As the $4.5 trillion U.S. retail industry evolves from being product centric to focusing on consumer relationships, customer retention has become a key metric of success. Brand loyalty is no longer something to be won once and relied on forever. Today, you have to win your customers repeatedly with every interaction.
The 20th century product economy was based on discrete, anonymous transactions. Retail was about inventory, shelving and cost-plus pricing. Companies had minimal insight into who was actually buying their products, or how they were using them.
But, in today’s Subscription Economy, the customer is king and customer retention must top every retail company’s priorities. Consumers value outcomes and unique experiences – they want easy shopping customized to their individual needs, curated choices, easy payments, and guaranteed satisfaction. And they want all of these to be delightfully smooth experiences – both online and in-store.
In many ways, today’s Subscription Economy is about rediscovering the value of ongoing, commercial relationships. We used to know the names of the people who sold us things. Retail needs to rediscover those relationships.
The recipe for customer retention is simple – retail has to become relentlessly customer-focused. Here are 5 ways you can help your retail company evolve to meet the new consumer:
To think there’s still a distinction between online and physical retail, between e-commerce and brick-and-mortar stores, is to live in the past. Your customers have a unified view of your brand – they don’t categorize their experiences as e-commerce, m-commerce, in-store, etc. It’s time you saw it as a single entity too.
Legacy retailers have to stop looking at e-commerce as a secondary storefront. Potential customers may try out products in stores and then buy them online or research online first, and then head to stores to try them out.
It doesn’t matter where the customer first connects with you, nor does it matter where the purchase is made. What matters for customer retention is a consistent and reliable experience at every touchpoint. Remember, you are no longer looking at a single transaction but at a long-term relationship with each customer.
While traditional retailers such as Walmart and Macy’s are increasing focus on the online experience, e-commerce companies such as Amazon, Warby Parker and Trunk Club are using their physical stores as extensions of their online stores.
Customers are increasingly only interested in outcomes — a ride, a place to stay, a cool new coat to wear — not necessarily stuff filling up their closets. They clearly favor access over ownership. Some retailers have caught on to the trend and have begun to offer subscription, rental and stylist services for clothing, shoes and accessories.
Be creative with the services you offer. It’s no longer a one size fits all world.
Many consumers prefer to rent products such as premium clothing, shoes, etc. Rent the runway is a great example of an innovative company capturing the market for premium clothing.
With extremely busy lives, many people value shopping services that offer personal stylist services and a regular uphaul of their closet. Services such as Stitchfix have successfully catered to this need.
Legacy retailers such as Nordstrom which recently bought the subscription service Trunk Club are combining online and offline offerings. Nordstrom realized even with personalized curatorial services such as Trunk Club, it’s still nice to be able to try stuff on and get fitted in a physical showroom.
Pick-up and subscription services also are a way of acknowledging that for most repeat purchases, stores should really just concentrate on seamless physical delivery. Target Subscriptions is a great example of offering ongoing convenience for repeat purchases.
We live in the age of big data but it’s amazing how many companies are yet to wrap their heads around it. Agreed, big data can be daunting but once you define your goals and work with the right tools, the impact on customer retention can be huge.
The basics are obvious- use data to understand your customers, their likes and dislikes, their shopping behavior patterns, etc and customize your services accordingly. But it doesn’t stop there. Retail must view data comprehensively and use online data to inform in-store practices and vice-versa.
For example, Birchbox uses rankings and reviews from their website to inform the way they arrange their physical inventory in their New York store. Nordstrom tracks Pinterest social data to highlight popular products in its stores. Again, the distinctions between e-commerce and stores are becoming increasingly irrelevant because it’s often the same customer at both touchpoints.
It used to be that shopping was a social activity with friends and family. It gave people an opportunity to hang out, browse, compare, review and window-shop. Somewhere along the way, retail lost it’s shine. Surfing online in your PJs is definitely not the same experience but malls and store visits with their accompanying parking woes and long lines are serious deterrents for consumers.
To increase customer retention, retail must focus on the strengths of both outlets. Many younger companies are reimagining their physical stores as showrooms rather than prettified warehouses. If you like something in the store, they’ll ship it to you. The main idea is for people to try things on and get advice. The key is that they are successfully using stores to surface the discovery process, not to manage inventory.
Tesla is a great example. Their dealerships are physical showcases and trial centres. You cannot drive out with a Tesla. They are dealing with a smart and informed client base, so the point is to delight, inform and answer questions. If you like the car, you can take care of the transactional stuff online and the car is delivered to your doorstep.
Beacons, m-commerce, apps – everybody wants to have them but few know how best to use them. Using technology just for the sake of it will only lead to customer frustration and dissatisfaction. Let’s look at beacons for example – these devices communicate with your smartphone and follow you through the store to offer relevant promotions and product details. They represent a lot of potential but can also backfire with privacy conscious customers or those who simply don’t want to be pull out their phones for no immediate benefit.
Home Depot is a great example of a company using beacon technology creatively to help consumers and in turn understand customer behavior – they use it to help customers navigate in stores and locate products. The benefits are immediate for customers and the store gains valuable data.
Instacart is another great example of a two-way use of technology. When a shopper is unable to find a product of your choice, they message or call you (only if you allow it) with substitutions that you can approve or reject with a single click. Obviously, completed shopping lists lead to happier consumers. And by taking the extra step, Instacart is able to increase customer retention.