Traditional brick-and-mortar stores are discovering a new world online and are trying to compete with established internet players. They, on the other hand, are setting up storefronts as they have found that they cannot do without them. The retail world’s rapid developments were mapped at the KPMG Retail Forum 2016, a summit meeting of the best in the sector.
The frugal customer myth
Shopping via the internet is becoming ever-more popular. As reported by the Czech Statistical Office, just ten years ago, only 5 percent of all inhabitants used the internet to purchase goods; last year, this figure had grown to 42 percent. Most often, people buy clothing and shoes, followed by concert and admissions tickets, cosmetics and health and medical supplements. Lately, Czechs have also begun to do their grocery shopping online. KPMG’s survey of shopping habits, published this March, found out that a fifth of the Czech population already has experience in buying food online, while a fourth are at least thinking about trying it. What makes grocery shopping online so attractive? First of all, it’s convenient – at least that’s what 72 percent of the survey’s respondents mentioned, ending once and for all the myth about financial considerations being the consumer’s first and foremost motivation. Indeed, only a quarter of all respondents admitted to buying food online because of lower prices.
The retailers who at the end of March came together at the KPMG Retail Forum 2016 perceive their customers in a similar way. For example, Michal Macourek, manager of BENU Pharmacies, stated that one of the reasons for BENU’s e-shop presence is the company’s already existing dense network of affiliated pharmacies. “Shopping on the internet, people aren’t just interested in the lowest price but want to take advantage of the combination of branches and on-line shopping. In our brick-and-mortar stores, we offer a multi-channel service. Our customers can pick up their order at their convenience, ask the pharmacist for advice and maybe even fill their prescriptions. All orders are expedited daily to the branches and it’s possible to pick them up immediately. Customers thus save on postage and medications are transported and held at the appropriate temperatures at the pharmacies.” Macourek explained.
Brick-and-mortars linked with virtual stores
The traditional fashion brand Blažek, selling elegant men’s wear, opened an online shop for similar reasons. “The linkage of our brick-and-mortars with the online world is important to us”, said Ladislav Blažek, founder and director of the namesake company. Interaction between the two sales types is key – products ordered via the internet can be tried on at the branches, each of which has its own tailoring department, allowing for any kind of customer-specific alterations. The company’s business results for the last year are proof that this concept is working. Also due to the massively successful ad campaign with celebrity Leoš Mareš becoming the face of the brand, the firm’s overall turnover rose by 4 percent last year. The year-on-year growth of internet sales was much more significant, however, as they increased by a whopping 44 percent.
The mirror image of this has been Alza.cz, known for its progressiveness. The retailer has been selling via the internet since the last decade of the last century and with its CZK 14 billion annual turnover is the Czech Republic’s largest online shopping provider. When opening new brick-and-mortar stores, it makes sure that they are conveniently accessible for customers.
Empathy and data
To be able to claim the biggest piece of the retail pie, business have to perfectly understand their customers. “Today’s customers are impatient, more critical, more demanding, less loyal, constantly online and, what’s more, immune to traditional marketing tactics”, says Tomáš Potměšil, manager at the Management Consulting department of KPMG Česká republika. Retailers have to adapt to this combination of characteristics if they want to succeed. A universally valid recipe for all merchants is made up of the six pillars of perfect customer experience: personalisation, integrity, expectations, empathy, time and effort, and resolution. An empathetic and personalised approach is the best way to gain and retain a customer.
Data analytics, undergoing a tremendous boom, also stresses the importance of a personal client approach. Customers, today more than ever immune to traditional marketing, will most likely be less resistant to marketing that is directly and personally aimed at them. Data analytics hence offers a perfect method of how to get to know one’s customers with their needs and preferences.
KPMG’s David Slánský and Pavel Kohout have on many occasions vividly described how useful data analytics have proven to be. Internet stores like international boots.com, surprisingly selling cosmetics and health care products instead of shoes, try to collect an absolute maximum of information about every customer visiting its website. This lets the company assemble the customer’s perfect profile before extending its targeted offers. Another example is the American fashion retailer stitchfix.com, recently experiencing remarkable growth without having invested a single dollar into any customer acquisition campaigns. The shop follows and profiles its website visitors and based on their behaviour sends them a package containing clothing items specifically assembled for them. Customers keep and pay only for what they want. On average, only 25 percent of the sent-out goods are returned, which is a very decent result. Data hence help the company to significantly lower costs as well.
In Great Britain, one of KPMG’s clients opening 25 to 30 new natural fast food outlets every year was having a hard time accurately estimating the daily demand for specific products at individual store locations. It was also impossible to predict the stores’ revenue so as to be able to make any kind of sensible managerial decisions. KPMG Česká republika was asked by its British colleagues to find a way how to predict the parameters with a much higher accuracy. To do the job right, it was necessary to take into account many factors and to reveal the specifics of every location. Important became, for example, the distance from the location to the nearest bus stop or ATM, the opening hours of the competition, store traffic volatility, but also the average number of sunny, cloudy and rainy days. The results were very surprising – the predictions made by KPMG’s analysts were twice as accurate as those by the client and ultimately led to cost savings of CZK 950 million. We can thus expect that data analytics will soon significantly influence not only the strategy of retailers but also our shopping habits.
© 2022 KPMG Česká republika, s.r.o., společnost s ručením omezeným založená dle právních předpisů České republiky a členská společnost globální organizace nezávislých členských společností KPMG, přidružených ke KPMG International Limited, soukromé anglické společnosti s ručením omezeným. Všechna práva vyhrazena.
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