By Anastasia Lloyd-Wallis
Chief Operating Officer and Head of Consumer Insights, Retail Doctor Group
The Australian retail ecosystem is changing rapidly, with new customer touchpoints emerging all the time. But it’s not just post-pandemic shoptimism that’s driving this change; It’s the changing needs of the emerging consumer that’s making pivotal change possible.
Emerging Australian consumers are a diverse group of people who are shaping the future of the retail landscape down under. Where Generation Y (Millennials) had most of the buying power until the early-to-mid 2010’s, Generation Z have begun earning a living and are looking for ways to make meaningful purchases.
But this is where it starts getting interesting… Generation Alpha – born sometime between 2010 and 2020 – are set to be the generation with the most powerful of all buying powers. They’re living in a world where their parents are more digitally savvy, more socially conscious, and more demanding than previous generations of consumers. Their parents are also more likely to be influenced by peers and social media.
Gen Zs (or Zoomers) are comfortable shopping online and using mobile devices to research products and make purchases. They also expect retailers to offer a seamless and personalised shopping experience across multiple channels, known as omnipresent retail.
They’re socially conscious, choosing brands that align with their values, such as those that are sustainable or ethical. They’re demanding enough to expect high-quality products and services at a fair price, and are quite willing to switch brands if they aren’t satisfied with their experience.
But best of all, they’re teaching the next generation – the emerging consumer – how to have exacting standards, what to shop for and what to demand on a service level. Retailers that are able to understand and cater to these emerging needs will be well-positioned for success in the future.
Changing Customer Touchpoints in the Retail Ecosystem of the Future
These trends are also being seen globally, but there are some unique factors that are shaping the Australian retail landscape. For example, Australia has a relatively small population and a large geographic area, which makes it difficult for retailers to reach customers in remote areas.
The expectation for retailers to grow their store network has increased from 42% to 71% as a direct result of this.
90% of retailers worldwide predict that physical stores will be the most important channel in the next 5 years. In Australia, 70% of retailers reckon that their physical store will be their most important channel 5 years from now.
These digital platforms (particularly retailers’ own online stores) are almost as important to the majority of retailers polled in the Retail Doctor Group’s Insights division 4-year study that analysed the changing retail ecosystem in Australia and also around the world.
This is driving the development of new technologies and digital platforms to help retailers deliver products to customers more quickly and efficiently.
But these stats also beg the question… if only 70% of Australian retailers think their physical stores will be important to their bottom line 5 years from now, how are they adapting to this anticipated change, and are they Fit for Business™ to meet the challenge?
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Consumer Purchase Locations
Physical retail still remains dominant for consumers. In addition to this, consumer usage of stand-alone stores has seen an increase in the last 4 years. This notable increase is driven by the ever-growing need for convenience.
Large shopping centres are decreasing in popularity as more channels open up to the consumer, however these “traditional” shopping centres still remain the #1 destination.
Marketplaces are also seeing a decrease in popularity with consumers increasing their preference to use retailer apps. Despite this growth and alternating decline, our findings indicate that physical stores are amongst the top 4 out of 6 shopping destinations for consumers.
Digital Channel Share of Sales for Retailers
It’s expected that the share of sales from Digital channels will increase by 10-12 points in the next 5 years, with Australian retails having higher predictions.
Internationally, retailers are more conservative in their predictions, possibly due to an almost-static growth rate in digital channel sales. For Australian retailers, the more-positive outlook can likely be attributed to the somewhat delayed and long-anticipated regional and rural exposure to digital channels in outlying areas.
Retailers Digital Selling Locations
The platforms where retailers sell tell a detailed story about how consumers have been shopping. Sales from retailers’ own websites, for example, have not seen much growth between 2022 and 2023, however, sales across social media platforms like Facebook, Instagram, and TikTok have increased in retailer usage.
Shoptimism – the idea that purchasing low-cost, high-value items like chocolate, trinkets, and other luxury items to feel better or as a reward – must be factored into retailer strategies as this trend continues to grow.
Paid Marketing Channels for Retailers
Digital marketing in general continues to increase in importance for retailers. Previous research by RDG and other interested parties indicates that consumers have come to rely on their digital devices more and more, not just for shopping, but for finding deals and discounts, too.
Social media channels have gained in meaning and popularity for consumers, with testimonials and word-of-mouth being the most important deciding factor to purchase from a retailer. It’s no surprise then that paid social media – which was in 4th position in 2022 – has gained significance for retailers and is now the #1 paid marketing channel.
Catalogues, magazines, and postal advertising have gained significant traction in 2023, while radio, vehicle signage, and newspapers have lost importance to consumers. This may be due to the lack of trust attributed to mass media of late (radio and newspaper reporting), while vehicle signage is difficult to read and recognise if one is always looking down at the trusted device in hand.
Social Media Usage
Consumer social media usage is constantly increasing, with 65% of consumers now saying they use it to interact with brands and retailers. 27% of those aged 55+ are using social media, with those numbers continuing to grow as digital devices become the norm across all generations.
With this in mind, it becomes apparent why retailers now consider social media as their #1 paid marketing channel.
Social Media Platforms Consumers Use to Interact with Retailers and Brands
Exponential growth is evident across almost all popular social media channels, with Facebook, Instagram, Snapchat, TikTok, Twitter, and YouTube enjoying the rise in channel use by consumers reaching out to brands and retailers.
The business social media channel LinkedIn – though not traditionally used to buy and sell products – is also seeing an increase in retailer/consumer communications. This may be due to a rise in the number of AaS (As a Service) business models, which include:
- Software-as-a-Service (SaaS)
- Data-as-a-Service (DaaS)
- Cloud-as-a-Service (CaaS)
- Content-as-a-Service (also CaaS)
- AI-as-a-Service (AIaaS)
- Backup-as-a-Service (BaaS)
- Blockchain-as-a-Service (also BaaS)
- Data Management-as-a-Service (DMaaS)
- Encryption-as-a-Service (EMaaS)
The AaS list goes on, but the overwhelming theme is a service located offsite and virtually that manages an online environment for businesses who rent space on the internet. As these types of businesses are mostly data- and information-driven, it’s difficult to create engaging reels and short-form videos to showcase services that would be interesting to anyone who isn’t looking for that service on a business level.
Social Media Platforms Retailers Use to Interact with Consumers
Retailers are increasing their use of social media in general, with a focus on platforms like Tik Tok, YouTube, and Pinterest. Almost all retailers are using Facebook to stay connected with their consumers.
TikTok continues to grow in importance and is now on par with YouTube, however consumer usage of TikTok has now surpassed that of YouTube. This may have something to do with YouTube’s adverts which interrupt viewing on the free plan, while TikTok ads are non-intrusive.
Opportunities in this space include Reddit, Twitch, and Snapchat, which indicate that consumers have begun using these platforms more than they did before, and may now be actively looking for the adverts that guide their purchasing behaviours.
Next Steps for Retailers
Analysing emerging trends will help retailers identify opportunities as they arise. This has a positive knock-on effect for the consumer, who recognises the retailers’ willingness to meet their demands. This will help to foster brand recognition and loyalty in those consumers who are looking for a brand to align their values to.
What Consumers are Saying
Consumers are social by nature and continue to seek social interactions through the physical store. Whilst certain products can be commoditised and sold via digital channels, consumers remain on the lookout for retailers who help them save time and effort, whilst also acknowledging their need for physical engagement and entertainment when in-store.
What Retailers are Doing
Retailers globally are in agreement that the physical store is a priority. However, next steps are to ensure consistency, engagement, and excitement in the physical experience – an intentional action by the retailer that’s not transactional in nature and cannot be replaced by digital.
RDG Recommendations
- Retailers should be talking to their customers to understand how they prefer to be engaged with.
- To determine “time well spent” versus “time well saved”, retailers must analyse their ideal in-store and online engagement strategies to find shortcomings and opportunities for growth.
To download the RDG Retailer and Consumer Sentiment 2023 – Click here
Talk to our strategy division about our Industry 2030 program, e-mail us on businessfitness@retaildoctor.com.au or call 02 9460 2882