The retail environment has never been more complex as consumers continue to develop their own approach to researching and purchasing products, both online and in-store. Retailers are being left overstored, making lower margins and experiencing reduced profitability.
Retailers are facing four waves of disruption according to findings from PwC’s Total Retail 2015: Retailers and the Age of Disruption, the eighth annual study in a series tracking changes in global consumers’ shopping preferences, and the biggest one yet: 19,000 online users representing 19 countries were surveyed.
Four waves of disruption
- The evolution of the store – While e-commerce sales are growing every year, the store isn’t dead yet. According to our survey, while 68 percent of our global sample say that they have browsed products at a store but decided to purchase them online, 70 percent of our global sample said that they have done just the opposite; that is, browsed products online but decided to purchase them in-store.
Shopkeepers and shops have been around for centuries, so it’s a pretty safe bet, mobile apps or not, that stores will still be around in very familiar forms for at least the next few decades. This year’s survey data strongly backs that up; in fact, in some areas we’ve found a strong bounce-back for the store from previous surveys.
- Mobile technology – Mobile is still a very small piece of the pie in terms of overall retail sales. But mobile phones are increasingly a critical factor in setting the stage for a purchase. Thirty percent of our global respondents have located stores, and a quarter have used coupons they received by mobile phone.
Companies and governments analysing trends with ‘big data’ has provided these organisations with exceptionally valuable insights. Today’s consumers can access their own versions of big data on their smartphones, and this capability has only scratched the surface. Improvements in data storage, near-field and GPS technologies and retailers’ abilities to recognise shoppers’ preferences are game-changers. The smartphone won’t be just something consumers can call or search with - it will be constantly searching on their behalf for the cheapest, greatest value, and most unique product.
- Social networks – When asked if their interactions on social media had led them to buy more, a total of 62 percent of our respondents answered either “Yes in most cases” (19 percent), or “Yes in some cases” (43 percent).
Optimising or integrating social with your site, particularly in its mobile web presence, investing to improve search engine rankings, and creating a focused social strategy may be the best approach for retailers who are innovating their social networks. Social media platforms are ideally suited for creating or supporting a brand, distributing great content, and providing the space to generate genuine word-of-mouth and viral buzz. Digital and display ads, on the other hand, reinforce consumer interest. Search platforms point to a strong desire to complete an actual transaction. To improve viability as a purchase destination, search engine optimisation should be invested in.
- Demographic shifts – Global ageing patterns show retailers can count on a large segment of global consumers who have a long track record of spending, and are intending to spend into the foreseeable future. Our survey also illustrates how ‘digital natives’ – those aged 18-24 – include mobile and social media as part of their shopping experience at a much higher rate than the rest of our survey respondents.
Interactions with favourite brands tend to make digital natives spend more on products and engage in mobile purchasing behaviours more often. The question remains whether they, together with the next wave of young, digitally-savvy shoppers, have the economic clout in the next few years to force retailers’ hands in how they view their business models. Although, it’s worth noting, these younger demographic behaviours have a track record of ‘infecting’ the more mature generations . The significant growth of ‘parental’ and ‘grandparental’ migration to Facebook over the last four years is a good indicator of this. Any store manager will tell you ‘showrooming’ in store is not just restricted to under 24 year olds.
As online shopping continues to grow at the expense of store visits, the premium in the future will be on creating unique, brand-defining experiences that keep customers coming back— whatever the channel. With the very real prospect of increasing tax on the 42 percent split of ecommerce purchases New Zealand consumers make on overseas sites, there is a real domestic imperative to focus energies on the digital.
This story was originally published in NZRetail magazine issue 737, April/May 2015.