Evolving to meet changing customer demands
Retailers must constantly evolve and adopt more sustainable business models if they are to successfully navigate the changing behaviours and demands of customers.
Consumer behaviours are forever changing, especially in these current volatile and uncertain times, and retailers have been looking to technology to help them handle the constant changes but care has to be taken, warned Adam Warne, CIO at River Island, at the recent IRX & eDX 2023 event at the NEC Birmingham.
Evolution not revolution
“There has been exponential growth of technology and the pace of adoption means digital transformations are risky business because the technology becomes outdated very quickly. Digital transformation goals should therefore set the business up for rapid evolution and not for a revolution,” he suggests.
For this he recommends retailers: do not simply select solutions from the leading providers in the market; use small teams as they innovate faster; adopt the principles of the MACH (Microservices-based, API-first, Cloud-native SaaS and Headless) alliance whereby micro-services are utilised to provide a flexible way of constantly evolving the business through ongoing updated solutions.
This is very much the thinking of Giles Smith, head of digital, customer & data at Selfridges, who previously undertook a technology re-platforming at Burberry that involved moving away from what he describes as a “monolithic” system and instead adopt the new methodology around MACH.
“With the new system we were able to go with a new infrastructure and methods involving gluing together the best components. Previously we’d have just gone with a single big vendor. The biggest barrier to this route is the mind-set of the business…it all depends on the confidence in the organisation,” he says.
Focus on areas of differentiation
Retailers should focus on the areas where they will achieve some differentiation and build these aspects bespoke. “A checkout won’t differentiate you so why build your own. All brands are differentiated on their algorithms and customer data and personalisation so that’s where they might build their own platforms. The front-end of websites is often built bespoke as retailers don’t want to have to rely on templates,” explains Smith.
What also differentiates is marketing and Gymshark has been particularly successful in this areas as its marketing and social media has helped it build a core of loyal customers. Helping it achieve this is Carly O’Brien, CMO at Gymshark, who is using her former experience in the financial services sector to gain a better understanding of Gymshark’s customers.
“The physical product dominates the thinking of retailers and it has all been about showcasing the product rather than understanding the customer. Retail is a little behind the curve on customer-centricity compared to financial services where there is no physical product and it’s all about selling different products to customers and following them thorough their lifecycles,” she explains.
Segment to find the nucleus
Elevating the customer view is undertaken by segmentation – into four to eight segments – that should identify the prime segment of the most valuable customers and these should be treated as the nucleus of the business. “This primary segment is so rich with data you have to look at what you can do with it. What’s important to these customers and what [things] can you develop and enhance for them?” asks O’Brien.
Delivery could be one area of importance to them – that might not be about speed but about surety of delivery at a specific time. “They might want this assurance and this could lead to a different type of delivery innovation,” she suggests.
Interestingly, this is an area that Dheeraj Harjani, e-commerce director at Aftershock, believes will be important in the future. “We’re looking at on-demand, same-day delivery as there is a demand for this but the future will be one-hour timed deliveries. This is not necessarily about fast delivery but it’s about the assurance of having a delivery at a certain time. This will be more important than a fast delivery,” he says.
The returns headache
Deliveries are certainly an increasingly hot topic especially the returns aspect that is causing financial headaches for many businesses. The big question is whether retailers charge customers for returning unwanted products.
For Chris Haighton, head of logistics at The Very Group, there is some reluctance to go down this route: “No matter how many serial returners you have, no customer actually wants the hassle of returning items. Retailers need to make it seamless and give confidence at the checkout that it will be free returns. Short-to-medium-term I can’t see us changing our policy.”
What he is taking a look at is making the sizing on the website more accurate, and ensuring the images and descriptions are fully representative of the products, as well as using the data from the returns centre to identify the causes of returns. The Very Group has also created a returns portal through which customers can manage their returns including printing labels and arranging for collections from home for large items.
Steve Allen, global head of enterprise at Sendcloud, believes returns portals are “the way to go” but says they have to be extremely easy to use otherwise they will simply drive customers to the call centre with their queries. Haighton has used post-purchase communications to help ease the burden on the call centre for returns.
Presenting green options
For Michelle Kearns, IT director at Boots Ireland, the company tries to push customers to return goods into stores as this is more cost efficient and actually easier for the customer. Such an option is also arguably more environmentally-friendly, which is of increasing importance for retailers.
Lewe Goldman, supply chain & operations director at Cloud Nine Hair, says the routes given to customers for the return of products should include green options: “Things have moved on from convenience, it’s about our responsibility to make the green choice the obvious one. If we make it the same price as the other options then it’s an easy choice for customers.”
The availability of green, sustainable options is proving attractive to a growing number of people, according to Joanna Yarrow, former chief sustainability officer at IKEA, who says: “People are moving their business to companies that are sustainable…and employees are also choosing to work for these companies.”
Although Ikea was doing much work behind the scenes with sustainability, such as the sourcing of environmentally friendly materials, it recognised that it needed to bring this more to the fore at the business. “Sustainability needed to be put at the core of the business. It was not just about looking back at what we’d done previously and changed it but to also innovate in order to be about growth and the commercial opportunity,” she explains.
Embedding sustainability at the core
This has involved embedding sustainability into the core business strategies and KPIs as well as looking at having it as part of everyone’s job in the company. “We also needed to inspire and enable people because they wanted to take action but needed to be inspired and to also be given the [relevant] tools,” she says, adding that part of this involved the creation of the Ikea Better Living app.
Although Ikea has made progress on its environmental journey, Yarrow says: “The scale of change required is too difficult for one organisation. You need to work with others and be radically transparent with sharing information.”
Circularity specialist Reskinned is one such organisation that brands and retailers can work with. Matt Hanrahan, founder & CEO of Reskinned, says the company “does all the heavy-lifting for brands and helps them with sustainability”, which includes handling take-backs, preparing clothing for resale on other platforms, and also recycling.
It works with its flagship client Finisterre as well as the likes of Joules and Sweaty Betty and Hanrahan says it avoids any brands involved with greenwashing. For circularity to take hold in the retail sector it needs a change of customer behaviour, which he says is happening.
Changing customer behaviours
“Customers are not only buying on the efficacy of a product and what it looks like but also if it is from a ‘sustainable’ business. It started with food and then beauty, where we’ve seen the biggest growth in transparency around what’s in the bottle. We’re now starting to see it with clothing – around manufacturing and circular models. We work with brands to achieve circularity, which is a repeatable model dealing with what [products] a brand already has out there,” he explains.
Hanrahan says there is no silver bullet to dealing with sustainability and suggests brands simply have to get started on the journey: “It can’t be done overnight. Learn from other brands and don’t be afraid to steal ideas.”Evolving to meet changing customer demands