The challenges caused by the ongoing pandemic aren’t over. Far from it, in fact. With supply chain strain, historically high inflation rates and fears of a looming recession, shipping prices are skyrocketing and consumers, feeling the financial pinch, are cutting back on discretionary spending.
While the situation is far from rosy, there are ‘easier-than-you-think’ ways retailers can alleviate these macro trends. But what does today’s economic climate look like? What do consumers expect from retailers in these market conditions? And, how can retailers ensure they meet customer demands when their expectations are high and their tolerance low?
Customers are spending less
Faced with increased inflation, interest rate hikes and a cost-of-living squeeze, Australian consumers are spending less on their online purchases today than they have in previous years. Shippit data found that consumers spent approximately $38 less per order leading up to this EOFY than in the same period in 2019, pre-pandemic, and even less than in 2020 and 2021 – at the height of the pandemic.
Meanwhile, Shippit data also shows that sales of health & beauty products like soap have increased by 187% during the same period. Many economists talk about the so-called ‘lipstick effect’, an economic theory that can indicate a looming recession. The theory suggests people cut back their overall spending, but continue purchasing small treats and indulgences, like lipstick or other cosmetics. While the signs may be daunting, by understanding today’s consumers, their buying habits and their purchasing needs retailers can succeed.
It’s all about convenience
After lockdowns sparked an ecommerce boom and record online sales, consumers today have grown to expect convenient, transparent and fast delivery. Nothing less will do. According to Shopify’s Future of Commerce report, consumers said shipping offerings had a “significant or very significant influence” on their decision to make a purchase. If you make it convenient for your shoppers, it becomes convenient for your business. Rather than relying on one delivery partner, for example, diversify your delivery options so your customers have more choice, convenience and, therefore, greater incentive to shop with you.
We now live in a culture of instant gratification – if we can order then track a food delivery every minute of the way, why not with a dress or a book? Take fashion retailer Cue, for example. Cue not only meets, but exceeds customer expectations by offering on-demand same hour delivery with Uber. By offering a variety of customer-centric delivery options, Cue ensures that shoppers have choice and can receive their goods where and when it’s convenient – even if that’s within the hour.
Convenience is not just in choice, but transparency too. Communicate your delivery options, returns policies, shipping costs and the status of a delivery at every opportunity. Customers crave this clarity. If retailers can provide the transparency and certainty we’ve grown accustomed to from food deliveries, they’ll have an advantage over those that don’t.
Offer omnichannel experiences
Consumers today are channel agnostic, enjoying both the convenience of ecommerce and the meaningful nature of in-store shopping. While alternatives to in-store shopping accelerated during the pandemic, including same-day delivery and click and collect, recent research reveals that Aussies are also excited to shop in-store again. Retailers who can merge these two channels together seamlessly to provide a streamlined online and in-store experience, will appeal to today’s omnichannel consumers.
By optimising an omnichannel approach, retailers can provide strategic, personalised and convenient experiences that cater to customers whether they’re worried about shopping in-store as cases surge, or would prefer to forgo delivery costs and opt for greater certainty through click-and-collect. According to McKinsey, companies that personalise the customer experience across physical and digital channels in this way can see revenue increase by up to 15%. When economic pressures are present, every customer, every purchase and every convenient omnichannel interaction makes a difference.
As economic headwinds swirl, it’s important to take action and understand the cost-effective ways your customer experience can appeal to consumers even as household spending slows. Retailers that offer convenient delivery options and shopping experiences across multiple channels, will be able to meet and exceed their customers’ needs, even in the face of economic uncertainty.
Rob Hango-Zada is co-CEO of Shippit.