Numerous retailers are currently testing loyalty programs as a means to incentivize repeated purchases. However, on average, consumers are members of over four loyalty programs; nevertheless, only around two-thirds of these participants actually redeem their points within a three-month timeframe. Data suggests that prioritizing customer service initiatives might be a more effective allocation of resources.
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GLOHighlights from the PYMNTS Digital-First Banking Tracker® Series Report
- Consumer behaviors have rapidly evolved in recent years alongside the rise of eCommerce. Presently, customers desire the same level of speed and seamlessness in their in-person shopping experiences as they do with online ones. To fulfill these expectations, many retailers have recognized the significance of incorporating self-service options.
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In recent times, few technologies have generated as much impact as AI, a force that is projected to replace numerous job roles in the coming years. The retail industry is embracing this change, as stores formulate strategies to leverage AI in various aspects, both behind the scenes and in interactions with customers.
- Retailers are confronted with heightened competition, not solely from fellow retailers but also from colossal eCommerce conglomerates. Keeping pace necessitates a comprehensive overhaul of their existing operations, a formidable challenge in itself.
The retail landscape underwent an irreversible shift following the closure of stores and implementation of stay-at-home orders in the initial months of the pandemic. The widespread transition to eCommerce introduced elevated customer expectations regarding swiftness, convenience, and adaptable payment options. Remarkably, consumers retained these expectations even as they resumed in-person shopping.
Catering to these fresh demands presents a significant challenge for numerous retailers, as it requires substantial overhauls of their backend systems to integrate cutting-edge digital technology. Many are discovering that the path to success lies in collaborating with third-party providers rather than expending valuable resources ineffectually.
Self-service is rapidly becoming the expected standard
As eCommerce gained popularity, consumer behaviors rapidly evolved over the past few years. Presently, customers desire in-person retail encounters to mirror the speed and seamlessness they experience online. Recognizing this trend, numerous retailers have come to understand the significance of integrating self-service options to effectively address these expectations.
of consumers in the United States
enjoy self-service kiosks, with 66%
preferring them to staffed checkouts.
While self-service options are widely favored by customers, some individuals who still have reservations.
A recent survey reveals that 84% of Americans find self-service kiosks enjoyable, with 66% expressing a preference for them over staffed checkouts. This inclination towards self-service is consistent across various generations: 84% of Generation Z, 76% of millennials, and 57% of Generation X consumers show a preference for this option. However, baby boomers stand in the minority, with only 46% opting for self-service over staffed checkout.
Some individuals who resist this trend provide several reasons for their stance: 67% believe that technology has hindered the development of meaningful connections among individuals, while 75% attribute a decline in social skills to interactions that rely on technology.
Customers commonly cite waiting in lines at retail stores to be a significant source of frustration.
The increased adoption of self-checkout options is partly attributed to their effectiveness in expediting transactions and minimizing queues. According to a recent study, as much as 82% of consumers go out of their way to avoid businesses that have any form of waiting line.
Professionals estimate that Americans collectively spend approximately 37 billion hours waiting in line annually, with retail stores being the predominant setting for such waits. As a result, customers perceive self-service kiosks as a welcome relief from this monotony.
Retail establishments are utilizing artificial intelligence (AI) to enhance the quality of customer experiences.
AI has emerged as one of the most influential technologies in recent times, and its potential to replace numerous job roles in the foreseeable future is significant. The retail industry is actively embracing this paradigm shift, as businesses formulate strategies to effectively incorporate AI into both their backend operations and customer-facing interactions.
could be saved by the grocery industry
by deploying AI in both consumer-facing
and back-end applications.
The implementation of AI in grocery stores is expected to increase by 400% by 2025.
Based on a recent report, AI is projected to yield over $113 billion in efficiency improvements and new revenue within the grocery industry. A significant portion, more than $58 billion, is anticipated to stem from savings in inventory management as grocers implement more intelligent ordering practices to reduce waste. The implementation of AI is also expected to drive advancements in pricing strategies and product assortment.
On the operational side, AI holds the potential to eliminate approximately 18% of store associate positions, streamline 53% of customer inquiries, and optimize 73% of in-store tasks such as checkout and shelf-stocking. Presently, only a modest 13% of grocers are using AI across multiple store areas. However, as the value of AI becomes increasingly evident, this percentage is likely to escalate swiftly.
Retailers must enhance their internal systems to accommodate the integration of AI.
The majority of retailers are faced with the necessity of having to upgrade their backend systems before they can effectively leverage AI. In a recent survey, 83% of respondents indicated that they could tap into the benefits of AI only after modernizing their infrastructure. Nonetheless, accomplishing this task is a considerable challenge, as merely 48% of the respondents believe that their current infrastructure is capable of undergoing the necessary modernization. For most businesses, a complete replacement of their systems will be necessary. In addition to technical obstacles, they also have to overcome challenges like resource constraints, resistance within the organization, and inadequate communication among stakeholders.
Retailers are revamping in-store experiences to align with customer expectations and preferences.
Retailers are experiencing intensified competition, not only from fellow retailers but also from large eCommerce conglomerates. Staying competitive now demands a comprehensive overhaul of their existing business models, a formidable task that presents significant challenges.
of U.S. and U.K. retailers plan to outsource
payments innovation to third parties.
Point-based loyalty programs might be becoming increasingly inefficient.
Numerous retailers are currently testing loyalty programs as a means to incentivize repeated purchases. However, certain specialists caution against relying solely on point-based loyalty systems. On average, consumers are members of over four loyalty programs; nevertheless, only around two-thirds of these participants actually redeem their points within a three-month timeframe. This indicates that these programs are not particularly successful in driving customers to make return visits. Instead, data proposes that prioritizing customer service initiatives might be a more effective allocation of resources. A significant 48% of individuals who have switched brands attribute their decision to the desire for improved customer service.
Most retail stores choose to outsource payments innovation.
Enabling rapid and smooth shopping experiences hinges on payments innovation, a process that can prove expensive and time-intensive, particularly for smaller establishments. Consequently, merchants are increasingly turning to external sources to handle their payment system revamps. According to a recent PYMNTS survey, 51% of retailers in the United States and 63% in the United Kingdom intend to delegate all aspects of their payment method innovations to third-party providers. When selecting new payment methods, retailers predominantly emphasize user experience enhancements, robust data tracking, and fraud prevention measures.
To meet customer expectations, retailers are required to collaborate with FinTechs and other third-party entities.
The rapid rise of eCommerce has expanded customers’ choices in the retail landscape, making them increasingly open to switching brands. Recent research indicates that 55% of consumers have completely abandoned a brand due to a subpar in-store experience, recognizing the ease with which they can transition to another provider to fulfill their requirements. Consequently, retailers are under pressure to deliver exceptional customer experiences and seamless payment processes, regardless of associated costs.
Retailers have identified the following technologies as having the most potential for enhancing customer retention:
- Mobile apps, with 78% of retailers saying they improved customer loyalty
- Ability to shop in-store and order for delivery (76%)
- Barcode and QR code scanner access (74%)
Deploying these technologies can indeed consume significant time and financial resources, especially for smaller retailers operating with limited budgets. Thankfully, a range of third-party retail service providers possess the requisite expertise and technology to undertake such projects in a considerably shorter timeframe and at a fraction of the cost that would be required to develop new tools in-house. For any business aspiring to gain a competitive edge in an increasingly fierce market, collaboration with these proficient partners should be a primary focus.
Irrespective of the chosen interaction channel, businesses must ensure that customers have the capability to engage in activities like shopping and banking seamlessly across various platforms. Those retailers that manage to provide a consistent and smooth experience across channels are poised for success. Personalization is anticipated to be a pivotal factor in the triumph of nearly all businesses in the future. Regardless of the interaction medium, customers anticipate a high level of individualized service. To fulfill these expectations and thrive, it is essential for financial institutions, retailers, and other entities to establish partnerships with leading technology providers in their respective fields, while also leveraging the wealth of data available to them.
Source: PYMNTS
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