Consumers Take it Personally, But Retailers Lag Behind
No one could have predicted this year’s drastic shift in consumer behavior as shoppers were relegated to their homes, or that this behavior would solidify into habit even as lockdowns eased. Retail, of course, shifted online, as there was no other option for consumers. However, the magnitude of this e-commerce shift and the evidence that it's continuing to grow has taken everyone by surprise. Most surprising of all, consumers who had rarely or never shopped online gave it a try, liked it, and quickly became good at it.
But what does the future hold? Most analysts believe that the sales boom retailers have recently enjoyed as lockdowns eased isn't sustainable. For example, fashion sales could be down by as much as 35 percent by the end of 2020, according to Boston Consulting Group. And after suffering a severe decline early in the year, sales of luxury goods will decrease 16.9 percent in 2020, according to Bank of America.
A report by McKinsey and The Business of Fashion discusses how brands can respond to these dynamics by choosing which strategic role to pursue, based on survival instincts, discount mindset, digital escalation, Darwinian shakeout, and innovative imperative. The underlying thread here is the need to ramp up digital channels as consumers default to online shopping and continue to become more demanding. The companies left standing will have to develop more innovative tools and strategies to future-proof their business models.
Behind the mega trends of the shift to online shopping lies a whole range of new behaviors that will require a more personalized response from retailers. In fashion, we've already seen a buy-now, wear-now trend, so retailers will need shorter supply chains, which may include re-shoring. Collections introduced too far in advance may not sell, while inventories may have to be smaller for the generation that only buys what it needs. As if this wasn’t enough, consumers increasingly want to be involved in the decisions about what's sold to them. According to Workplace Intelligence, 42 percent of millennials say they want to influence product development.
How can retailers respond to these myriad pressures? They will require much deeper insight into customers, enabling them to manage buying, merchandising, ranging, promotion, supply chain and fulfillment. Most importantly, these insights will enable brands to personalize communications with customers, a key competitive advantage when compared with brands that broadcast the same messages to everyone.
Evidence of these advantages may be found in dotdigital’s annual “Hitting the Mark” research report, which benchmarks the omnichannel marketing tactics adopted by 100 global e-commerce brands. The research found that 70 percent of U.S. retailers fail to collect post-purchase data from shoppers, and therefore are missing out on opportunities to segment and target shoppers and personalize future engagement to drive conversions and sales. In addition, only 23 percent requested feedback on email unsubscribes to find out why customers wished to be removed from their mailing lists, missing out further on opportunities to enhance one-to-one online experiences.
Consumers crave a more personal experience. The demand for online personalization has soared by 123 percent since the start of the COVID-19 crisis in mid-March, as the report shows. However, retailers can’t deliver on this need for personalization without capturing the right data. Data drives relevancy, which in turn improves the customer experience and keeps shoppers engaged.
Part 2 of this article will focus on strategies for capturing data and personalizing it to improve engagement and relevancy.
Genelle Kunst is the Americas head of marketing for dotdigital, an online marketing company.