Every aspect of retail over the next 12 months and beyond is set to be influenced by inflation. The first week of January saw shop prices jump to a record high of 8%, according to recent figures from the BRC-Nielsen Shop Price Index. As consumer sentiment falls and consumers search for value, how can retailers support their customer base while also safeguarding margins?
Fortunately, these two objectives are not restricted by mutual exclusivity. It is possible for retailers to decrease costs to transform the consumer experience through taking advantage of the true value of cloud-based analytics, Machine Learning and Artificial Intelligence. Retailers are able to generate innovative solutions through granular insights, enhancing both customer experience and costs. AI is also a powerful tool for ensuring customers are locating the right products online, in spite of flawed spelling or vague search terms. This helps establish a greater experience while decreasing the $trillions lost to abandoned baskets every year.
Andrew Bithell, Sales Team Lead, CTS, outlines the importance behind such technology’s role in enabling retailers to leverage the full potential of their data resources. And, thereby develop the innovation required to decrease costs while matching evolving consumer requirements .
Acknowledging Alternative Experiences
Understanding and acting upon the changes in consumer activity has always been a necessity for retailers, but today’s customer behaviours are more nuanced than ever. Shopping patterns are being interrupted by the rising cost of living. Consistently increasing prices are showcasing a large difference between product types, resulting in certain retailers – and some categories – facing substantially tougher trading conditions than others.
Current pressures are increasing the importance of accessing granular insight into the experience of different customer groups, preferably at SKU level. How can retailers provide the best value to consumers whilst ensuring the quality of experience isn’t compromised? What is the best process for finding new ways to attract and satisfy a consumer base struggling to commit to purchasing decisions? What must a business do to retain customers, but also safeguard margins and decrease costs?
A large majority of retailers already have the data that can provide such critical information. Yet, siloed data results in isolated decisions being made whilst failing to consider the context derived from a whole data view. If a retailer intelligently discounts their day to day essentials, will customers still purchase the high margin luxury items? What opportunities are there to attract the sustainability sensitive shopper with better value on eco-friendly goods? This is where cloud technology is renovating retail, enabling companies to run sophisticated analytics across multiple data sets to drive vital innovation that will both decrease costs and boost experiences.
Minimising Lost Opportunities with the use of AI
A significant priority for 2023 is decreasing cart abandonment. While figures range from 56% to 81%, recent data from the Baymard Institute puts the average cart abandonment rate at just under 70%. An even higher abandonment rate goes to mobile users, who have a rate of 85%, which is alarming when more digital buyers will use smartphones to shop throughout 2023.
The past few years have seen ecommerce retailers be extremely proactive in leveraging data to improve the quality of checkout processes and eliminate frustrating payment glitches. So how else can the online experience be improved? And what else can be done to limit the forecast $4 trillion worth of merchandise expected to be abandoned in digital carts in 2024 alone?
Transforming how customers navigate to the desired products is one of the biggest opportunities. Ensuring as little clicks as possible are needed is critical to minimising frustration and increasing likelihood to purchase. Customers are at risk of being taken to the wrong products thanks to spelling errors and misunderstood voice search, increasing the chances of them abandoning everything already in their cart. A key role in this area is AI, with Natural Language Processing (NLP) catching standard spelling mistakes and automatically directing the customer to the intended product. By prioritising a faster and more efficient process for shoppers, retailers will decrease the amount of abandoned baskets and enhance the buyer experience, promoting retention and loyalty.
Transforming Experiences through Collaboration
Returns are another substantial retail cost, with free returns costing UK retailers approximately £7bn a year. Abandoned baskets are also influenced by returns policies, with an estimated 67% of consumers abandoning virtual baskets if a retailer’s returns policy fails to meet their expectations.
Retailers need a new perspective. They have trialled a range of options like implementing fees to deter ‘bracketers’ and ‘wardrobers’. However, the issue is not limited to the price of returns, but also the quality of the returns experience and how this impacts customer opinions. Why expect shoppers to print their own returns label when so few of them have a home printer these days? What is the likelihood of a customer returning to shop with the brand after having to queue in the Post Office for ages to return their item, regardless of whether the return was free or not?
Despite omnichannel retailers simplifying the processes behind buying online, picking up and returning in store, customer time and effort is still required. A large majority of consumers have a weekly supermarket delivery, so what is stopping retailers from borrowing the Nespresso approach (where used capsules are collected for recycling when new products are delivered) and providing a returns option within the same service?
The optimal approach has already been established: advanced delivery models, hand-held devices to gain information, powerful cloud-based analytics to rapidly assess, in granular detail, the effect on customer behaviour and the company’s sustainability objectives. This not only results in a better returns experience for consumers, increasing their likelihood of repurchasing, but it could allow delivery companies to decrease the amount of empty miles, increasing their sustainability credentials whilst decreasing costs.
Conclusion The outlook for the end of 2023 and beyond remains optimistic, according to the British Retail Consortium, who suggest the market will improve. However, this fails to solve the issue of consumers who are searching for trusted retailers now. These customers are looking for both value and an improved experience that will support them through the next few tough months ahead. Retailers must recognise the opportunity to leverage cloud-based analytics to transform customer and cross business understanding. Taking advantage of this insight can aid in providing value to customers through greater shopping experiences and optimised pricing that will ensure the retailer is best placed to leverage opportunities as the market recovers.