Professor Paul Hopkinson is head of Edinburgh Business School at Heriot-Watt University Dubai and academic director for Heriot-Watt Online
Like most other industries, retail has been significantly reshaped by the pandemic-induced changes and digital development. From growing supply chain complexity to the rise of e-commerce and omnichannel, retailers were left with a lot to conjure with. According to a recent article by McKinsey, over the past five years, the margins have been shrinking by two to three percentage points per year, signifying critical financial losses. The source of the challenges that retailers are facing lies in changing customer behaviour and hyper-personalisation. Although this is not a new phenomenon, it was significantly accelerated by the pandemic. Research shows that consumer behaviour is becoming more unpredictable than it has ever been. In some cases, it is even impossible for retailers to track and control the way consumers use channels during the search and purchase process in an omnichannel environment. New trends in consumer behaviour include consumers being less loyal – in other words “channel agnostic” – more connected and informed. Research shows that one bad experience is enough for the customer not to use the channel or brand again. Amid this fast-changing consumer landscape and increased competition, how can retailers reverse the negative trajectory of recent years and overcome these challenges?
Currently, most research addresses how establishing a seamless omnichannel experience is the way forward, and how to leverage technology to that end. While there is no doubt that this is the case, little has been said about the challenges that come with the omnichannel process, and the changes that it further induces in consumer behaviour. While retailers that built seamless omnichannel offerings and a robust tech model to further their operating models have shown great success, understanding how consumers continue to respond to omnichannel offerings is key to long-term business survival.
The advent of mobile channels, tablets, social media, and the process of integrating these new channels in online and offline retailing has led to profound changes in consumer behaviour. Omnishoppers might research a product using a mobile app, compare prices on websites from their laptop, and finally buy the product at a physical store. Therefore, channels are used seamlessly and interchangeably during the purchase process. This marks the first challenge, namely the difficulty in tracking this search and purchase process. It also shows the way consumers are more connected and informed, posing larger competition between brands. This has largely changed the way consumers engage with a brand and make purchases.
Another challenge is the blurring lines between channel and brand. Customers perceive their interaction to be with the brand rather than the channel. According to a study by Harvard Business Review, 73 per cent of consumers used multiple channels throughout their shopping journey. In other words, a number significantly more than online shoppers only or store-only shoppers. Customers are not aware of the brand’s limitations on each channel and can get easily frustrated if migrating across different channels disrupts their shopping experience. This means that brands need to ensure that they not only provide a consistent customer experience across multiple physical and digital channels but ensure a seamless experience to keep the customers engaged and increase positive interactions with the brand. Customers expect a consistent and uniform service, regardless of the channel. They are willing to move between channels depending on factors such as their current situation, preferences, time of the day and more. According to a case study by researchers Cook and Piotrowicz and Cuthbertson in 2014, technological mobility means that the omnishopper does not simply access the channel, but is rather always in it, or in several all at once. The availability of different platforms to perform searches, read reviews or look for cheaper alternatives encourages customers to take advantage of each channel as they see fit.
The key to successful marketing has always been developing an understanding of the consumers’ needs. Today, the rapidly changing behaviour of omnichannel consumers accelerated the need to cultivate a more in-depth understanding of consumer needs across the shopping journey, starting with intent of purchasing the product until the purchase takes place. Starbucks recently provided a great example of that. Realising that many consumers like to grab a coffee before heading home at the end of a long workday but are put off by the idea of waiting in a queue to purchase coffee, Starbucks enabled pre-ordering coffee via an app. The company’s mobile payment makes up 29 per cent of its transactions. In doing so, not only was Starbucks able to enhance the customer experience, but it boosted its revenue through omnichannel technology. Similarly, by predicting consumer needs and constantly leveraging technology to that end, retailers can boost their performance and guarantee consumer loyalty.