelligence can help, reports Penelope Ody
Retailers are accustomed to change – in product assortments, local demographics, the technology they use and in consumer demand. Not only is demand for goods and services changing but the very way those customers want to shop and their expectations of how retailers will satisfy their needs are changing too, with the rate at which all this is happening speeding up too.
Customers used to be well trained. They would arrive at a store, rely on sales staff for information, trust their recommendations, pay by cash or card, then carry their shopping away with them. Simple. In 2018 though, things have become rather different. If a customer actually bothers to visit a store, it may be just to ‘touch and feel’ an item already pre-selected on the internet. Thanks to online research, the customer may know more about the item than the shop assistant, may have already compared competitors’ prices and may expect the hapless assistant to be prepared to negotiate. They may want to pay using Paypal or a digital wallet and instead of carrying the goods away, might just prefer to place an online order, in-store, for home delivery at a time of their choosing.
If the way customers choose to shop is changing, then so too are the customers themselves. A study by marketplace OnBuy.com found that almost two-thirds in the 25-34 age group preferred to use texts, online chat or messenger apps to interact with retailers rather than actually speak to a sales assistant, while more than half (52%) of this age group would rather find information online than ask a member of staff, even when they were actually in a store.
Used to an instant response online – or from Alexa at home – such customers are also more likely to be impatient of service delays. Perhaps surprisingly, a survey of more than 180,000 consumers by KPMG last year, The Truth About Online Consumers, found that 39% of millennials preferred shops to buying online. Their reasons were their need for instant gratification and because “delivery took too long”.
In the decade since the launch of Apple’s first iPhone, the smartphone has brought about a shopping revolution. Who would have imagined a decade ago that analysts would be predicting that mobile shopping could overtake in-store purchases by 2023? A study of global consumers by PwC, its Total Retail Survey 2017, found that in Europe, up to a third of shoppers regularly bought products at least monthly via a mobile device. Top of the league table were the Italians, where 44% shopped this way, closely followed by consumers in UK and Germany at 38%.
And if the mobile revolution were not enough, there is Amazon, which launched in 1995. That same PwC report found that 45% of the German shoppers surveyed started their product search on Amazon, as did 42% of Italians. Apart from selling rather more than the books that began the business, Amazon’s influence now spreads far beyond basic retailing. Last October, CEO Jeff Bezos reported than more than 20m of its Amazon Echo smart speakers, voiced by Alexa, had been sold. With the company recording sales of “many millions” of the devices over the Christmas period, a great many more homes now have an Alexa to do householders’ bidding. So many, in fact, that Ocado has now enabled voice-activated grocery shopping via the devices, which – it seems – contributed to a significant upturn in customer numbers last year and a 12.4% increase in sales revenue, according to its latest figures.
It is a small step from asking Alexa about train times or using it to order groceries, to trusting Alexa 2.0 to compile that shopping list based on previous purchases, or to search out the best deals – no doubt to be found on Amazon – for whatever it is customers wish to buy. As use of artificial intelligence (AI) continues to escalate, we can expect Alexa’s successors to play an ever greater part in everyday life – should we choose to let them. This will be an important choice for us all, as Max Tegmark of MIT stresses in his recent book, Life 3.0: Being Human In The Age Of Artificial Intelligence.
Keeping up with changes
For retailers, keeping up with these changes in customer behaviour has never been more challenging. Most leading retailers will already have embraced mobile with suitably optimised sites, although not all may appreciate just how rapidly this channel is gaining dominance. With so many people – especially those millennials – dependent on their mobile devices for news, social media, entertainment, travel, payments and, of course, shopping, it becomes the prime channel for any customer contact. A recent study by Shopgate, The Mobile Method: The App Commerce Outlook For 2018 suggested that the typical person checks their phone 150 times a day, while a significant number of those millennials seem reluctant to talk to real people.
To satisfy these mobile-loving customers, retailers need rather more than a transactional mobile site. They need one that is capable of providing the same functionality as their main online presence, that offers access to loyalty schemes, wish lists, order history, information and advice, or whatever else customers can do at the desktop. Retailers also need to offer relevant apps, link any loyalty scheme to digital wallets, ensure rapid page loading speeds, use geolocation promotional tactics, add QR codes in-store as well as providing free wi-fi there, or – perhaps – equip store staff with mobile devices to respond to queries from all those millennials unwilling to actually speak to them directly.
They must also deal with the vagaries of today’s technology. Ever larger page sizes may be fine for those with a 4G smartphone or fast broadband speed but for customers in rural areas or with ageing hardware, it simply means waiting even longer for a page to load, then probably abandoning the attempt before it does so.
Obviously, despite the statistics, not all customers will ever want to shop entirely by mobile. Some prefer the desktop, others remain loyal to what may become a diminishing numbers of real-world stores, while the truly impatient will demand same-day click and collect rather than wait for a delivery. Coping with the shopping preferences of both baby boomers and millennials requires an even greater understanding of customer profiles and target segments than retailers already achieve. This can mean embracing the leading-edge technologies favoured by younger age groups without alienating those who struggle to understand the various icons on a website.
Finding this balance can be a challenge. Uninvited live chat windows popping up on the screen or a lack of an obvious customer service telephone number can be as much a reason for some shoppers to abandoned baskets as slow page loads or limited returns options.
According to Eurostat, across Europe, almost 70% of those who do not shop online give as their main reason a preference for seeing real products and dealing directly with real people. However, Eurostat also estimates that 85% of all those aged 16 to 74 in the EU used the Internet last year and 68% of them shopped online, in numbers ranging from 23% of the internet users in Romania to 86% in the UK. One in three of these European customers bought from EU countries other than their own, while almost a quarter bought from retailers outside the EU. Surprising, then, that so many retailers – including some leading names among the Top500 – eschew international trade. That can be understandable where the domestic market is immature, as in Romania, but is surprising where internet usage has almost reached saturation and there is little growth remaining at home.
According to Eurostat, the number of European customers buying cross-border within the EU rose by 8% between 2012 and 2017, while those buying from non-EU sites increased slightly more by 10%. It’s a small difference but as consumer confidence grows, shoppers appear to be more willing to buy from far distant places rather than stay within the single market. This should be some comfort for UK retailers worried about the impact of Brexit. One only has to consider the significance of international sales at Asos to appreciate how valuable global customers can be. For the four months to 31 December 2017, its UK sales were £300.9m, its EU sales, £235.2m, and the rest of the world (including the US) £254.3m.
Tomorrow’s shoppers will not only be increasingly global in their search for the products they want, they will only have ever known omnichannel choices and they will expect those channels to be fully integrated, capable of recognising them and their preferences whichever way they shop. And if the millennials have been driving the mobile revolution and are demanding ever faster fulfilment options what about the next generation – variously dubbed the post-millennials, digital natives or Generation Z? Will they be happier dealing with a robot than a sales assistant while expecting many of their purchases to be delivered instantly by 3D printers? Who knows. What is likely is that they’ll be doing more of their shopping via a mobile – or perhaps Alexa will be doing it for them?