Building businesses from better customer understanding.

Building businesses from better customer understanding.

Retail is behind the financial services sector in its understanding of customers and should improve its standing by using data to identify core customer groupings and build their operations around this valuable cohort.

Speaking at the recent IRX & eDX 2023 conference at the NEC in Birmingham Carly O’Brien, CMO at Gymshark, suggested that her previous experience in the financial services sector had highlighted how more mature that industry is with its strong focus on customers compared with retail.

“The physical product dominates the thinking of retailers and it has all been about showcasing the product rather than understanding the customer. Retail is a little behind the curve on customer-centricity compared to financial services where there is no physical product and it’s all about selling different products to customers and following them thorough their lifecycles,” she says.

Whereas retail has a tendency to use a commercial lens as it focuses on sales generated O’Brien says there needs to be an elevation of the customer view whereby the life-time value of shoppers is better understood. “Product sales only tell you so much. Elevate the customer view so you don’t just look at just product profitability,” she suggests.

This involves segmentation – into four to eight groups – that will help identify the prime segment comprising the most valuable customers and these should be treated as the nucleus of the business.

“The more that’s understood about life-time value will help retailers build a strategy around these valuable customers. This primary segment is so rich with data retailers will have to look at what they can do with it. What’s important to these customers and what [things] can retailers develop and enhance for them?” asks O’Brien. 

What is absolutely critical to these customers are the basics of online shopping – involving secure transactions, always-on capability, and high levels of performance. To this has been added, in recent years, the demand for seamless, joined-up experiences across channels involving a personalised experience. 

Giles Smith, head of digital, customer & data at Selfridges, says: “Customers also want to see innovation. We’re now all competing with Amazon and this has raised the bar. People are now unforgiving.”  

What has complicated things is the incredible amount of change and volatility taking place in today’s world and the exponential growth in the development of technology. Adam Warne, CIO at River Island, says: “If tech improves 50% each year it’s massive. How are we leveraging technology? The pace of the adoption of technology means digital transformations are risky business as the technology is outdated very quickly.” 

His solution to this challenge involves avoiding simply selecting solutions from the leading [large] providers in the market; using small teams as they innovate faster; and using flexible micro-services technology that enables companies to constantly evolve through the ongoing updating of their tech solutions.

This is very much aligned with the thinking of Smith who previously undertook a technology re-platforming at Burberry that involved moving away from what he describes as a “monolithic” system and instead adopting the new methodology around MACH (Microservices-based, API-first, Cloud-native SaaS and Headless).

“With the new system we were able to go with a new infrastructure and methods involving gluing together the best components. Previously we’d have just gone with a single big vendor. The biggest barrier to this [new] route is the mind-set of the business…it all depends on the confidence in the organisation,” he says.

Alongside utilising this methodology retailers should focus on the areas where they will achieve differentiation and seek to build-out their unique aspects on a bespoke basis that will enable them to stand out. “A checkout won’t differentiate you so why build your own. All brands are differentiated on their algorithms and customer data and personalisation so that’s where they might build their own platforms,” explains Smith.

This personalisation is extending into the problematic area of returns, with Chris Haighton, head of logistics at The Very Group, highlighting that his company has created a returns portal through which customers can manage their returns in a way that best suits their requirements. It includes the ability to print labels and arrange for collection from their homes for large unwanted items.

Steve Allen, global head of enterprise at Sendcloud, believes these returns portals are “the way to go” and will be adopted by more retailers. However, he says care has to be taken because if there is any complexity involved then they will simply drive customers to retailers’ call centres to air their queries, which will add more cost onto the processing of returns.

For Lewe Goldman, supply chain & operations director at Cloud Nine Hair, these returns portals should include giving customers green options for the return of products: “Things have moved on from convenience, it’s about our responsibility to make the green choice the obvious one. If we make it the same price as the other [return] options then it’s an easy choice for customers.”

There is certainly a growing move by consumers to select green options, according to Matt Hanrahan, founder & CEO of Reskinned, who says: “Customers are not only buying on the efficacy of a product and what it looks like but also if it is from a ‘sustainable’ business. It started with food and then beauty, where we’ve seen the biggest growth in transparency around what’s in the bottle. We’re now starting to see it with clothing – around manufacturing and circular models,” he explains.

Hanrahan recommends retailers work with other companies to help them on their sustainability journey. This is certainly a view shared by Joanna Yarrow, former chief sustainability officer at IKEA, who says: “The scale of change required is too difficult for one organisation. You need to work with others and be radically transparent with sharing information.”