Attracting And Retaining Customers Is The Biggest Challenge For Aussie Retailers

Attracting And Retaining Customers Is The Biggest Challenge For Aussie Retailers
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Attracting and retaining customers is the leading challenge that Australian retailers face today, but 42 percent of retailers do not have a customer experience management strategy in place (even higher for small retailers at 51 percent), according to new research.

The research was sponsored by NetSuite and the Australian Retailers Association (ARA). It was conducted by Frost & Sullivan.

The study indicates the proliferation of retail channels has made customer experience management far more challenging, with retailers now required to deliver a consistently high and increasingly personalised customer experience across multiple channels – brick-and-mortar stores, online, mobile, call centres and social media.

The Frost & Sullivan study of 100 ARA members was carried out in June 2015 to understand how Australian retailers are responding to customer experience challenges and how cloud computing is supporting this process.

The study revealed that while customer experience management is identified as the top strategic priority, many retailers are yet to develop and implement strategies to improve it. In addition, many retailers are not formally measuring and monitoring the experience of their customers, with challenges including the absence of a single customer database, as well as a lack of a single commerce platform across all channels that enable the consistent management of a customer’s shopping journey.

“The changing retail environment and the emergence of the multi-channel retail model are driving a profound change in the way that retailers manage their business,” said Mark Dougan, managing director for Australia and New Zealand at Frost & Sullivan.

“Retailers are moving away from the traditional aspirations of increasing store sales year-on-year and are putting more effort into measuring and monitoring customer satisfaction and lifetime value. Yet, with customers now using multiple channels to interact and transact, this has become infinitely more challenging.”

Volatile Market Conditions Continues to Drive Caution

According to the study, retailers in Australia remain cautious, if not pessimistic, about retail conditions in 2015, with limited signs of improvement expected – 39 percent believe conditions are worse than a year ago, with only 28 percent thinking they are better (compared to 35 percent in 2013). While high and inflexible operating costs, increased competition from online retailers, and recruiting and retaining staff were cited as key challenges facing retail businesses in 2015, attracting and retaining customers came in at number one.

On the positive side, the majority of Australian retailers are adapting to changing market conditions by becoming multi-channel businesses, with almost 90 percent now operating a website (up from just over 50 percent in 2013); over 80 percent having a social media presence (up from 32 percent in 2013); 61 percent offering transactional capabilities on their website (up from 38 percent in 2013); and 43 percent having a mobile website or application (up from 28 percent in 2013).

Frost & Sullivan believes that while the development of multi-channel models by retailers is a response to the way that today’s consumers shop, it creates greater complexity in managing the customer experience. Not only is the number of touchpoints increasing, the customer journey is becoming increasingly complex, and many retailers are still operating under a siloed business structure which makes it very difficult to offer a consistent consumer experience.

There is also wide discrepancy amongst Australian retailers on how they monitor the customer experience. While 89 percent of respondents indicated that they currently offer an excellent or good customer experience (and only 2 percent feel they offer a poor experience), Frost & Sullivan suggested this judgement is largely based on perception rather than tangible measurement. While 85 percent of medium and large retailers currently measure and monitor the quality of the customer experience, only 37 percent of smaller retailers do, with many relying on unsolicited customer feedback, which is an unstructured and largely unreliable form of measurement.

Integration is Essential First Step in Managing Customer Experience

According to Frost & Sullivan, to gain a holistic approach to managing the customer experience, an integrated strategy is required by retailers to combine all customer touchpoints within a single organisational structure and business system. Achieving this is not always simple, particularly when retailers have existing legacy systems that support different business functions.

“The key to managing the customer experience is to have one database with a single and unique record for every customer, which can be accessed in real-time at all points of interaction,” said Dougan. “The richer the data the better, as this enables tailored and relevant interactions with customers. This personalisation is increasingly critical to customer experience management, as consumers are responsive to offers and communications that are highly relevant to them, and very unresponsive to those that are not.”

The study indicates that while over three-quarters of retailers currently have a customer database, its value and use is variable. Half of these retailers send promotional messages periodically to customers by email or SMS, but in most cases these efforts are generic and not targeted at individual customers. Less than 20 percent currently make an effort to measure customer value, which allows them to identify and manage their best customers. In addition, less than a fifth make a proactive effort to contact former customers that have not purchased for a while.

Integrated Cloud-Based Software Platform to Overcome Challenges

Frost & Sullivan believes having the right business systems in place is the key to managing the customer experience, yet in many cases the software required to manage their business processes is letting them down. Two-thirds of retailers surveyed still have multiple business systems, with disparate and generally unlinked software used for functions such as point-of-sale (POS), ecommerce, inventory management and financial management. Many respondents felt, however, that their current software is inhibiting them from offering an excellent customer experience.

“The latest generation of cloud-based software can support retailers in providing a consistent customer experience across all channels, without the complexities and costs that are involved in integrating them with existing business systems,” added Dougan. “This type of software allows retailers to quickly and easily add new channels, enhance existing channels and make the overall customer experience highly consistent and totally seamless.”

According to the study, Australian retailers are increasingly recognising this, with 30 percent of medium and large businesses and 17 percent of smaller retailers now using a single cloud-based commerce solution. Over two-thirds believe it has improved the performance of their business, enabling them to more quickly and cost-effectively make changes to their business models in response to rapid shifts in technology and customer behaviour.

“With growing knowledge, power and expectations, consumers increasingly dictate and control the terms of their engagement with retailers,” said Lee Thompson, senior vice president and GM of Asia Pacific & Japan for NetSuite.

“Customer-centric commerce means reorienting a business from its traditional focus on sales channels to designing a business around customers. To remain viable and relevant, retailers must redefine their approach to effectively and seamlessly engage consumers across multiple channels. Done right, it drives sales and customer loyalty, while also maximising the lifetime value of customer relationships.”

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