Retail is in a state of revolution. And what happens in any revolution? All the experts come out with points of view. In the case of today’s changing retail market, quite a few industry ‘experts,’ including major consulting firms, have opinions on what retail’s focus should be. It’s what we’d call a solid recap of the new mechanics of retail – such as optimizing the omnichannel experience, applying increased analytical rigor to available data, or leveraging automation to improve process.
But retail is a very competitive business and most retailers will tell you that implementing the basics is just the table stakes. The basic tactics will not create a differentiated experience. In fact, being too stringent in following these experts’ advice runs the risk of creating an antiseptic, non-human shopping experience. Yet, customers are humans. They are individuals with motivations, values and needs.
To create a retail experience that creates loyalty and commitment requires understanding where consumers are coming from and what motivates them, deep down, so that your shoppers become advocates and great long-term customers. When we at Magid give advice about winning in retail for the longer term, we tap into our Magid Knowledge Core, a body of proprietary research that uncovers and informs our understanding of what motivates people and how that is evolving. Here is what we have found out:
- Consumers are rethinking life: As a starting point, we know from our research the pandemic caused most Americans to rethink what they value in life. From our data we know more than half the population changed how they are spending their time and money vs. pre-pandemic. We see this manifesting itself across industry verticals that affect just about every consumer-facing category. Retail is no exception and any merchant can tell you there have been major changes in how consumers shop.
- There is a “45 Divide”: Gen Zs and Millennials, who together represent all adults under the age of 45, are much more about “Me” while Gen Xers and Baby Boomers are focused on “We”. Those under 45 are concerned, primarily, about looking good to family and friends, being seen as powerful and having influence, and being treated well by others. This is miles apart from Gen Xers and Boomers who are much more focused on helping others and the betterment of society as a whole.
- People crave connection: The majority of Gen Zs and Millennials (who now represent over half of the core buying demographic and whose representation of the 18-75 year old demo has increased by 5% since the beginning of the pandemic alone!) self-describe themselves as depressed. They are not happy but want to live better lives. They seek positivity where they can find it and want to be recognized. That sense of lacking and longing is part of their reality every day.
An awareness and understanding of these societal conditions leads to retailer strategies that are focused on connecting with consumers, shoppers and customers. Implementing strategies that foster connection is the differentiation required for future success.
Being nice is the most important action a retailer can take
Consumers are seeking positive, enjoyable experiences in retail stores. In fact, we have identified that the number one predictor of “the best in-store experience” is having employees who are pleasant to interact with and know when and how to engage customers. This is about being nice and welcoming and having a good EQ. Focusing on tactical management and operational programs such as omnichannel experiences and self-checkout do not make the physical retail experience better for consumers. What consumers really want are nice, welcoming store employees. They want positive human interaction. It’s not deep, but it’s the most important thing a retailer can do.
Don’t automate away your opportunity to connect
Jumping on the automation band wagon is popular and the hot topic from consultancies is self-checkout. Many advisories have proclaimed that retailers should continue to press ahead with aggressive self-checkout plans because “everyone wants it.” The data used to support the contention is traffic data that indicates more consumers are using self-checkout lanes than ever before. But did these consultants ask consumers if they actually like self-checkout? We have. Interestingly, when asked if they prefer self-checkout to employee-staffed registers, half of retail shoppers say they do. But when we ask how often and under which conditions they use self-checkout, we find that nearly 40% of consumers use self-checkout because the human-staffed checkout lanes are miserable. And 20% say they avoid self-checkout at all costs.
It turns out that self-checkout is the worst of two evils for the majority of shoppers. And when retailers limit employee-staffed checkout lanes in favor of self-checkout, they make the shopping experience worse for most people and push people to a sub-optimal experience. Furthermore, retailers miss an all-important opportunity to have a pleasant human interaction with their customers…one that consumers (particularly those under 45) are craving.
The shift towards impersonal in-store experiences has created a disconnect between retailers and consumers. And although retailers might be cheering as customers scan their products’ barcodes, increasing store efficiency, this should not overshadow the human connection young consumers seek. Better understanding the current desires of young consumers and personally identifying how to evolve the in-store experience effectively is critical to drawing the younger generations into retail spaces. Retailers have the opportunity to reestablish their relevance by delivering an authentic and fulfilling shopping experience that consumers truly crave.
Don’t substitute hyper-personalization for a relationship
The combination of more available data and AI has advisories pushing retailers to accelerate ‘personalized’ emails, offers, notifications and content. Yet we found the number one frustration among younger consumers with loyalty programs was too much of this type of personalized content. The constant correspondence of a turbo-charged program is clutter, not hyper-personalization.
If retailers are to build meaningful relationships with new audiences, they need to think about the fundamentals of what a relationship is. Retailers can win by responding to the consumer need for personal connection. Expanding self-checkout or increasing automated communication may drive efficiency and boost one-time transactions, but those moves actually run the risk of diminishing loyalty.
Our data found that 38% of the population believe the shopping experience is becoming too impersonal. The real opportunity is to drive toward a customer experience that prioritizes human connection, a void that is disproportionately affecting younger consumers. Contrary to popular belief, only 16% of Gen Z and 11% of Millennials state they do not like seeing or talking to employees when asked why they do not go in-store.
With a solid understanding of what really motivates customers, retailers can build engagement strategies that will endure. It takes more than connected databases. Gen Z is too smart for that trick. They want to know that a retailer understands them and how their values drive choice. A retailer should be assessing its various touchpoints, including self-checkout, and carefully evaluating how each experience positively contributes or detracts from the aspirational desires of its customers.
When executed effectively, a retailer that understands and effectively executes on consumers’ deep desires will foster customer loyalty, advocacy and repeat business. Isn’t that why you opened your store in the first place?