Walk through any shopping centre and it is hard to miss the “Sale” signs out front of nearly every retail outlet. There is no doubt retailers are doing it tough right now but should this be a surprise to us. If we look around the retail landscape, there have been very few significant changes in the past 30-40 years.
Unfortunately, with this inability to adapt to change, retailers falsely believe that the only thing they can compete on is price. As prices continue this downward spiral, you could assume the winner would be the consumer; but at what cost? Prices may be going down and as a consumer, you may think this is a good thing but unfortunately, the price squeezing is also having a negative impact on the quality of products. Think of it, with the exception of LEGO, when was the last toy you bought that managed to survive longer than its batteries? Price reductions have also played a significant part in the decline in customer service to the point where today, customer service has gotten so bad that if it is not terrible, we as customers are relieved.
Contrast this to consumer behaviour, which has changed dramatically over the last 30-40 years, in particular the past decade. We are now in a new are, the era of the enlightened customer. At the end of the first decade of the 21st century, this so called enlightened customer has emerged as a result of a number of factors.
- Customers today have so much choice: there are so many more retailers offering the same, or similar, products and services, customers have a myriad of retailers to choose from.
- Customers have become promiscuous: where generations before showed loyalty to their retailers, generations today show little evidence of that same loyalty.
- The rise of the prosumer: many customers do their research on their products and services prior to entering the store. In many situations, customers often know more about their purchase than the person selling to them.
- Customers have become rebellious: it was once said that when a customer had a bad experience, they were likely to tell 20 people. In today’s always on society, if a customer has a bad experience, they could be telling millions of people through social networking sites in a minute. Think of the impact this can have on a retailer’s brand.
- Customer expectations are changing: many retail outlets, such as the Apple stores, are changing customers’ expectations forever. When customers experience the level of service they receive in an Apple store, there expectation is changing and they are craving the same level of service from other retailers.
- Multiple channels: customers want to do business their way, through the channel of their choice and they expect the same level of service through every channel.
With competition at an all time high, customer service, prices and quality at an all time low, Australian retailers have shown few signs of changing their game or doing things differently. The only answer seems to be to increase the marketing and reduce the margins.
There is something else to be fearful of on the horizon, successful international retailers are now establishing a foothold in Australia. These retailers have succeeded overseas and now see plenty of an opportunity in Australia and this may change things forever.
One of the newest arrivals scheduled to reach our shores in the near future is Zara, the Spanish fashion company. Behind the success of Zara is a complete and total alignment to what customer’s really need. They have truly challenged the fashion industry, turning it on its head by doing something that few thought possible. Where it used to take the leading fashion retailers in excess of 18 months to get fashion to consumers, Zara’s model is all about velocity and they can now put fashions in store in less than two weeks. No more waiting to purchase next year’s fashions, at Zara you can have fashion now.
Few signs of this type of innovation exist in Australian retailers. It is not too late, but Australian retailers must understand that the game has changed. It is no longer sufficient to wait for customers to enter your store because the customer experience starts well before the customer leaves their home and the experience is not over until they return.
There is still an opportunity for success, but it will take a significant mind shift. It is time to stop trying to trick customers with gimmicks or over promising and under delivering; it is now time to change perspective, to look at the retail experience from the customer’s perspective, to take an outside in approach.
By changing the focus to the entire customer value chain, and by making a commitment to making their lives easier, simpler and more successful, opportunities abound. And it is precisely this change and this commitment to deliver value to customers, to truly understand the needs of customers, this shift in focus toward the success of the customer that is at the heart of the success of some of this century’s most successful companies.