Competition has steadily been heating up in the retail sector for some time. Customer preference toward online shopping is expected to continue as total worldwide sales are forecast to surpass $30 trillion (USD) by 2025. At the same time, retailers are also contending with shifting consumer tastes as sustainability becomes more important in major markets like the UK and US. If things weren’t hard enough, rocky supply chains and labour shortages are placing further pressure on stores’ ability to deliver the best customer service to their community. Senior leaders must adapt and learn how to thrive in the digital age if they’re to navigate these problems successfully. In this paper, we’ll explore the changes in consumer behaviour over time and discuss what leading retailers can do to grow their market position. Read on to learn more about:

• What changes has the retail industry faced over the last decade?
• How to thrive in the digital age
• What does customer service in the digital age look like?

What changes has the retail industry faced over the last decade?

 Customer preference towards online shopping

 E-commerce is arguably the largest challenge facing retailers today as it’s caused a massive upheaval in how customers shop. Available 24/7, e-commerce offers consumers unparalleled choice and the ability to plan purchases at their leisure. Today, e-commerce holds around 20% of all global retail sales, however, this number is higher in more developed e-commerce markets like China. It’s important to note that retailers aren’t simply fighting against other large firms in the consumer goods sector. Instead, the growth of e-commerce juggernauts like Amazon has coincided with a wider uptake in e-commerce more generally. For example, platforms like Wix and Shopify have helped small businesses launch stores using direct-to-consumer strategies and effectively cut retailers out of the picture. Therefore, retailers are battling large e-commerce firms as much as they are small ones. At the same time, consumers have also begun using platforms like Deliveroo and JustEat to complete small shopping tasks. As a result, some consumers are having less interaction with the businesses they purchase from. Altogether, this means customers are becoming more distant, making it increasingly difficult to build brand loyalty. What’s clear is that convenience and access to information are driving customer preferences toward online shopping. 2020 was a record year for the e-commerce industry, having grown nearly five times as fast compared to the previous four years. However, worldwide e-commerce sales have grown eightfold since 2014. Therefore, the shift is part of a wider trend towards online shopping that’s been happening for more than a decade.

Sustainability and circular economies

In addition to e-commerce simplifying the purchasing process, consumers have begun also changing what they buy. For example, sustainable goods have become more important to consumers, particularly younger ones. Around a fifth of US Gen Z and Millennial consumers consider the environmental impact of the brands they purchase from. Interestingly, Deloitte research has shown that consumers equally favour environmental benefits like a lower carbon footprint, green packaging and an ethical supply chain. What’s more, around two-thirds of consumers are willing to pay more for eco-friendly goods. As a result, some retailers have updated their inventory or rebranded their packaging to help customers find more products that fit their ideals. However, sustainability has impacted retailers in other ways, as modern customers expect their goods to last longer in turn. Platforms like Depop are expanding the second-hand economy by helping consumers buy and sell pre-loved clothing. Similarly, consumers are delaying their smartphone upgrades or turning to repair services to breathe new life into old devices. Therefore, retailers within the fashion and consumer electronics categories have experienced a dip in sales.

The spillover from FinTech innovation

As with the rise in small online sellers, innovations in the financial services industry have spurred further competition between physical retail outlets, too. Firms like Klarna are giving customers easier access to 0% credit for their purchases. Instead of saving for a particular item, or paying a premium for poor credit, ‘Buy Now, Pay Later’ (BNPL) schemes help consumers spread the cost at no extra charge. Until recently, BNPL schemes have only been available online. This has pushed the popularity of e-commerce even further since the lending solutions help consumers access goods more easily. However, BNPL schemes are increasingly available in-store which is intensifying the competition between physical retailers also. Similarly, firms like Square are empowering smaller retailers by improving their access to card machines. As a result, the younger businesses can widen their accepted payment methods and grow their operations with the increase in sales revenue. Therefore, traditional retailers have had to compete with younger businesses using popup shops and stalls that offer fewer overheads and liability.

How to thrive in the digital age

With the mounting challenges facing today’s retailers, it can feel like it’s never been more difficult to run a successful retail business. However, there’s plenty to be optimistic about. PwC’s recent Global Consumer Insights Pulse Survey found that in-store shopping is still consumers’ favourite channel for regular shopping trips. What’s more, brick and mortar retail sales grew faster than e-commerce sales in 2021 meaning that in-person retail has exciting growth opportunities ahead of it. Even short-term challenges like the supply chain crisis contain a silver lining. Analysis has shown that the crisis is being exacerbated by a tremendous amount of pent-up consumer demand as customers are eager to return to normal. Therefore, senior leaders within retail organisations must focus on what makes in-person retail special. Below we outline three key areas that separate retail from e-commerce that you can focus on:

a. Leading with the human touch

Customers want to be able to ask staff questions (whether in person or over the phone) about products in real-time. A human touch can also ensure customers feel catered to during returns and complaints processes. These types of personal interactions can help build brand loyalty and save customers time from having to find information themselves.

b. Delivering an exclusive experience

Personable customer service and live product demonstrations can help consumers feel a sense of exclusivity from the shopping experience. Expert staff can ensure that your online presence and storefront become a source of unique product insight and value from sales events.

c. Blurring the lines between offline and online

Retailers can also work with their customers’ preference towards online shopping by bridging the gap between the online and offline world. The physical storefront can become a hub for customers to collect, try, return and even expand upon their purchases. Additionally, storefronts can use customers’ online data to shape their experience in-store. For example, makeup retailer Sephora recently launched an in-store companion app that helps customers check stock, book appointments and see personalised recommendations.

What does customer service in the digital age look like?

This blended approach to customer service differs somewhat from what retailers have historically offered. It’s only been in the last few years that retailers have transitioned to an experienced-based model and integrated e-commerce elements into the physical storefront. In search of ways to expand this new model, it’s important to understand what customer service in the digital age looks like. We discuss the three main aspects below:

a) Available everywhere

The shift to e-commerce and online marketing means customers expect to be able to find or request information on any channel. Therefore, it’s vital that modern retailers establish an omnichannel customer service presence. In particular, retailers need to support customers who prefer to phone versus those who prefer to use live chats. These channels should be offered in addition to other measures like social media and email support. For example, customers can feel that written channels like emails can be easily overlooked in comparison to phone support. Even if they have to wait in a queue to be seen, customers know they’ll be able to talk to someone. Therefore, telephony-based customer service is particularly popular when consumers want to make complaints or address time-sensitive issues with their orders.

b. Available all the time

Building on the previous section, customers also want to be able to reach out at any time to get the answers they need. Product information and FAQ pages aren’t always enough to satisfy customer queries. Whether the answers are actually available online or not isn’t important. Instead, consumers are inclined to feel that their question is the exception and needs human attention. As such, senior leaders must start delivering a more attentive customer service style. Namely, offering things like live chat, phone and email replies outside of traditional business hours. Doing so can help increase conversions while consumers are in a high-intent purchasing state.

c. Available only when asked

As a note of caution, just because customers like to receive support during the purchasing process doesn’t mean they want to be engaged all the time. Research from McKinsey found that service staff should wait for customers to prompt them for help. For example, customers are content when conducting transactions by themselves but often like to have support to understand and weigh differing product details ahead of purchasing. Therefore, customer service isn’t simply about having a presence available, it’s also about understanding where and when to support customers most. As retailers head into seasonal periods, understanding these contours is vital as stretching your existing customer services staff is unlikely to work. Instead, outsourcing solutions can support busier periods, lower costs or even extend availability to customers.

Start your journey to delivering the best customer service today

Retailers are facing a range of challenges that make delivering the best customer service levels to their consumers more difficult. Customers’ preference towards online shopping is understandable; the convenience factor of shopping at home or on the go is difficult to overcome. However, that’s not all. Retailers are also facing increased competition with other physical retailers in the form of more nimble small businesses using popup stalls and firms using BNPL payments to streamline purchasing. What can retailers do to overcome these challenges? In-person retail remains customers’ favourite way to shop, so investing in customer service offers a crucial way for senior leaders to help differentiate their organisation. By modelling your customer service strategy after the three fundamental elements listed above — available everywhere, all the time, but only ever when prompted — senior leaders within retail organisations can foster more resilience and brand buy-in from consumers. As a result, your business can deliver customer service in the digital age that meets and exceeds consumer expectations. In particular, today’s flexible outsourcing solutions offer easy ways to extend your availability or smooth peak demand periods in a cost-efficient and effective manner.

Deliver customer service ready for the digital age with Sigma Connected

Sigma Connected allows you to place your customer service experience in the hands of trusted professionals. We offer high-quality, flexible customer contact solutions that can help you support online customer orders or peak periods with ease. We work across all communication channels so we’re able to be deployed within your organisation quickly and effectively. Learn how to thrive in the digital age by enhancing your customer service. Discover more about our white-label customer service solutions by contacting us today.