What today’s consumers are looking for, can be distilled down to just three key points: value, convenience and a unique experience. Retailers who fail to respond to these trends are being punished. Businesses must move towards a more customer-centric approach if they want to survive.
By Paul Martin, KPMG
The last few years have seen a period of significant change in the retail sector. As well as maintaining their focus on product quality, businesses must move towards a more customer-centric approach if they hope to survive. Now more than ever, customer is king. But as businesses struggle to map the ultimate customer journey and build further complexity into their business models, has shopper research gone too far? Is it now the beast that’s eating its own tail?
Lots of traditional consumer-facing organisations are currently being disrupted. But when responding to these challenges, it’s crucial we manage the complexity and avoid adding further unnecessary layers. There’s enough over analysis out there, so we need to take a step back and ask one simple question: what does my customer actually want?
Consumers can be satisfied with value, convenience and unique experience
Yes, this may sound obvious, but over-complexity can be the death of many businesses, and no organisation in the world is equipped to accommodate hundreds of different customer personas. You just can’t be all things to all people.
I believe that what today’s consumers are looking for can be distilled down to just three key points: value, convenience and a unique experience. Retailers who fail to respond to these trends are being punished – often severely. Retailers who deliver on one or more of these trends, however, are being rewarded – often handsomely.
So who are the winners in this brave new world of retail commerce?
Taking a closer look at our first point – value – one newcomer that’s proved to be a classic disruptor is online eyewear specialist Warby Parker. By bringing design and production in house and stripping out the middleman, the company has been able to reduce costs and so offer designer glasses at the single price point of just $95 per pair.
Companies need to building a culture that customers want to be part of
Customers are posted a selection of glasses to try, and can then return any pairs they don’t want, for free. Although only a limited range of frames and colours are available, it’s a limitation that customers are happy to accept in return for designer glasses, delivered direct to their door, that are significantly cheaper than anything the competition can offer.
Crucially, the company has also been able to extend its value proposition, building a culture that customers actively want to be part of. Suggested reading lists are offered to all new customers and for every pair of glasses sold, another is donated to charity.
When their first physical stores opened, they were acts of pure retail theatre, with library-themed décor, digital photo booths and teams of digitally-enabled staff.
By building a customer experience and relationship that perfectly aligns with their market, Warby Parker has grown into a business that, in April 2015, was valued at $1.3 billion. Not bad going for a newcomer that started life as an online pure player with a business model that many thought was pure fantasy.
The convenience of home delivery, redefines how customers buy food
So what of our second trend, convenience? Like value, convenience is not new as a driver of change in the retail sector, and it’s always been something that customers are willing to pay for, particularly cash-rich, time-poor customers.
An excellent example of this proposition in action is Hello Fresh, founded in Berlin in 2011. This ‘ready to cook’ grocery delivery service aims to make shopping for food, and cooking it, simpler by delivering ingredients for meals that are pre-selected by the customer via its user-friendly website. A range of options, which vary each week, are available, and customers can book a one-hour delivery slot that suits.
As well as the obvious convenience of home delivery, this model completely redefines how customers actually buy fresh produce. By allowing customers to buy only the exact quantities of fresh organic ingredients they need, Hello Fresh are not only simplifying their lives, they’re helping them to make a healthy lifestyle change and cut down on food waste too. It’s a winning formula that’s seen the company grow to service half a million subscribers in seven countries across three continents.
Thread.com create a business that can offer mass personalisation
As modern customers learn to understand their own value, they also learn to have far higher expectations. Providing the right product at the right price is, quite simply, no longer enough. Today’s customers want experiences that are tailored, even personalised, to them – something relevant and valuable that is worth paying (often a premium) for.
Whilst both the above examples have incorporated elements of ‘customer experience’, one new kid on the block that seems to have really excelled in this area is London-based styling service, Thread. Offering a free, digital personal styling service for the time-poor, style conscious, shopping-averse male, Thread.com blends both the human touch (personal stylists) with digital (data and algorithms) to create a scalable business that can offer mass personalisation.
The fact that the business is small and entrepreneurial enables it to remain nimble. By listening to their customer feedback and data, and using social media platforms, they can continually test and innovate, and build the perfect ‘customer experience’ for their demographic to engage with. And it’s working. In just three years, Thread.com have grown their customer base from 20,000 subscribers to over 250,000 – a significant achievement for an online platform.
Businesses learn to put the customer at the center of the retail experience
You need only look at these examples to see how vital it is that businesses learn to put the customer at the centre of the retail experience. But old habits die hard and it’s an evolution that’s proving challenging for many. Whilst there’s no standard template for success, we can help ourselves by not over-complicating the customer journey. If, broadly speaking, customers are demanding value, convenience or a unique experience (ideally all three) – then that’s what businesses need to be measuring themselves against. Whether we like it or not, this is the new face of retail. However retailers choose to respond to these disruptors, one thing’s for sure, failing to respond at all is no longer an option.
This article has been prepared for Wirecard (the “Client”) on engagement terms agreed with the Client. KPMG does not accept or assume responsibility to any party except the Client (to the extent agreed in engagement terms) for any views formed or made when preparing this article. Accordingly, any such party accessing, viewing and relying on this article does so at its own risk. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. Any copies that are made of this article may be made in full only and not in part.
© 2016 KPMG Boxwood Limited is a subsidiary of KPMG Holdings Limited, a subsidiary of KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved.
The KPMG name and logo are registered trademarks or trademarks of KPMG International.