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Is Customer Obsession the Future of Retail?

The retail sector—a huge driver of economic activity in the US—has already undergone a seismic shift with the rise of online shopping. And the shakeout isn’t over.

E-commerce sales volumes remain a fraction of overall retail sales— about 10% this year. Yet only e-commerce retailers are growing robustly. Brick-and-mortar mainstays like JC Penney and Sears, by contrast, continue to shed locations and staff.

How can this be, when consumers still prefer to do most of their shopping in physical stores?

Is Customer Obsession the Future of Retail?

Consider who among retailers is succeeding and who is struggling. Most of the growth in brick-and-mortar retail is happening at the low end of the market.

According to Forrester, low-price brands are poised to add thousands of brick-and-mortar outlets in the coming years. Dollar Tree and Dollar General will open a combined 1,650 stores this year alone. Aldi expects to launch 900 new supermarkets by 2022. Clothing discounters Ross Stores and T.J. Maxx are expanding their footprint, as well.

What will differentiate the successful retailers from the not-so-successful ones in the years to come? Will we see a race to the bottom on price?

To some extent, the answer to the second question is yes. Lower-income people are being squeezed by surging healthcare costs and slow wage growth.

Not only that, a lot of consumer spending looks to be fueled by borrowing. American households now have $12.8 trillion in debt.

Amazon’s recent price drops at Whole Foods are instructive. After buying the supermarket chain, Amazon slashed prices on fish, apples, bananas, and other staples by as much as 40%.

The good news is that retail, in contrast to more commoditized industries like airlines, is itself highly differentiated.

That means retailers can set themselves apart in the marketplace—and gain more pricing power—by focusing on customer experience.

This approach may become a strategic imperative. Some have suggested that customer experience will be the only meaningful brand differentiator in the years to come—in both B2C and B2B.

Retail outlets seeking to reorient themselves around CX—even those that are exclusively brick-and-mortar—may want to focus their energy on digital first and foremost. Already, an estimated 56% of in-store sales are influenced by digital channels (social networks, rating and review websites, the stores’ own sites, and so on).

In addition to a compelling mobile experience, what else can retailers do to differentiate on CX?

The experience of one inSided customer offers a lesson. As profiled here, the company was seeking to increase sales at its online store. It had relied extensively on social ads, and began running ads on its inSided community, as well.

Surprising even the company’s community managers, the community ads converted at a 4X higher rate than the social ads—a result of shoppers being able to educate themselves and ask questions on the community. By the time they arrived at the brand’s online store, community visitors were better informed and more ready to buy.

Enabling customer-to-customer engagement before the sale is one exciting avenue for retail differentiation in the years to come. We’ll simply have to see what else is in store.

The real upshot of all of this retail disruption? It’s never been a better time to be a consumer.