five strategies for bricks and mortar prosperity in a digital world – and the lessons for other businesses

  • Customer lifetime value.
  • Customer experience.
  • Omnichannel retailing.
  • Targeting
  • Shopping local.

Bricks and mortar retailing has had its barriers to profitability over recent years. This is reflected in growing shopfront vacancies in the centre of cities and towns throughout Australia and the world. In 2021, the Sydney Morning Herald reported that CBD retail vacancy rates had risen 12.9% as a result of COVID 19. The high vacancy rates for CBD retail will remain high and continue to grow. According to Business News, in 2022, retail vacancy rates in the Perth CBD are 18%. There are two observations I would note regarding these numbers:

  • The high vacancy rates for CBD retail will remain high and continue to grow.
  • The factors impacting on retail in general are relevant to many other industries.

Before addressing the solutions to declining retailing and identifying strategies, retailers and other businesses can implement to stem this decline and facilitate growth. There is merit in highlighting the reasons for the current decline. Accepting that the state of the economy is a significant factor (including inflation, interest rates and uncertainty), marketing-related factors include the:

  • Decline of consumerism.
  • Attraction of experiences.
  • Growth of e-commerce.
  • Second-hand market.
  • Demanding consumer.

While the Australian economy depends on consumerism, recent research has found that 80% of Australian consumers recognise that they have been buying more than they need, and 60% believe consumerism is bad for society as a whole. Consumerism is declining, especially among Gen Z, who are increasingly environmentally conscious and attracted to a simpler life with less ‘stuff.’ More consumers are preferring to buy ‘experiences’ instead of goods. Research suggests that some 74% of Americans now prefer buying experiences over goods. The key motivators include:

  • Experiences are more sociable – helping people to connect.
  • Experiences are more memorable – and a potential topic of conversation.
  • Experiences are seen as delivering more happiness.

Ecommerce is growing at a phenomenal rate. Some 19.3% share of total retail sales in Australia are now online, with that figure expected to continue to grow, due largely to:

  • The larger range online.
  • The greater convenience online.
  • Cost savings online.
  • The avoidance of retail staff online.

My girlfriend is currently renovating a house. This has helped me to notice two things:

  • She has saved a small fortune by engaging contractors directly – and I suspect the outcome is better.
  • She has saved a small fortune buying building materials (e.g. bricks) and furniture (e.g. office and kitchen furniture) online.

I was especially struck by the volume of people now using online marketplaces to buy second-hand – just about anything they may have once purchased new; and the number of people using apps (including Facebook) to purchase food and other consumables. One report suggests that the second-hand goods market in Australia is now worth $3.5 billion and continuing to grow. My prediction is that we have only seen the beginning of this market-driven by the potential for:

  • Cost savings.
  • Instant delivery.
  • Range.
  • Fun.

Finally, retailing, and other sectors are negatively impacted by the poor customer service experiences, which many people are very tired of. Consider three of mine over just the last two weeks:

  • Waiting on the phone for 45 minutes to talk to the right person.
  • Twice failing to deliver at 8.00 am as promised and ringing to apologise after 11.00 am.
  • Having to make four visits to a business to ensure an account was correctly set up.

My conclusion about most staff in most businesses in 2022 is that they just do not care. This, in turn, reflects poorly on the team and management, who so often reflect a view that:

  • Their time is more important than mine (or yours).
  • The only thing (you and) I am concerned about is price.
  • Returning a call is an option, not a necessity.
  • 1800 numbers may be inconvenient for the customer, but they shield the business.
  • That the requirements of the business are more important than those of the customer.

I believe strongly that this will be the case in most businesses in 2022, and I, like so many customers, am avoiding these businesses for this very reason.

Even in this environment, many strategies can save bricks-and-mortar retailing and many other businesses subject to similar influences. Five of the most important are:

  • Customer lifetime value.
  • Customer experience.
  • Omni-channelling
  • Targeting 
  • Shopping local.

CUSTOMER LIFETIME VALUE.

In part encouraged by advertising agencies and other businesses involved in promotion, the focus of most retail businesses is attracting new customers. While new customers are important, existing customers are generally of greater value. Note:

  • Repeat customers spend 300 timesmore than first-time customers.
  • Referred customers are four timesmore likely to purchase.
  • Referral customers spend 25% more than un-referred customers.
  • 52% of businesses cite repeat business as the primary driver of profitability.
  • 45% of businesses cited new customers as the primary driver of profitability.

Many businesses talk about repeat business and referral rates – but few have a strategic approach to either. Many businesses understand conversion rates and margins and the average sale – but fail to address their potential in terms of maximising lifetime value. Many businesses have heard of these issues but are yet to embrace their superior potential to drive profitability. Relevant strategies include:

  • Personalisation – arguably the fastest growing trend in marketing.
  • CRM – so long as it is addressed strategically and methodically.
  • Customised pricing strategies – that reward loyalty.
  • Listening – and understanding need to facilitate cross and up-selling. 

Every business needs to incorporate into its marketing strategy – processes and procedures to maximise the lifetime value of each customer.

CUSTOMER EXPERIENCE.

Many businesses talk about the customer experience – but few address it well – while those that do (apple, Zara, Ikea benefit big-time. The customer experience is important to most consumers. Note:

  • 73%of consumers love a brand because of helpful customer service.
  • 73%of customers agree that customer experience helps to drive their buying decision
  • 86%of customers will pay more to get a better customer experience.

Increasingly, businesses would be wise to consider customer experience (including customer service) as part of the product or what the customer is buying. To do this, it is essential to:

  • Understand the customer journey and each touchpoint on that journey.
  • Understand and address customer expectations at each touchpoint.
  • Understand and address the requirements of the business at each touchpoint. 

In the absence of an excellent customer experience – why not shop online? In the absence of a good customer experience – who wants to buy from a business? (I certainly don’t). Most businesses also focus on what they consider a good customer experience – failing to appreciate that it is the consumer, not the business, that defines what and what is not – good. Research suggests that – 66% of customers expect companies to understand their needs, and most expect greater:

  • Personalisation
  • Convenience
  • Respect and empathy.
  • Ease of doing business.
  • Delivering exactly as promised.
  • Consumers are also increasingly attracted to unique and memorable experiences.

OMNICHANNEL 

Consumers are increasingly expecting to be able to buy what they want when they want it. It should not be a retailer or any other business that makes the decision as to which channels a consumer has to use. If consumers want to buy online, they can – so not offering that option is counter-productive. I would strongly argue that:

  • The first rule of good marketing is having a product that the target market wants to buy.
  • The second rule of good marketing is to make it as easy as possible to make a purchase.

Addressing the latter of these points requires an integrated approach to omnichannel retailing – ensuring that any member of the target market can purchase by whatever means they choose. All bricks and mortar retailers and businesses have a responsibility to offer their customers the capacity to purchase instore and:

  • Through a dedicated website.
  • Through several online marketplaces.

The optimum omnichannel experience:

  • Is seamless and convenient. 
  • Focuses on customer expectations.
  • Makes the best use of technology.

 

E-commerce is a fact of life, and its incidence will only grow, especially for businesses that do not focus on lifetime value and do not offer an excellent customer experience. Furthermore, there is a growing consumer expectation that:

  • What is available in-store is also available online.
  • There is a consistent and coordinated approach to pricing.
  • The online and offline offerings are completely integrated.

It is not enough to just have a website – you need a convenient and responsive customer experience. 

TARGETTING.

Research suggests that 60% of retail advertising targets people under 50. This is despite the fact that people over 50:

  • Are more likely to shop at a brick-and-mortar store.
  • Have a significantly greater capacity and propensity to spend.

One report on this subject noted – ‘Australian Statistics from 2011 show that seniors hold over 40% of the nation’s assets. Couples between 50 and 70 have the highest median net worth: $900.000, while singles between 30 and 40 have the lowest at $50,000.’ This report goes on to note: ‘Older people shop more frequently, tend to be less price-sensitive and value quality above anything else, buying fewer items but spending more per item.

Increasing numbers of older consumers are technology-friendly. They see technology as an important part of their lives, and a great many are online. This has been taken seriously by global e-retailer Amazon. It launched a sub-site in 2013 dedicated to over 50s. My point is that just as a significant part of the solution to the skills shortage crisis can be found in the ranks of competent older people who want to keep working, older people may well hold part of the solution to the consumption shortfalls.

While there is no good reason to avoid targeting younger people, there is clear evidence to suggest that brick-and-mortar retailers can benefit from developing a marketing strategy that focuses on people over 50 years of age. There is evidence that this represents a significant opportunity in 2022, with another report noting that: ‘New consumer research suggests that high street retailers are currently overlooking the needs of over 50s in their range of homewares, appliances, and fittings, and are missing out on a large and growing market for easier to use products that are also aesthetically pleasing. The report warns that retailers who fail to provide products that appeal to this lucrative market are missing out, with over 50s already spending £319 billion a year (excluding housing costs), equivalent to roughly 54% of total household consumer spending.’

And, if you think that people over 50 do not shop online – consider this quote from yet another report: ‘The online shopping revolution has officially become mainstream among the once tech-resistant generation aged 65 and over, with more than half now saying they shop online.’

SHOPPING LOCAL

The growth in e-commerce is beyond question. Online shopping in Australia doubled during the COVID 19 Pandemic. For Australia, the headline statistics are as follows:

  • Some 3%share of total retail sales are now online, with that figure continuing to grow.
  • Growth in spending on online physical goods was strong, at 4%year on year.

While online shopping continues to grow, so does the preference for buying locally. While in 2000, 50% of Australian online sales were made on a site outside of Australia, by 2021, only 20% of Australians purchased from stores outside of Australia. While some 40% of online purchases are manufactured in China, purchases from other parts of the world are in decline – and not all the Chinese products are sold outside of Australia. This reflects a growing preference for online and offline shoppers to shop locally.

Research in 2021 found that – 71% of Australians are planning to shop local, preferring to buy from Australian-owned brands whenever possible, with Baby Boomers the most committed to buying Aussie products (82%) during this holiday season. Research by the Commonwealth Bank found that – 50%+ of Australian shoppers want to buy locally sourced and produced products, according to a new study by our finance and banking partners.  

Consider:

  • 38%of shoppers say they want to support their community and local creators.
  • 70%of consumers support local businesses by shopping online only, or in-store.
  • 76 %of shoppers say they would rather support a local business than a large corporation.
  • 28%of shoppers buy local for better service, and 19% to help local non-profits.

There are several reasons for the increase in the preference for shopping locally. They include:

  • Support local communities and jobs.
  • Environmental protection.
  • Ideological support for small businesses.
  • Perception that Australia makes quality.
  • It has the potential to be more personal.
  • It is easier to complain. 

Whatever the reason, this more to buying local is a significant trend. It is not, however, a trend without its limitations. Research suggests that consumers are less likely to shop local if the only benefits are community support and jobs. There is a limit to how much more consumers will pay to buy local. While consumers say they will pay more to shop local, data suggests that it is not much more. There is no open chequebook.

I highly recommend that businesses:

  • Highlight their local credentials.
  • Make it as easy as possible to buy local.
  • Emphasise their SME status if they have one.
  • Don’t use local as an excuse for being more expensive.

AT THE CORE

At the core of these five strategies for reinvigorating bricks-and-mortar retailers and related businesses, as discussed here, are three factors:

  • Customers.
  • Relationships.
  • Innovation.

Understanding and leveraging the understanding of the primary target market is essential. The more customer responsive a business is, the lower will be its marketing costs and the higher will be its revenue. A clever and inexpensive way of addressing customer focus is:

Co-creation – creating the overall offering WITH the customer.

Nothing will facilitate a positive customer experience and maximise the lifetime value of a customer than building and maintaining strong relationships with customers and potential customers. A great strategy for facilitating this is:

An online community that enables permission marketing.

Innovation, and the agility it requires, are central to developing and maintaining a customer-focused business. Innovation is, in turn, facilitated by co-creation and an online community and using the data to create what the market will respond to most positively. A great approach to addressing innovation is to:

Recognise and conform to all staff, that customers define ‘good’ and ‘great’.

INSIGHTS

Maximising the performance of bricks and mortar business in 2022 requires:

  • Embracing and addressing the decline of consumerism.
  • Creating a memorable customer experience.
  • Embrace rather than fight the growth of e-commerce.
  • Understand and address the rapidly growing second-hand market.
  • Understand and embrace the increasingly demanding consumer.

ANOTHER INSIGHT

 RECOMMENDED READING

ACTION

To maximise bricks and mortar returns:

  • Refocus your marketing strategy on – customer lifetime value.
  • Develop a memorable customer experience that exceeds expectations.
  • Embrace omnichannel retailing as essential rather than optional.
  • Target mature consumers who have more money and like shops.
  • Help your target market shop locally – especially online.

 

QUESTIONS

Questions for which all marketers should have the answer:

  • Given that 64% of companies state that the brand community has improved their decision-making – why do you not have one?
  • Given that 81% of consumers believe brands collaborating with their customers are more authentic – why don’t you co-create your customer’s experience?
  • Given that 70% of consumers support local businesses by shopping online only, or a mix of online and in-store – what are you doing to be seen as local?
  • Given that some 19.3% of retail sales are now online – what is your omnichannel retailing strategy?
  • Since 86%of customers will pay more if it means getting a better customer experience, how many customers have you involved in developing the optimum experience?

STATISTICS

Statistics every marketer should know.

  • Repeat customers spend 300 timesmore than first-time customers.
  • Referred customers are four timesmore likely to purchase.
  • Referral customers spend 25% more than un-referred customers.
  • 52% of businesses cite repeat business as the primary driver of profitability.
  • 45% of businesses cited new customers as the primary driver of profitability.

So – place a higher priority on lifetime value. 

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