RetailEXPO ran a series of virtual conference webinars recently, starting with an excellent presentation by Mark Price, former MD of Waitrose and Deputy Chairman of John Lewis Partnership.
In his webinar, View from the Top Creating a new vision for a new era of retail, Mark talked about the future of the industry post Covid-19. The retail industry is undergoing significant change and retailers know they must adapt to survive.
Key takeaways from the talk were:
- Create a differentiated strategy and proposition, through innovation.
- Focus on retention of the customers you already have (vs acquisition).
- Improve your service offering, adding value to the customer experience.
Before making those cases, Mark gave a stark warning about the mid to long-term future of retail and hospitality, rooted in the macro-economic landscape of increased government borrowing, and the social impacts of self-isolation and household austerity.
As a direct impact of Covid-19, the UK has increased its financial borrowing by £60 billion a month, and that’s just the tip of a very large iceberg. It’s inevitable that some taxes will need to be increased to help pay off that debt, leading to pressure on business costs and margin.
In parallel, people have changed their short-term purchasing behaviours (leaning heavily towards online rather than the high street) and that’s likely to stick. It takes around two months for a change in behaviour to become a habit, meaning that many people will want to shop out less in the future. Clearly, for many retailers and hospitality businesses, that’s going to make the challenge of bouncing back even more of an uphill battle.
Thirdly, people will increasingly and habitually look for savings, and the big discounters will dominate even more than they have in the past. Not just Amazon; bargain basements across every sector are likely to see a surge in demand, putting even more competitive pressure on sales margins and revenue.
It all sounded pretty bleak, to be honest. But then the advice was clear: You must see this time as an opportunity to think, adapt and survive. So, here’s my personal take on things.
Create a differentiated strategy
As the old saying goes, if you can’t beat them, join them. In this current situation, I’d firmly recommend that you opt for beating them! You can’t change your competitors’ products or pricing, and there’s likely only so much that you can do on your own, so it’s time to think out of the box and take some bold moves.
- Did you know that over half of all online sales are through mobile channels? If you haven’t got the best mobile platform out there (most findable, usable and rewarding), you’re already losing.
- Do you know your target market? I mean, really know them? What would make them come to you rather than go somewhere else? If you’re not certain, it’s time to ask.
- Different business models can be hugely attractive. Think about the boom in subscription businesses. How could you package things differently to offer customers more perceived value, avoid revenue volatility and increase profits?
Innovation is about doing new things, or doing existing things in new and better ways. The good news is that the best ideas are likely to come from within the business, so start the conversation going all the way from the shop floor to the boardroom and do it today.
Retain the customers you already have
Mark Price was vocal about this point, in particular. Whilst it’s always attractive to hunt for new customers, the ones you have today are the ones paying the wages you just need to keep them. It’s a much more cost-effective way to drive an increase to revenue and profit.
Retention has typically been the preserve of loyalty programs, and that’s not likely to change any time soon; the first-party data collected from identifiable purchase behaviour is essential to fuel a data-led strategy for customer engagement (you know the drill) However, most traditional points-based loyalty programs simply don’t deliver a financial return. That’s a fact.
That doesn’t necessarily mean that you should ditch your strategy, just take a good hard look at the numbers (I can almost promise you now that things could be much, much better).
With increased downward pressure on pricing, you’re going to need to play the long game of customer retention in order to recoup profits. Part of that strategy will inevitably be through discounting, but it should be done at a time and place that makes sense for your business as well as the customer. Individualised, financially optimised promotions are your weapon to increase retention and protect margins so use them.
Add value to the customer experience
If there’s one thing that we know at HTK, it’s that customer experience defines loyalty. Nobody buys four cups of bad coffee because the fifth cup (of bad coffee) is free. Nobody.
It may be a great experience to receive money off a purchase, but there are cheaper and equally effective ways of achieving the same goal which is to routinely put a smile on the face of your customer. To that end, more data and technology exists than you could possibly imagine your job is to find out where best to apply it.
If you’d like to find out more about the post-Covid future of loyalty and the three fundamental building blocks of (1) insight generation and real-time exploitation across mobile channels, (2) individualised and financially optimised promotions, and (3) fast, tactical and impactful ways to innovate and improve the customer experience, we’re here to help.
