Knowing the customer – their wants, needs and attitudes – is key in every industry, but even more so for retailers. Yet, in spite of its importance, research commissioned by Oracle NetSuite suggests that many retailers still struggle to understand their customers.
The study of 1200 consumers and 400 retail executives across the US, UK, and Australia found that 44 per cent of the retailers have made little progress towards tailoring the retail experience to different generations. That marks a significant missed opportunity for these retailers, as 42 per cent of consumers who participated in the survey would be willing to pay more to receive a more personalised experience in-store or online.
The study points to a major “generational gap” between retailers and their different consumer segments. Retailers often make assumptions about preferences of certain groups of consumers, like Baby Boomers or Millennials, which may not reflect their actual wants or needs.
When compiling the research insights, we discovered three major generational myths which often hold retailers back from meeting the needs of their consumers from a range of age groups:
1. Retail stores, and older consumers, are over
Retailers may assume that the in-store experience has waned in importance as a result of the rise of e-commerce and other online sales channels. However, actual consumer behaviour suggests otherwise. In fact, Gen Z and millennial customers are actually more likely to shop in-store than older generations, with 43 per cent of those surveyed doing so this year compared to 29 per cent of Gen Xers and just 13 per cent of Baby Boomers. Instead of pursuing an online-only strategy, retailers should consider a more nuanced multichannel approach that plays to the strengths of physical outlets, like immediacy of purchase and expert guidance from sales staff.
This brings us to the question. Why are older generations less likely to go in-store? Of those surveyed, only 27 per cent of Baby Boomers describe today’s in-store experiences as inviting, compared with 57 per cent of Gen Z and millennial shoppers. Further, 52 per cent of Baby Boomers who participated in the study said they never receive any sort of personalised shopping experience, either online or offline.
This means that retailers should be mindful to cater for these shoppers, who often hold more purchasing power. More in-store interactions from staff, for example, coupled with offers and services catering to specific generational needs, can improve the relationship with Baby Boomers as well as other generations like millennials.
2. Technology is the ‘silver bullet’
Most retailers tend to view digital technology as an unprecedented opportunity to engage customers. Almost four in five of the retail executives believe AI and VR technologies will increase sales. However, only 14 per cent of the consumers participated feel those same technologies will significantly impact their purchasing decisions. And while more retailers seek to automate customer engagement for greater efficiency, doing so may cost more in the long run.
Despite the relative maturity of AI-enabled chatbots, the study found that only 26 per cent of Australian consumers frequently use them to engage with retailers, while 48 per cent have never engaged with a retailer in this way.
As retailers upgrade the customer experience through new technologies, they should take the time to understand how different generations will respond to these changes. While one in two Millennials like the idea of novel technologies like AI and VR in retail stores, only a minority of other generations – Baby Boomers, Gen X, and even Gen Z – feel attracted to the prospect of using these. Rather than assuming technology will automatically raise sales across all consumer segments, retailers may be better off investing in the fundamentals of customer experience, like additional training for staff or deeper personalisation of existing technologies, like offers over email.
3. Social media dictates youth spending
Perhaps the biggest generational myth contradicted by our research is the influence that social media has on consumer’s purchasing habits. Although 98 per cent of the retail executives believed that social media engagement builds stronger, more valuable relationships with customers, only 12 per cent of the consumers felt that social media changes how they feel about brands. In fact, only 25 per cent of the millennials said they used social media to get to know a brand, only slightly more than the 21 per cent of the Baby Boomers.
Those results suggest that social media reinforces existing perceptions about retail brands, rather than changing them or developing them from scratch. While social media channels play a part in engaging younger consumers, retailers should avoid focusing on them at the expense of other, more effective forms of engagement. It’s worth noting that 56 per cent of the millennials, the generation most commonly associated with social media reliance, felt most welcome when they experience in-store interactions from a brand. In an increasingly digital marketplace, retailers can differentiate themselves by going back to basics: offer personal service and expert advice that all consumers, including younger ones, crave.
Busting generational myths
Retailers should be conscious not to stereotype their customers, intentionally or otherwise. Our research suggests that common assumptions about demographics and retail channels often represent only part of a much more complex picture. The more retailers engage with, and draw feedback from their customers, the better they can understand their needs. Only with that understanding can they make informed decisions as to which channels to invest in, when to do so, and who to target.
Jason Toshack is the managing director at Netsuite for Australia and New Zealand.