Retailers turn to the web as consumer trends shift: New buying landscape alters back-to-school shopping

(As originally appeared in FEI Canada F.A.R. member e-newsletter, August 2010)

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By Daniel Baer, Partner and Canadian Leader, Consumer Products, Ernst & Young LLP

With back-to-school shopping season upon us, retailers are making efforts to meet the evolving demands of buyers. Vendors are faced with the challenge of building a connection to consumers as the buying culture begins to deviate from traditional shopping methods. Today, busy parents seek an easy solution when shopping for their child’s first-day-of-school essentials. Developing an understanding of the contemporary shopping environment and connecting with consumers help retailers understand how to turn a healthy profit.

Sales for the back-to-school shopping season are projected to increase 4% to 5% from last year. However, this growth is relatively weak compared to previous years, and can be attributed mainly to a rising population, inflation and a weak 2009 basis of comparison.

Though the economy is in a recovery phase, recent talk of a double-dip recession is commanding many to continue using caution when pulling out their wallets for school supplies. But the state of the economy is not the only factor affecting business growth. New buying trends are now forcing retailers to reconsider the way they approach the transaction process.

To retain a competitive advantage and stay relevant, companies should take full advantage of the web, the fastest-growing retail channel, as well as the emerging mobile application platform. In the era of easy access, people pursue products and resources that are available at their fingertips. To ensure retailers stay in tune with the new dynamics of the vendor-customer relationship, they should:

  • Increase investments in the mobile platform: Mobile commerce, or m-commerce, is the newest channel to connect with shoppers. New applications offer mobile updates and promotions, allow product research, improve consumer relations and gain brand loyalty in the long run.
  • Re-think the website: Websites are becoming the number-one shopping arena, and are often even more profitable than physical stores. Purchasing needs to be seamless and transparent to the consumer, regardless of the channel — consumers are buying from a brand, not a channel.
  • Embrace social media: Social media allows for real-time customer feedback. Features like Facebook’s “like” button or Twitter’s “retweet” feature spread opinions instantaneously. Social media not only increase sales, but drive traffic to company websites, raising brand recognition and helping the bottom line.
  • Build customer intelligence: Understanding customer buying trends is essential when building short- and long-term plans for sales and product mixes. Retailers who offer branded credit cards and loyalty programs often gather more important customer information and brand build. Consumers respond positively to, and are looking for, targeted email based on their individual shopping patterns.

Consumer sentiment: no longer live to shop, but shop to live

With a growing apprehension over spending, consumers think long and hard before making a purchase. Regardless, back-to-school shopping remains an enjoyable occasion for most families, and market growth for retailers will surely reflect this sentiment. Parents want to spend money on their children to contribute to their education and prepare them for the school year ahead. The focus of this year’s excursion, however, will be on necessities such as books, laptops and mobile technology for communication purposes, and less on clothes and discretionary items.

No guess work, consumers are telling retailers what they want

Looking back, certain retail trends stand out. Twenty years ago, it was all about “location, location, location.” Then there came a form of retail entertainment in which shoppers sought an “experience.”  In the latest retail shift, it is clear that customer engagement and two-way communication are fundamental.

Retailers benefit from starting personalized conversations with consumers by using social media, a valuable communication tool. Companies can learn if customers are satisfied with products or services via Twitter or Facebook, for example. Consumers want input into products retailers are selling; a two-way conversation is vital.

New climate leaves small window for impact

Parents are looking for efficiency and convenience when searching for the best back-to-school deals. Overloaded schedules don’t allow time for leisurely shopping trips. Instead, customers rely on their cell phones and the internet to browse and make purchases. If people don’t find what they are looking for quickly and with little effort, they will move on to the next retailer.

The limited time to make an impact on shoppers, paired with globalization, has created an intensely competitive retail environment, making it essential for companies to reassess their delivery. Retailers need to present targeted and fast information and engage in an open dialogue with shoppers, letting them know their voices are being heard.

Today’s consumer is savvy and will often go online to quickly seek the best deals and discounts. Some stores merely function to showcase a small stock of items for viewing purposes, while websites are becoming the predominant buying zone. Retailers have to be creative in drawing people to their sites and keeping them coming back by engaging with them to develop customer intelligence. High shipping costs and out-of-stock items will quickly deter shoppers. Consumers will not differentiate their brand experience between the bricks-and-mortar and online, worlds. A poor consumer experience online will therefore tarnish a retailer’s brand globally. Consumers want a seamless shopping experience — however, whenever, and wherever they choose it.

It is increasingly important to embrace these new platforms, and to keep pace with emerging trends and technology. Investing in an online presence and mobile applications — even when the return on investment is difficult if not impossible to measure — and welcoming a customer dialogue will help retailers stay in the game this back-to-school season.