Tumult has become something of a constant in our lives. Retail is dealing with the impact of everything from supply chain troubles to geopolitical uncertainty. For every business – large and small – taking control back in this environment means expecting, preparing for, and embracing disruption. For a consumer-facing industry such as retail, the most powerful way to preempt oncoming changes is by listening to the all-powerful consumer and using that knowledge to put the right investment, resources, and energies into the right areas.
Retailers have talked about making consumer insights a core capability that impacts decisions up and down the organization for years. However, the urgent need to truly do so has never been higher. This is because consumers are no longer the reliable and static demographic clusters marketers have been used to targeting. Instead, they are constantly regrouping and changing according to social trends, identity politics, personal whims, and even time of day. And because they have unlimited access to information and the ability to communicate with each other, they have both the power and agency to make choices. This shift in power is monumental and irreversible. Never again will companies control the narrative or tell consumers what, when, and how to buy something.
More than 80% of customers trust recommendations from family and friends over those from companies and two-thirds do not trust advertisements or sponsored social media advertisements.
Consumer loyalty is at an all-time low – even in usually brand-loyal categories like footwear. We found in a survey last year that 77% of U.S. consumers were likely to switch retailers if a preferred shoe style became available on sale elsewhere.
Some companies have come to this realization – the quick rise of direct-to-consumer businesses was one example where consumers controlled the relationship. But the solution isn’t hidden in one specific platform or technology, and this power shift cannot be attributed to ecommerce alone either. Too many consumer companies are operating under the false assumption that the difference is the ability to buy goods and services online. However, the key change has arisen through the power of information, with consumers using technology as research and connection tools before making their purchasing decisions.
Even when consumers are shopping in a physical store, they are likely to simultaneously use their phone for related actions – comparing prices, finding other colorways or sizes, and exploring similar products at competitors (Figure 2).
Retail CEOs realize the urgency of needing to make a change – but their understanding of what must change continues to come from what rivals are doing or what new technology is available. The 2022 AlixPartners Disruption index finds that 96% of retail executives say their business models must change within the next three years. But their top concerns are focused on operations (Figure 3).
Consider this your wake-up call to the consumer revolution. While coming to terms with the idea of losing power is difficult, retailers should realize that this is an opportunity to build an intimate and lasting relationship with their customer and grow in a sustainable, lasting manner. The question is, how do you begin to understand your customer? Here is how to get closer to the answer:
- There are six Cs that are the essential elements defining companies’ relationships with their customers
- Cost: Give Me a Steal
- Convenience: Make It Easy for Me
- Category Expertise: Show Me What You Know
- Customization: That Made-for-Me Feeling
- Curation: That Chosen-for-Me Feeling
- Community: Make Me Feel at Home
The six Cs, along with examples of companies implementing them successfully, are explained in detail in The Metail Economy, a book by Joel Bines, the co-head of the AlixPartners global retail practice.
- Companies must take an honest stock of what they have, what differentiates them from the competition, and what their customer values in them most. The six Cs distill the nature of a company’s relationship with their customer
- Then they must develop their own recipe with the right blend of Cs that are most relevant to their customers. They may need to deconstruct every aspect of their operations to support this recipe
- Focus investment, resources, and energies into the right areas in order to maximize the customer relationships in this Metail economy
Consumer-focused companies must understand how their organization is seen by their customers and prioritize this over all else. Retailers need to rethink every single practice, policy, procedure, and person from the lens of having to pay for this transformation journey. But this also means having the opportunity to build a lasting relationship with their consumers.