TheRetailer_Summer_19

Can businesses really get closer to consumers? If so, how?

LINDA ELLETT UK HEAD OF CONSUMER MARKETS KPMG

WE COMMONLY SPEAK OF GETTING CLOSER TO CONSUMERS, BUT WHAT DOES THAT ACTUALLY ENTAIL AND WHERE MIGHT INSPIRATION BE SOUGHT? Retail and consumer businesses more broadly are undoubtedly undergoing reinvention, but amidst the drudgery of negative headlines plaguing retailers and other consumer businesses, it’s easy to lose sight of the sparks of brilliance or key signs of where some players are actually managing to buck adverse trading conditions. More often than not, the solution to any longstanding issue lurks in the unexpected, requiring a fresh pair of eyes; venturing into unchartered territory, or looking to industries beyond your own. Businesses are increasingly urged to get closer to their customers, as traditional business-to-consumer relationships stretch beyond being merely transactional, and as the oversupply of retail clashes with lacklustre consumer demand. But what does this mean? Why is it important? Where can inspiration be found? Before delving into it, we have to appreciate just how tough the trading environment is. Recent updates from the BRC-KPMG Retail Sales Monitor recorded record low sales growth in May 2019, and June’s figures did little to ease the blow. Spend on retail is notably in decline, as shoppers hold back or spend elsewhere, whilst the gap between those seemingly ‘winning’ and ‘losing’ widens. Our recent Economic Outlook didn’t provide signs of relief to come either, suggesting that consumer spend will continue to slow, despite unemployment remaining low and inflation easing. A combination of ever-changing consumer behaviour; increased costs for retailers to digest, and the volatile economic and geopolitical landscape more widely, are giving rise to a mounting number of casualties as well as more restructuring. The fallout of all this is plain for all to see, but the antidote to such a lethal cocktail remains very much a work in progress. The fundamental truth however, is that customers need to be at the heart of any solution. Without their buy-in, there simply isn’t a business to speak of. Just think of the wave of traditional industries – not just retail – disrupted by new customer-centric competitors. Customer-centricity is a prerequisite for survival, and we must grapple the complexities of today’s – and tomorrow’s – consumers, however hard that task may be. Our Me, My Life, My Wallet report shed light on this, stressing the continuous assault of ‘pushes’ and ‘pulls’ thrust upon consumers. It’s not just retail, it’s all consumer businesses they interact with, while they’re attempting to save or pay off debt at the same time. Retail or not, all industries must be conscious of the fact that we’re all competing to remain relevant and on the consumer’s radar. We have to take a multidimensional view to understand consumer motivations; how to grab their attention; learn how to build a connection with them, and justify why we deserve their highly valued time and money. In its simplest form though, shoppers seek value, convenience and experience, and therein lies the key to reconnecting. The war on price goes without saying among us bargain-hunting Brits. But too many retailers look to ‘buy’ demand through promotion. As recent financials lay out rather painfully, such pressure on margins is unsustainable and becomes expected by shoppers – just think of Black Friday. Price remains important, but convenience and differentiated experience hold better

potential to engage the modern consumer. KPMG Nunwood recently outlined the correlation between customer experience and revenue growth, finding that those that deliver the best experience achieve 54 per cent higher revenue growth. KPMG Nunwood’s latest report – Power to the people – found that the UK is thankfully getting better at delivering customer experience – recovering from a record low in 2017. While many of the same brands from previous years remained top performers, lower performing brands realised the most improvement. Progress is of course welcome, but we have to remember that customer expectations continue to rise in parallel, so no brand can afford to sit on its hands where added convenience or better experience is concerned. The latest report also highlighted the key contribution employee engagement plays in improving customer experience, with satisfied and engaged employees a commonality among the strongest performers. Most organisations have venerable operating models that place the responsibility of experience for customers in a different place to experience for employees, resulting in confusion where language, vision and purpose is concerned. In our connected world, employee experience is just as important, especially given the impact on customer experience. All businesses need to look outside-in, and inside-out, with customer centricity front of mind. Retailers will no longer benefit from comparing themselves next to their nearest competitor. Consumers are increasingly rethinking their relationships will all businesses. By the same token, inspiration on how best to engage today’s customers may well come from an entirely different sector. So who might consumer businesses look to? One industry worthy of note is video game developers. They can certainly say a thing or two about putting customers at the centre of their business. As an industry, they are creating games to meet, if not surpass, the expectations of an informed, passionate and vocal customer base. They have to embed user experience into every aspect of their business. They have to use discipline to cut through any confusion that may mar product development. They use player psychology to support game design and testing. And more often than not, user experience is too crucial to be entrusted to just one group, with it being the responsibility of everyone. Yes, perhaps it’s time to start looking further afield as retail and consumer businesses look at redefining themselves before its ‘game over’!

“Customer-centricity really is a prerequisite for survival, and we must grapple with the complexities of today’s – and indeed tomorrow’s – consumers, however hard that task may be.”

20 | summer 2019 | the retailer