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We all know that times are tough for many people right now. Uncertainty is high and money is tight. Shoppers are feeling the pinch and keeping a close eye on their outgoings.
What’s true of consumers is equally true of retail businesses. For retail leaders, maintaining profitability is front of mind as they grapple with multiple business challenges, including rising costs, flatlining revenue growth, and staffing difficulties.
Taking steps to improve profitability is essential, of course — and no business can survive long without it — but it’s vital that this efficiency doesn’t come at the expense of meaningful customer experiences.
Because when customers start to notice these actions, it adds up to a decline in value for them. In turn, the effects can be deeply harmful to long-term business prospects.
Where’s the love?
Accenture’s just-published Life Trends 2024 report sets out the scale of this challenge. It describes how consumers are starting to feel the effects of the cost-cutting and margin-protecting steps businesses have been taking this year.
That includes everything from reducing the size of products (“shrinkflation”) to swapping out ingredients or components for cheaper options (“skimpflation”) to declining customer service levels and more.
For example, data shows one in three consumers have found it difficult to get help from customer service agents in the past year. Or even get through to someone to speak to in the first place.
The result? People feel less loved and appreciated. Close to half of those surveyed by Accenture said poor customer service made them feel less valued. Nearly as many said the same about ignored feedback (41%) and declining product quality (37%).
The financial impact is real. According to the latest Customer Rage Survey, the future revenue lost by businesses failing to properly manage complaints could now reach a massive $887 billion. Just three years ago, it was $494 billion.
Holiday raises the stakes
The stakes are even higher now that we’re in the thick of the shopping season. The golden fourth-quarter period is critical to retail profitability.
Consider that Accenture’s latest Annual Holiday Shopping Survey finds that quality (50%) and value for money (60%) are among the most important deciding factors in how consumers will shop and what they’ll spend money on this season.
At the same time, the data confirms many consumers are planning to trim back their spending this year. They’re being creatively pragmatic about their buying decisions, making more considered choices, and looking to make their festive dollars stretch further.
Retailers can’t afford to find themselves on the wrong side of these buying decisions, and refocusing on creating a valuable customer experience will be incredibly important in delivering a strong holiday season.
Retail’s tech-led response
So, what can retailers do to show consumers the love this holiday? They need refreshed strategies for demonstrating their value. And a new way to define and develop their relationship with their customers.
But another way to think about this is how digital technology can create positive retail experiences. Firstly, that means delivering the ‘brilliant basics,’ such as self-checkout in store or hassle-free returns online.
Accenture’s Holiday Survey reveals 85% of shoppers would use or are already using the self-checkout, and almost two-thirds would use or are using hassle-free returns. And 79% would like to be able to initiate a return process without calling a helpline or visiting a store.
There are other more advanced tech-enabled experiences that we know customers appreciate and add to a valuable experience. Examples include livestream shopping events, virtual consultations with a personal shopper, and virtual online try-ons of clothing or cosmetics.
Leaning into loyalty
Customer loyalty programs are another important factor to consider here. But the challenge with loyalty is making sure your program is still offering what customers want. Too often, the tried and tested points-based approaches of the past are now misaligned with the expectations of customers today.
The good news is that Accenture’s 2023 Retail Executive Survey showed that more and more retailers are getting serious about upgrading their programs, refocusing around a more nuanced, data-driven understanding of consumers.
Nearly half of those surveyed say they’re expanding or changing the benefits they offer to incentivize members to remain active customers.
Just look at the Walmart rewards initiative, Walmart+. An exclusive rewards program introduced a little over a year ago offers members a range of benefits, from fee-less deliveries to the home to early access to sales promotions. For Walmart’s Black Friday sales, members get a seven-hour head-start on Black Friday discounts, giving them extra time to add their picks to their cart and check out before the rush – and possible out-of-stock notifications.
Other retailers are also making programs easier for customers to participate in – through greater personalization, gamification, streamlined redemption experiences, and lowering the thresholds where rewards kick in.
A human holiday
One final point to consider: In times of uncertainty, there’s a natural tendency to seek out community and human connection. We should expect that to be reflected in consumer desires and behaviors this holiday season.
It’s about embracing nostalgia and the simple enjoyment of traditional holiday experiences. And let’s face it, retail has a key role to play in delivering that, whether it’s the shelves packed with seasonal holiday goods or fresh produce that make up the festive meal at home. The trick is to ensure the in-stock position of key items, especially those with short shelf life, is available or else customers will go elsewhere.
Retailers that can ‘show the love’ by understanding and acting on these desires for human-centered holiday experiences will go a long way toward building and sustaining customer loyalty far beyond the peak season.