Some 60% of companies in retail do not know their customers
Some 60% of Spanish retailers find it hard to know their customers well because new consumers have increasingly individualized, changing and heterogeneous preferences and habits, according to the findings of the 4th edition of the report“Barómetro Retail 2023 – 2024: Hacia un retail inteligente” published by Esade Alumni, with the support of the tech consultant SEIDOR and the collaboration of the communication consultant ATREVIA, on the basis of a survey of 250 manufacturers, distributors and persons working in retail and wholesale firms.
Similarly, as a result of these heterogeneous customer traits – affected by many factors including changing habits, values, behavior, attitudes and references, along with fragmented channels and points of contact – just 40% of retailers have already defined the customer journey of their online and high-street sales.
So, although retailers agree that an understanding of consumers’ in-store behavior is necessary in order to design a customer experience strategy, the report reveals that most retailers lack this information and that the numbers are worse than in the 2022 report.
The inherent difficulty of identifying a typical consumer journey calls for retailers to understand each individual consumer better in order to customize their proposals. In this respect, the report also highlights the tendency of retailers to focus on key elements, such as the use of automated tools to ensure a seamless customer journey, and implement smart prediction and customization systems.
Generally speaking, for the Spanish retailer, the main competitive advantage of technology is its contribution to customer insights (32%), followed by process (29%) and productive efficiency (26%).
Hyperpersonalization and AI
The growing availability and accessibility of AI, driven by the avalanche of data about purchases, store visits, online interaction, trials, returns, experience surveys and synthetic data, is advancing the hyperpersonalization of retail proposals adapted to the individual characteristics of each customer.
In this respect, hyperpersonalization, in the sense of adapting products, messages and offers to the explicit, implicit and emotional needs of each customer, will remain to the fore in retailers’ innovation strategies in 2023.
In this respect, Javier Alonso, Marketing & Commerce Senior Advisor at SEIDOR, explained that “the use of these technologies to advance hyperpersonalization is increasingly within retailers’ grasp, thanks to the growing availability and accessibility of predictive AI tools”.
Tech challenges
Compared to the previous report, the challenges that have increased most are those related to the implementation of technology in retail (to double digits in all instances), with an average increase of 17%. The challenge that worries this sector most is the proliferation of sales on digital platforms and third-part marketplaces (27%), followed by the digitalization of high-street stores to adapt them to buyers (13%) and, finally, tech developments in the supply chain (10%).
The other challenges deemed most important by the Spanish retail sector mostly tally with the findings of the 2022 report, with most companies saying they need to make their businesses more agile, a factor mentioned by 72% of companies; boost their innovation, 66%; and enhance customer communications, 66% of responses.
In this competitive landscape, retailers have renewed their efforts regarding digitalization strategies, as already revealed in 2022, particularly considering multi-channel operations, automation and hyperpersonalization.
Complementary nature of high-street and online stores
Another finding published in the latest report is that phygital has evolved from the seamless integration of high-street and online stores to being a complementary factor at the interface between physical stores and online shopping channels, with each one retaining its own distinguishing features.
In the words of Guillem Crosas, associate professor in Esade’s Marketing Department, “within the concept of phygital the complementary differences between high-street stores and the capacity of the online channel to enhance the experience, personalization and service that give a meaning to both are beginning to be redefined, thus shifting from the concept of the multi-channel concept strictly speaking to that of the customer more in charge of the customer journey”.
The increased strategic value of sustainability
The business of retail world is already starting to see sustainability and all things related as one of its strategic mainstays. There is an evident drive by new generations of customers towards responsible, sustainable buying. As a result, particularly in recent months, sustainability has been trickling down into the retail sector.
With regard to this evolution, Mónica Colmenero, head of consumer affairs at ATREVIA, highlighted that “in 2023, consumers have focused on cost-cutting in response to the higher cost of living and lower energy consumption, turning away from buying to renting or sharing or reusing. All this has reduced the environmental impact of consumer spending and helped promote sustainability”.
Likewise, practices such as the use of cloud technologies (and more recently AI) to digitalize processes, and on-going innovation in technologies for packaging materials and raw material traceability, in the case of manufacturers, are helping retailers accelerate their sustainability practices.
More selective, demanding and polarized customers
The report also confirms that today’s retail customers are more selective and demanding, want more of a shopping experience, rank comfort as a top priority, have an increasingly critical eye, and show greater awareness when deciding from whom, how, what and why they buy.
In addition, due to the current geopolitical scenario characterized by inflation, fear of a recession and political instability, shopping habits are shifting away from buying physical objects towards services and tradeoffs and more customization.
