Consumers in Australia demand more options, better service, speed, and affordable prices. In a nutshell, they want everything, they want it now, and they don’t want to pay too much for it.
Amid these high expectations, there are three major problems that Australian merchants must better understand and handle:
- The customer is evolving at a breakneck pace.
- Cost bases are continually rising
- Growth is more difficult than ever before.
In a highly competitive market, all three of these difficulties have the potential to have a major impact on a retailer’s ability to remain profitable and generate sufficient returns. Let’s look at each in turn and some of the steps you can take to overcome these challenges.
1. Consumer behaviour is evolving.
The global retail experience shows that the power balance has shifted significantly in favour of the rapidly changing consumer. As is well known, data will continue to be critical for retailers in determining exactly what their customers want and being able to meet those needs.
A recent survey of retailers in Australia found that only 11% of retail executives believe they gain meaningful insights from the data they collect. Australian merchants face the same problem: they’re acquiring a lot of data, but they need to turn it into actionable insights to acquire a competitive advantage and capture market share in the future.
Consumers are increasingly seeking experiences rather than just stuff. This trend was started by millennials. Millennials have a broad expectation that retailers will keep up with and deliver on their ever-changing requirements because they are digitally aware, have access to information from various sources, and have more disposable income than previous generations.
Similarly, Gen Z — the first real digital natives who are already crafting a world where anything is possible – will only raise consumer expectations. According to research, more than half of Gen Z members shop online at least once a month. We should expect Gen Z’s online shopping behaviour to considerably outstrip that of Millennials once they start working and have more access to finances.
The dilemma remains: How do we continue to meet and surpass our customers’ expectations as they evolve at breakneck speed? How do you market to the future consumer? This is a subject that both big and small merchants are grappling with. The answer is for merchants to have a clear understanding of their strategy and customer.
2. The cost bases are rising.
The way forward is to use technology to reduce expenses and complexity in the business, as well as to pull all levers across all areas. To fully realise its potential – to rethink retail and provide an end-to-end experience for users while also decreasing costs and creating business efficiencies – it must happen from the inside out. For those who haven’t yet taken the jump, while the initial investment will be substantial, the cost of doing nothing will be far higher. To date, I feel Australian retailers are doing an excellent job with data and analytics, but there is still work to be done, as is the case with most businesses.
The importance of supply chain and logistics will be crucial, but another major challenge for Australian retailers is that their current supply chains are not fit for purpose in an omnichannel future.
According to our analysis, the cost of logistics’ “last mile” can rise by up to 70% in the next several years, owing to traffic congestion and transportation costs. At a time when customers are expecting more timely service and speedier delivery of goods, businesses must definitely invest in this area. It’s their last interaction with their consumer, and if it goes badly, it’ll be the one the customer remembers the most.
While maintaining tight control over your costs is important in the current climate, there are some costs you should not avoid. Managing business risk is an important part of running your overall business. As part of this, you should fully research your business risks and the insurance that may be available to help you cover those risks. You can read more about how public liability insurance can help you here.
3. Growth is more difficult than ever before.
The influence of multinational players entering our market has arguably had the greatest impact on margins. Regrettably, these cost constraints are coming at a time when merchants should be investing in their long-term objectives.
While cost containment will unleash the value required to deliver growth, achieving growth in this climate will remain difficult.
Clearly, AI and robotics will have a significant impact on how retailers plan for the future in terms of cost management and efficiency gains, but the human element cannot be overlooked.
Knowing where that human involvement will be needed, as well as where brilliant individuals will be needed, will help retailers attract and develop talent now, so they’ll be better positioned to grow in the hard future ahead.
Australian businesses are making strides toward a deeper knowledge of their customers’ current and future demands. However, given the rate of change and the magnitude of change required, there is still much more work to be done, and now is not the time to do so.