Four in five Australian consumers are cutting down on something to save money as the cost of living crisis bites – and more than half of consumers in the country are looking for the best value when they shop. But are retailers up to the task of responding to these new pressures, and how are they adapting to remain competitive?
The statistics come from the newly released Shopify Australian Retail Report 2024 (available for download free here). The report is based on a survey of more than 1000 Australian consumers and 205 senior business decision-makers in Australian retail, along with qualitative interviews with top Australian retail leaders. Among its conclusions is that consumers are not just seeking lower prices; while that is important, 34 per cent are also looking for higher-quality products that last and 23 per cent are still looking to treat themselves every month or so.
“This suggests there is still space in the budget for life’s little luxuries, opening up opportunities for savvy retailers,” says Shaun Broughton, MD, Asia Pacific and Japan at Shopify.
“There is a compelling imperative for retailers to focus on both online and offline channels to suit shopper needs. Unified commerce will be an irrefutable growth driver, empowering retailers to sell better across multiple channels, while offering the best customer experiences and gaining access to unified datasets for the strongest business decisions,” he continues.
Foot traffic is proving to be a key driver of omnichannel adoption. With consumers now expecting an excellent experience wherever they interact with a brand, the survey found that almost all (99 per cent) of Australian retailers are investing in customer experiences, with personalisation, digital experience, in-store and omnichannel experience being key focus areas.
During the past year, Shopify has observed marked changes in consumer shopping behaviours, which are driving a shift for retailers. From increased demand for value to a stronger preference for in-store shopping experiences, retailers have a renewed focus on efficiency and innovation. Although cost remains a key factor for consumers switching brands, it’s no surprise that retailers are choosing to compete on enhanced customer experience instead of slashing prices.
With the popularity of in-store shopping on the rise, consumers purchasing items in brick-and-mortar shops consider ample stock, knowledgeable staff, and attentive service as the top three must-have characteristics for retail brands.
This highlights the value of knowledgeable staff and how they bolster customer experience.
Mathew Walker, head of e-commerce & digital, ANZ at Petstock Group concurs: “Knowledgeable and well-trained staff are a crucial part of our in-store customer experience. Online, we offer 8am-8pm customer support and seven-day social replies. Our goal is that whatever experience we offer in-store, we also offer online.”
Customer loyalty is increasingly fragile
Consumers are also less loyal than ever before, the research shows. Ninety-two per cent of consumers say they have switched brands during the past year, often trying something new, with 57 per cent saying they switched for a better price or discount promotion – up from 49 per cent in last year’s edition of the survey.
The loyalty battle is not lost for retailers who want to go the extra mile. The survey found that 92 per cent of consumers would remain loyal to a brand if the brand offered them something in return.
The report concludes that even though pricing is the top factor driving consumer preferences and customer churn, retailers need to carefully assess the feasibility of competing purely on price and its impact on sustainable profitability.
It’s possible that other tactics, such as loyalty rewards, better quality goods, and a seamless customer experience make more sense as differentiating factors.
Those consumers cutting costs are eating out less (47 per cent), choosing cheaper options when it comes to discretionary spending (38 per cent), and buying private-label groceries (31 per cent).
“We’ve had customers spending less, reflected in reduced conversion and in smaller basket size if not necessarily in traffic,” explains Richard Facioni, founder & executive chairman of Alquemie Group and chairman of Mosaic Brands. “But what we have found is when they are presented with something they want or desire, they find the money for it. The money’s there, but it’s more discerning.”
New ways to drive value
The Shopify Australian Retail Report also dives deep into how retail decision-makers can overcome the current challenges.
Retailers are responding to rising shopper expectations by demonstrating value in new ways and many are focused on customer retention (63 per cent), customer acquisition (62 per cent) and marketing and advertising (61 per cent).
The report identifies three key strategies for retailers to mitigate the impact of changing consumer behaviour – and to stand apart from their peers:
- Compete on experience: Competing on price alone can put pressure on profit margins. This means retailers should compete on other forms of value that consumers can’t get anywhere else, which is why customer experience is so important.
- Create personalisation: When it comes to what customers value, a personalised experience is a differentiating factor not linked to price that retailers can weave into their marketing and engagement activities. Offer customers relevant products at the right time to drive customer acquisition and secure customer retention.
- Leverage first-party data: A key on-ramp to the personalisation that makes for a differentiated customer experience is the collection and analysis of first-party data, which gives retailers the ability to gain a full picture of the customer across all channels. An e-commerce platform that can capture and consolidate customer information from all channels and touchpoints, both online and in-store, is essential.
Almost every retail executive (99 per cent) polled said they plan to invest in innovation during the coming year. They will focus on data and analytics that can power other technologies that support innovation aimed at efficiencies – such as automation and AI – while also supporting broader growth tactics, all aimed at achieving differentiation.
Footnote: Partners in this report include AKQA, Alquemie Group, Brand Collective, Australian Retailers Association, JB Hi-Fi, Oracle NetSuite, Petstock, Tryzens, and Toys“R”Us ANZ.
