The state of Australia’s retail environment is understandably making retailers nervous. Retail sales fell 0.1 per cent in July, despite low interest rates and income tax cuts. Consumer confidence fell 4.1 per cent in July, amid low wages growth and fears of worsening global economic performance.  With Australians now more reluctant to spend, there’s more competition between retailers to maintain their share of a shrinking market. It’s little wonder Australian retailers are concerned. 

However, from the most difficult situations, opportunity arises. Retail is undergoing major disruption all over the world. The way people choose to shop is drastically changing. In fact, it is this change that is having a far greater impact than troubling economic conditions. While Australia has been somewhat insulated from these changes thanks to the late arrival of the global eCommerce giants like Amazon, it’s clear the time for disruption in Australian retail is now. 

If retailers can evolve and adapt to changing shopper preferences they can thrive, despite softer retail conditions. 

How the shopper is changing the face of retail

Shopper behaviours and preferences are changing fast, led by millennials and Gen Z. 

Convenience and immediacy 

The younger generations were born with a smartphone in their hand. They enjoy the immediacy of online shopping and expect that delivery or click and collect will be readily available, within short timeframes and without exorbitant delivery fees. In other markets like China, fast and free home delivery is the norm and Australian shoppers want the same. But they don’t only want to shop online. They are happy to visit a store so long as their requirements for convenience, ease and instant gratification are met. 

Loyalty, community and personalisation

Millennials and Gen Z are not loyal to brands but they are loyal to their communities. The retailers that can create communities around their and their shopper’s values - for example ethical sourcing, sustainability or body positivity, will have an edge. Shoppers’ interest in community also explains why influencer culture has taken hold, driving shopping decisions. Loyalty can also be built through personalising the experience so the customer feels heard and understood. The shopper experience must always be relevant, valuable, convenient and personal. 

Ownership vs. renting or sharing

Millennials have embraced the ability to rent through the sharing economy over owning products outright. Renting or sharing is a lower cost and lower waste model. Unlike previous generations, millennials and Gen Z don’t prize ownership. They are also much more conscious of how excessive consumption creates environmental challenges. By using Uber they don’t need to own a car. By renting through Airbnb they get the benefit of a holiday home without needing to own one. By renting clothes they can reject “fast fashion” and access a wider range of higher quality items while spending less. 

Human interaction 

Despite how it may seem, today’s shoppers don’t always prefer to shop online. In fact, they crave human interaction but it must add value in order to make it worthwhile to venture to a store. Why visit a store if the customer service will be poor or the experience will be impersonal? 

The stores that are creating personalised in-store experiences and providing higher levels of customer service will win out. Retail is circling back to its roots. Somehow along the way retail lost some of the human touch and shoppers are telling us they want it back. 

The future of retail

All signs suggest that retail will evolve to focus on highly personalised shopping experiences both in-store and online. Shoppers will seek out human interactions and high quality customer service which add value to their shopping experiences. The store will be a major point of contact for personalised service, returns, returning rentals and more. 

Stores which are prioritising the in-store customer experience are already ahead of the game. For example, at BCF Australia staff are positioned as adventure experts and can make sound recommendations and share advice. It’s a similar model to French sports retailer Decathlon which only employs experts in-store. The BCF website shares articles and advice on everything to do with boating, camping and fishing, from boat maintenance, to fishing rigs, to camping recipes. 

With shoppers less loyal it will be easier for retailers to lose shoppers and it will cost more to acquire and retain them. The key to building loyalty will be to personalise and customise experiences and create communities shoppers can be a part of. 

Retailers like fashion retailer ModCloth have already embraced this approach through making body positivity and inclusivity a priority. They used plus size and transgender models long before it became more mainstream to do so. Their Community Style Gallery was created to allow customers to share photos of themselves wearing ModCloth’s clothes, creating a real sense of community. In the years since, many fashion brands have followed suit. 

Retailers will seek out pricing models which encourage loyalty. Nike has recently introduced a subscription model which provides families with eight pairs of shoes each year for a fee. That gives families flexibility and convenience, and ensures regular and consistent income for Nike. 

Diversifying services in-store also encourages loyalty. For example, convenience stores all over the world now allow you to recharge public transport services. Many provide ATM services. Some provide post office services. They have had to evolve to continue to be genuinely “convenient” for customers.

How can retailers evolve?

The existing model of retail in Australia cannot keep up with the coming changes in shopper behaviour. Retailers must evolve. 

The first port of call will be to find ways to create efficiencies and cut costs elsewhere to shift resources in-store. Relying on skeleton staff in-store, as many retailers in Australia now do, is completely counter-intuitive. It may save retailers money in the short-term but it is driving customers away and destroying loyalty in the long-term. Currently shoppers spend about three or four minutes in-store. With more customer service staff on the ground, this will grow exponentially, improving the chances of a purchase. 

Customer service will also take on new dimensions. Imagine if when you visited a fashion retailer you could be assisted by a stylist to help you select clothes that suit you and that match your tastes. Leveraging technology, the stylists could be equipped with prior knowledge of your purchase and returns history, your sizing and more, to customise the experience for you. Wouldn’t you be much happier with that experience and much more likely to make a purchase?

Technology will play a significant role in creating a frictionless and seamless in-store experience. Tills will eventually disappear, freeing up customer service staff to actually focus on customer service. Artificial intelligence (AI), machine learning (ML) and the internet of things (IoT) will continue to give retailers access to highly personalised data on shoppers allowing for hyper personalisation and optimised fulfillment. This will enable retailers to better predict future purchases. For example, when an influencer mentions a product and there is a subsequent influx of interest in the product, retailers will be able to anticipate demand, ensuring the product is available. 

Currently over 70 per cent of retail CEOs worldwide are investing in AI, ML and IoT, but many don’t quite know how to deliver on these projects. This is a missing piece of the puzzle which will need to be resolved in order for retailers to be capable of meeting shopper expectations going forward. 

Ultimately, while retailers may see the current softer economic conditions as their number one challenge, the truth is it comes second to the huge shift in how people are choosing to shop. If retailers keep doing what they’ve always done, without innovating to transform the customer experience, they’ll be left behind. 

Related reading:

New research asks ‘What will customer experience look like in 2030?’

Ethical mindset is shifting consumer purchases

Retailers under pressure due to technological change