In today’s digital and “always-on” world, customers expect retailers to anticipated and meet their needs in real time. However, this type of customer engagement is more than what retailers are used to providing.
It is not merely about giving customers a satisfactory experience during their sales journey. Customer engagement is about inspiring customers, as well as encouraging them to partake in the experiences retailers create for them – when they want to engage, and giving them the space to interact with you on their terms when they’re not ready to engage.
Why? Simply put, driving relevant contextual customer experience improves sales and profitability. Let’s look at some successful examples.
JD.com: Giving customers the choice of engaging or disengaging
In fashion, for instance, customers tend to want engagement from retailers or brands. The reverse is true in convenience stores; customers want to get what they want in the quickest and most seamless manner possible and then get on with their lives.
JD.com is a great example of a retailer allowing customers to disengage when they prefer not to engage. The online retailer successfully launched its first unmanned grocery store in January 2018, beating rivals – Amazon and Alibaba – in rolling out the first fully automated supermarket. The unmanned store in Yantai, Shandong Province, China, allows customers to walk in, pick up items, and pay for them using smartphones, without waiting in line. It is also equipped with advanced technologies, including facial recognition and cloud computing, that can improve the speed and accuracy of the payment process, enhancing satisfaction, throughput, and turnover.
Besides managing high labor costs and labor shortage issues, the bigger driving factor is really about understanding what products different customer profiles favor and when. There is so much knowledge to be gained by observing customers: where they stop to view a display, what they place in and remove from their baskets, the time they spend in the store, etc. This is possible today by advances in Big Data analytics.
In the end, stocking what customers want improves sales and profitability per square foot.
Ulta Beauty: Creating fierce customer loyalty to fend off the “Amazons”
Customer experience is also about customer loyalty – an especially important element that can help retailers mitigate disruptive forces during difficult retail periods.
Ulta Beauty sets a fine example in using customer profiling and experience as a competitive differentiator. To better serve its customers, Ulta Beauty gleaned consumer insights, which it translated into a customer experience formula that helped drive stock growth by more than 3,000% between 2009 and 2016, at a time when the S&P 500 grew 250%.
The company’s loyalty program now has 24.5 million members that account for 90% of Ulta’s sales.
So, what exactly is this American beauty chain getting right? First, the retailer has a deep understanding of what customers actually want from their shopping experience. Instead of how the beauty industry is usually set up – in distinct categories with prestigious brands in high-end stores and discount brands in pharmacies – Ulta Beauty established an assortment that reflects an “All Things Beauty” superstore. It also offers in-store salon services such as hair, skin, and brow treatments.
Second, Ulta Beauty is known for getting its online and physical presence balance right, allowing the company to grow both e-commerce and in-store sales. Notably, the company registered a whopping 70.9% growth in e-commerce sales in the first-quarter of 2017, which marked its highest ever quarterly growth since 2014.
Jefferies, a global investment banking firm, reiterated its buy rating on the cosmetics retailer amid the slowing pace of growth last year, believing that Ulta Beauty’s company’s business model is “defensible” against the rising threat of e-commerce competitors such as Amazon.
Stitch Fix: Curating experiences powered by artificial intelligence
Of course, personalization very much remains a key aspect of customer engagement. With competition hotter than ever, the key is how retailers can give customers a truly brilliant bespoke experience. Stitch Fix, a U.S.-based personalized fashion advisory services shows how it is successfully doing so by teaming extensive data analytics and artificial intelligence with human curation.
How does it work? A customer signs up for Stitch Fix and pays $20 upfront to receive a “Fix” in the mail – five pieces of clothing handpicked for him or her. The customer keeps what he or she likes and returns any undesired items. Stitch Fix then charges the customer for the items they keep, crediting the $20 upfront fee towards the purchase.
Recommendation quality is pivotal for Stitch Fix’s success. And Stitch Fix’s answer to that is hand-selection powered by sophisticated artificial intelligence algorithms. Stitch Fix boasts that the experience it delivers is not merely curated, it’s truly personalized to a customer’s taste, budget, and lifestyle. And it says that no two clients have ever received the same selection of items.
One can see why when you realize the extent of Stitch Fix’s data collection. It starts off with dozens of questions when a customer signs up – commencing with basics such as height, weight, shirt size, and body type. It moves into more granular preferences including style types and colors. But it delves even deeper. Stitch Fix even factors in occupation, commute type, zip code, and data from the customer’s social media accounts such as Instagram, Pinterest, and Twitter.
Furthermore, the customer’s profile is updated and improved continuously, with insights gleaned from each return and social media update. Many customers are not good at articulating what they like the first time around, therefore such continuous updating sharpens the algorithm’s grasp of individual customers’ preferences, leading to higher customer satisfaction and sales.
Engaging customers of the future
We know that new, disruptive technologies and innovative methods will continue to emerge to help retailers enhance customer engagement. The key is: Are retailers ready to capitalize on them?
Without adequate systems and processes, retailers will be left in the dust as competitors with superior systems and processes dish out superior new value propositions by exploiting innovations that sub-par systems can’t use.
To win, retailers need to transform their digital fundamentals now. That must be the beginning of any customer engagement strategy. Otherwise, retailers will continue to play catch up or worse – they will become irrelevant to their demanding and savvy customers.
How can your retail outfit engage customers of the future? Learn how with SAP’s exclusive resources for retailers.