Holiday Spending —Cement Customer Loyalty or Face Disruption

Blog /Holiday-Spending-Cement-Customer-Loyalty-or-Face-Disruption

The predictions for retail holiday sales this year are encouraging, with most pundits forecasting a sizable uptick over 2015. For many retailers, sales from November through December — including two of the biggest shopping days of the year, Black Friday and Cyber Monday — can make or break annual earnings.

Here’s a sample of rosy forecasts for this year’s holiday spending:

  • The National Retail Federation expects sales in November and December (excluding autos, gas and restaurant sales) to increase a solid 3.6% percent to $655.8 billion — significantly higher than the 10-year average of 2.5% and above the seven-year average of 3.4% since recovery began in 2009.
  • As reported in WSJ, The International Council of Shopping Centers (ICSC) forecasts a 3.3% spending increase at physical stores during the holiday season, compared with a 2.2% gain in sales last year. Holiday shoppers in the survey said they plan to spend an average of $683.90 this year.
  • According to The NPD Group’s 2016 Holiday Purchase Intentions Survey, consumers plan to spend an average of $636 on holiday-related expenses, up 3% from what they anticipated last year.

Caveat retailer — disruption looms

As reported in an SAP white paper “Retail in a Digital World: How to Survive and Thrive,” outside of the tech/media/telecom industries, retail is projected to have the highest degree of digital disruption through 2020. In line with this, as reported by SAP, almost half of retail executives believe that risk of being put out of business increases as a result of digital disruption.

In the 12 months ending June 2015, 90% of the top 100 consumer brands lost market share, as reported in Forbes.

Well-known examples of death-by-disruption in retail include Radio Shack, Circuit City, Aeropostale, Sports Authority and Pacific Sunwear — to name just a few.

Most recently, retail stalwarts Macy’s, Kohl’s and Nordstrom all reported disappointing (and unexpected) first-quarter earnings. As reported in TheStreet, Macy's first-quarter sales fell 7.4% year over year to $5.77 billion, missing forecasts for $5.94 billion. Kohl's first-quarter earnings fell a disturbing 50% year over year, and Nordstrom reported first-quarter earnings of 26 cents a share vs. forecasts of 46 cents a share.

Personalization and unified commerce a must for survival in retail

Contrary to popular opinion, the greatest threat of disruption for retailers comes not from established competitors investing in technology. Nor does it come from pure-play online retailers or new, niche-product players.

No. The biggest threat comes directly from consumers, specifically, from consumers dissatisfied with the sub-par shopping experience a retailer provides.

More than ever before, consumers are in control. They’ve grown accustomed to trading privacy for convenience, and the slightest disconnect between consumer expectation and a retailer’s ability to deliver means not simply losing a one-off sale but possibly losing a customer (or segment of customers) for life.

This is particularly true for millenials and younger generations who present all-or-nothing stakes for retailers. While more accepting of privacy trade-offs than past generations, younger consumers are also more demanding.

Having grown up hyper-connected, environmentally conscious, and digitally savvy, they want to participate with a brand that knows them, shares their values and makes transacting business a natural activity, one that is as engaging as it is helpful, as enjoyable as it is practical, as honest and safe as it is memorable and fun. They crave interactions with retailers that are both effortless and satisfying, putting retailers on notice — get it right every time across every channel or face death by a million, negative social-media impressions.

The high cost of a bad consumer experience

  • 47% of customers would take their business to a competitor within a day of experiencing poor customer service (24/7)
  • 60% of consumers have not completed an intended purchase based on a poor customer service experience. (BI Intelligence)
  • It takes 12 positive customer experiences to negate the poor impression left behind from one unresolved, bad experience (BI Intelligence)
  • Only 15% of shoppers would give a brand or product a second chance after a poor experience (InReality)
  • Only 27% of shoppers would give a physical store a second chance after a poor interaction (InReality)

Excellence in unified commerce with SAP Hybris from NTT DATA

SAP Hybris helps businesses strengthen brands, solidify customer relationships and grow revenue by empowering them to present customers a compelling and unified experience across all channels — the Web, mobile devices, social media, kiosks, call centers, physical locations, etc.

The combination of the SAP Hybris platform and SAP Hybris Cloud for Customer, along with the integration of additional SAP applications such as SAP Sales Insights for Retail, SAP Net Margin Analysis, SAP mobile solutions, the SAP BusinessObjects BI Platform and other Business Suite applications provides SAP customers a significant, sustainable competitive advantage in delivering new levels of personalized customer engagements and new opportunities for additional, unified commerce offerings that are both compelling and timely.

Spot-on personalization with SAP Sales Insights for Retail from NTT DATA

Success in retail no longer hinges on targeting demographic segments but engaging a specific customer personally (i.e., Bob — age 30, lives in Denver, CO., loves fine chocolate, drives a 2007 Honda and posts workout tips on Twitter).

To provide a truly personalized consumer experience, retailers must trawl oceans of data to make spot-on, real-time decisions.

Powered by the SAP HANA platform, the SAP Sales Insights for Retail analytic application not only helps retailers stay afloat but also empowers them to sail full steam through big-data waters — charted and uncharted.

Speed is of the essence for retailers in today’s fast-paced, big-data world. Leveraging HANA, the SAP Sales Insights for Retail analytic application enables retailers to significantly speed up analysis of terabytes of point-of-sale (POS) data (>20x faster than traditional databases), empowering retailers to anticipate the needs and tailor promotions to individual shoppers (i.e., sending Bob a coupon for cross-training sneakers and/or tips for determining when it’s time for new brake pads and, of course, adding premium chocolates to the check-out display mix).

The SAP Sales Insights for Retail analytic application also helps retailers reduce shelf turnaround, eliminate out of stock scenarios during promotions, and instantly identify and correct cross-channel discrepancies — among many additional, meaningful and measurable business benefits.

Tis the season for learning what customers want

While there is much debate on the holiday shopping season's waxing or waning importance for retailers, what cannot be denied is that, today, the spike in shopping from November through December provides retailers with a valuable widow through which much can be learned about shifting consumer behavior and shopping trends.

To remain relevant retailers must successfully navigate today's digital world and demanding consumers. According to the RIS 2016 Retail Technology Survey of 102 retailers conducted during the months of January and February of 2016, 60% of all retailers will increase their IT spending year over year. In fact, according to RIS, 30% of retailers indicate increases of more than 5% in their IT budgets.

RFID, IoT, unified commerce, mobile payments, mobile clienteling, beacon technology, digital displays, home delivery, in-store pickup and real-time analytics are just a sample of innovative technologies and processes retailers are investing in. But one-off projects amount to little more than paying lip service to customer-centricity. In the end, only seamless integration of myriad technologies — connecting core systems to all customer touch points — will have a lasting and positive impact on the shopping experience and, ultimately, a retailer's success.

Retailers who fail to provide a personalized, unified experience that presents the right product at the right price through the right channel at the right time are not long for this world.

Only by providing a unified, personalized shopping experience can retailers cement the customer loyalty needed today to ensure success and growth for years to come.

Contact NTT DATA today to learn more about our expertise in driving personalized, unified-commerce excellence for our retail customers.

Post Date: 11/30/2016

Tim Clark - NTT DATA Tim Clark

About the author

Tim is a Vice-President with NTT DATA with responsibility for SAP Consulting and the global HANA COE. He has 20+ years of experience in the SAP space with a focus on leading large scale global transformation programs and outsourcing engagements. He has worked across 30+ countries and a variety of industries, including Wholesale Distribution, Semiconductors, Building Materials, Consumer Products and Oil Field Services. Previously, Tim was a Vice-President at Neoris/CEMEX and a Partner at Accenture.

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