2019: The year of the disappearing customer

So 2018 has come and gone – a year filled with bankruptcy, liquidation, and the continuation of the decline in consumer spend. The difficult trading conditions that have plagued retailers for a number of years look set to continue into 2019, and the resulting pressure on retailers along with it.

The year saw large-format US retailer Sears fall into administration and, as it stands, potentially liquidation, as well as huge losses for well-established Australian brands such as Myer and David Jones.

However, there are a number of things retailers can expect to see over the course of the year across several parts of the industry.

Businesses closing, restructuring

Unfortunately, 2019 has already claimed at least one retail business. Beauty retailer Crabtree & Evelyn has partnered with administrator KordaMentha to solvently undergo a wind-down process, which will see a dozen stores close and upwards of 100 employees affected.

Not every brand is set to go under, of course, but many are in the throes of a difficult restructuring phase as they seek to bring customers back to their stores, whether online or physical. However, many customers are tightly controlling their spend, or have already moved on to newer, more customer-centric brands.

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“There have been a number of brands that have failed over the last little while, and if you look back on those you sort of wonder that they lost their way – and lost their reason for people to shop,” says KPMG’s national leader for consumer markets, Trent Duvall.

“There are still a number of brands in the market that are going to be challenged over the next little while. You’ll see new and better offers come and replace them, take their market share, and the established brand will fall away as others respond better to what the customer wants and needs.”

KMPG’s partner of customer, brands and marketing advisory, Lisa Bora, notes that brands that are doing a good job of retaining customers are those actively putting customers first.

“It could sound quite clichéd that you’ve got to have your customer at the heart [of your business], but it’s never more relevant, because those expectations keep growing and growing,” Bora says.

She goes on to note that it is imperative that retailers measure themselves not only against their industry contemporaries, but the best in class – regardless of industry.

“If [a customer] has had a terrific transportation experience through an Uber, or some other mechanism, that’s [now their] expectation of retail,” Bora says.

“It’s just about being the best-in-class in the experiences you deliver, and leading the customer need and personalising it where possible.”

Harnessing customer data

As retailers continue to refocus and reshape their businesses moving forward, it becomes important to take the opportunity to nail the fundamentals that customers have come to expect, yet many do not deliver.

According to Bora, Australian retail has found itself in a “laggard state”, with many businesses failing to provide what customers expect, and which struggle to build the ecosystem now that business is dropping off.

“We still have many retailers who do not leverage the full power of their data and technology,” Bora says.

“We still have many retailers that don’t do personalisation at scale very well. They rely on old-fashioned, high-cost, margin-eroding loyalty programs as a mechanism for stickiness – and those days are over.”

Areas such as mobile commerce, offering multiple payment options and facilitating quick and easy home delivery are likely to continue spreading, though a renewed focus on a retailers’ bricks-and-mortar strategy is likely to become an important trend this year.

Australian fashion brand Country Road is looking to revamp its bricks-and-mortar strategy in 2019, with plans to unveil a new store design later in the year.

“Our stores are critical to our business,” Country Road managing director Elle Roseby tells IRW.

“You will definitely start to see the stores evolve [in 2019], in particular with [our] new product launches and product offers that we have.

“We get a lot of feedback from our customers around our stores, so there is [some] customer insight [in that decision], but there is a creative insight as well that we always need to be doing to move our brand forward. I think it’s a combination of innovation and customer insight.”

Reducing the environmental footprint

Sustainability was a buzzword in retail during 2018, with supermarkets Coles and Woolworths’ nationwide ban on single-use plastic bags having put the topic in the spotlight.

According to Queensland University of Technology associate professor Gary Mortimer, this trend is likely to continue into 2019, with many retailers continuing to push forward their “green credentials”.

“While I think we’ve seen the big supermarkets ban single-use plastic bags, Victoria and certainly NSW legislatively need to come online, and I think that will take place [in 2019],” Mortimer tells IRW.

“We will see retailers also look at other ways to reduce their environmental footprint – whether that’s through the removal of straws, changing packaging material, reducing waste, or energy costs.”

This is in large part to consumers becoming more in tune with the environmental and ethical impacts of the retail industry, with many choosing to spend their limited discretionary impact on brands they see as aligning with their own personal, green values.

Mortimer notes it is likely the industry will see other categories, such as the convenience sector, begin to look at their sustainable practices throughout the year.

“If we walk into any convenience store today, we’re often confronted by a significant array of refrigeration, plant and lighting, in some cases 24 hours a day, seven days a week,” Mortimer says.

“I don’t think we’ll see much around plastic bags, [but] I think we may see things around LED lighting and structural changes to assets, particularly refrigeration, to reduce environmental impacts.”

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