The old adage – the customer is always right – certainly rings true in the retail world, particularly when it comes to the demand for a better customer experience. Today’s shoppers are increasingly basing their retail choices on stores and brands that can provide a more complete and fulfilling shopping experience.
According to Doug Stephens, author of Reengineering Retail: The Future of Selling in a Post-Digital World, “Department stores have a tremendous opportunity to redefine who they are. This notion of staging experiences — it should be what department stores are good at."
Stores that crack the code on creating an engaging customer experience are already reaping the rewards. A recent PWC study found that consumers are willing to pay up to a 16 percent premium on products and services for a great experience. The same study found that “while every industry sees a potential price bump for providing a positive customer experience, luxury and indulgence purchases benefit the most from top-flight service.” In addition to creating greater customer loyalty, delivering a better experience also encourages customers to try additional services and products from brands they trust.
To paraphrase the iconic writer, Mark Twain, reports of the death of brick-and-mortar stores has been greatly exaggerated. While online shopping has largely shifted the shopping preferences of consumers, many continue to frequent physical stores. In fact, RetailDive.com reports that half of the 189.6 million who shopped during the Thanksgiving through Black Friday weekend in 2019 stepped foot in an actual store. And, on Black Friday alone, the Fiserv data and analytics team reported 4.2% year-over-year growth in brick-and-mortar spending in 2019.
Physical stores that are evolving and finding better ways to connect with customers are attracting more foot traffic. Salesforce.com reports that “consumers of all ages still say going to physical stores to make purchases is their first choice, including 62 percent of Baby Boomers and 58 percent of Gen-Zers.”
Proof that having an actual store location still matters to consumers can be found in the prediction that digitally native brands are expected to open 850 brick-and-mortar stores in the next five years. Clearly, retail stores are not dead yet.
A big part of the shopping experience, whether it be online or in a physical store, is the actual payment. Consumers are increasingly expecting to be offered a broad range of options when it comes to completing their transactions. That is why it is important for retailers to provide payment options, such as credit and debit cards, Venmo, PayPal, Zelle, Alipay, or Pay-With-My-Bank®. One of the advantages of these payment channels is that customers are able to transact in their desired form of payment, which greatly improves the experience.
While having more payment options is vital, consumers are also concerned about the security of their purchase information. To ensure that transactions are protected against fraud and stay compliant with stringent data protection policies, such as PSD2 in Europe, retailers can avail themselves of advanced digitization solutions, like tokenization. Tokenization can protect data on both the issuer and merchant side of the transaction, while providing higher authorization rates to improve the customer experience.
Another important aspect of the shopping experience is the use of branded currency, also known as gift cards. Studies have shown that branded currency is a highly effective means for retailers to increase sales, build brands, and enhance customer loyalty, while reducing the overall cost of payments. According to the 2018 Prepaid Consumer Insights Study by First Data (now Fiserv) consumers, on average, will spend $59 more than the value of a gift card when using it in-store or online—creating a significant opportunity for retailers to create a lift in sales.
Retailers are increasingly turning to cutting-edge data science technologies such as artificial intelligence and advanced analytics to harness data extracted from transactions and combine it with other rich data sources, to provide deeper, more meaningful consumer experiences. Such data is also proving highly effective at lowering the cost of customer acquisition.
Data holds the key to effectively targeting the right offers to customers at the right time. While 43 percent of U.S. consumers have indicated they are reluctant to share personal data, such as location, age, purchase history and lifestyle, the vast majority are open to sharing this information if it delivers a more personalized, retail customer experience.
Many retailers are employing the buy online, pick up in-store (BOPIS) and buy online, return in-store (BORIS) models as a means for increasing traffic to stores, while also delivering a better shopping experience. During this past holiday season, research revealed that 49 percent of shoppers felt that in-store pickup was faster than at-home delivery. According to RetailDive.com, “BOPIS services may benefit traditional brick-and-mortar retailers by cutting down on last mile expenses and turning stores into a competitive advantage over online retailers. In a November interview with CNBC, Target CEO Brian Cornell noted that the retailer's costs drop 90% when customers utilized BOPIS.”
Many retailers are adopting omni-channel strategies to improve the customer experience. One of the ways they are putting this into practice is through “clienteling”, where customer sizes, style preferences, wish lists, past purchases and additional shopping habit indicators are tracked via tablets, smartphone and computer apps and programs. Armed with these invaluable insights, retailers can ensure they are meeting the needs and desires of their customers. This singular focus will be key for those who hope to dominate the business in the years to come.