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In today’s retail world, customers are experiencing the paradox of too much choice when deciding where to spend their money. Whether buying direct or through marketplaces, the customer has an abundance of options which, on the one hand, allows the customer the convenience to choose where, when, and how to shop but on the other hand can often lead to decision fatigue and dissatisfaction.
The traditional department store model is going out of favor with online retailing gaining a greater share of retail sales.
At present, 91% of UK shoppers use an online marketplace at least monthly. It is therefore no surprise that over recent years there has been a growing trend for traditional retailers to build out third-party marketplaces. M&S has expanded its third-party brand offering in the last six months (with brands like Seasalt and White Stuff) which is allowing their customer to trial new types of products through their marketplace without having to go through the development cycle themselves. This is more sustainable in terms of fewer samples and less shipping, and faster to launch to the customer. For the individual Brand, there is also a benefit from extending awareness to a wider audience. Host retailers need to focus on attracting and retaining brands in their portfolio as well as having commercial terms that share the rewards.
Retailers need to focus on a more refined digital experience on their own website. Personalized landing pages and ‘recommended for you’ options based on shopping history have been increasingly appearing on brands’ sites. In 2022, customers are more aware of how their data is being used and this is driving up expectations of service levels. Customers are looking for a more curated digital experience and retailers need to embrace what more can be done to simplify and speed up the buying journey. Some of the questions we are asking are:
Could websites pre-filter to your individual size of clothing?
Could customer data and product specification data be combined to tailor specific recommendations?
Companies leveraging consumer feedback, such as Stitch Fix and Thread which use data science algorithms to offer customers a more personalized shopping experience, are leading the way in this space and are reaping the rewards. Stitch Fix, for example, grew its active clients from 3,236,000 in 2019 to 4,165,000 in 2021 despite the pandemic.
Retailers should be combining customer data and data science to forecast the Customer Lifetime Value (CLV) to optimize their marketing as well as the online experience in order to target the customers with the highest CLV. These consumers are loyal and will regularly shop on the same channel for the same brand. It’s important to reward their loyalty and tailor specific offers to these customers.
There needs to be a focus on creating a truly consistent narrative across channels and devices. Shopping on mobiles continues to increase year on year. Global sales via smartphones are expected to increase by 25% YOY to reach over £318 billion in sales in 2022. 95% of customers use at least three channels for every one interaction with a brand and so the experience must be consistent throughout in order to maintain a positive customer experience. Not only will this improve the customer experience, but it will make the brand image more recognizable to the customer, improving brand recall and top-of-mind awareness.
Retail has always been dynamic but the pace of change is accelerating significantly. Moreover, an oversupplied market is impacting trading economics. Everyone is having to run faster and returns on investment are under pressure. It is no surprise that the idea of platforms and marketplaces is gaining ground. The opportunity to attract incremental business through existing and expensively built infrastructure is increasingly attractive. As ever, execution is everything and not everyone will see the success that Next, for example, is currently enjoying. Nevertheless, there is genuine potential here and we expect to see much more activity here over the coming years.
This article is part of our 2022 "Crystal Ball" Trend Predictions report. Download the report here and discover more exciting topics we'll be exploring throughout the year.