With retail businesses receiving mixed signals about the economy during the ramp up to the holiday shopping season, the one certainty is that excellent customer service is essential for success.
Retailers are getting mixed messages as they prepare for the all-important holiday shopping season. Inflation is down but not quite enough. Credit-card debt is up, but so are wages. The million-dollar question for retailers is, are we headed for an economic downturn or a soft landing? Let’s look at the good and not-so-good news, and what retailers can do to prepare themselves no matter which way the economy ultimately goes.
inflation rate during August 2023
trillion dollars in total household debt this year
of U.S. consumers who say inflation has caused them financial hardship
3.7%—Source: NBC News; $17T—Source: newyorkfed.org; 61%—Source: Gallup.
The good news
Inflation rates have cooled from a year ago—down to 3.7% in August from a pandemic-era peak of 9.1% in June 2022—although they’re still higher than the Federal Reserve Board’s goal. This has some analysts speculating that the steady rise in interest rates may be near its end—and the economy may dodge a recession.
Consumer confidence is at its highest level in two years.
Real wages are up, so after two years of inflation eroding workers’ purchasing power, consumers are finally starting to see real gains.
The less-than-good news
As of June, three in four consumers believed a recession would occur by the end of 2023.
Total household debt reached $17.06 trillion in the second quarter of 2023.
Credit-card debt has hit $1 trillion, and some of the approximately 40 million Americans with student loans may need to start repaying them in light of a recent Supreme Court decision.
61% of Americans said inflation has caused them financial hardship.
How should retailers respond at a time of mixed economic signals? The short answer is by staying calm and staying the course. That means continuing to provide excellent products and services, and now, more than ever, taking good care of your customers.
But pleasing every customer demographic gets tougher every year. They all want better and better experiences at the same time that the financial squeeze has them looking for low prices.
Given these customer challenges, retailers should consider the following as table stakes for a winning retail experience. Be sure you have these dialed in:
If you’re not doing those well, shoppers won’t hesitate to shift to another brand for a better price or a better experience. Let’s look at each one in more depth.
Personalization leads the way to loyal customers
In 2022, 73% of shoppers expected brands to “understand their unique needs and expectations.” In fact, 62% said they might stop doing business with a brand that doesn’t offer a personal experience.
Brands can personalize the experience in dozens of ways, from high-tech (augmented reality try-ons) to low-tech (sending a birthday card in the mail). Other effective ways to improve personalization include:
But what elevates these personalization methods to make customers feel a truly personal connection? One approach is to engage with customers in non-selling situations. Another is to make sure your brand personality comes through at every touchpoint and during every interaction, from online chat to in-person customer service calls.
As early as 2017, one study showed that 73% of customers were using multiple channels for shopping. At this point, it’s critical for retailers to make this omnichannel experience seamless, so that if a customer switches from one channel to another—physical store to mobile device to social media channel to desktop—they receive the same intuitive, positive experience.
There’s a big payoff for retailers who do this well. Omnichannel strategies drive an 80% higher rate of incremental store visits.
If you haven’t already, you may want to look at adding social media selling to the mix, depending on your customer base. Younger customers increasingly use channels like TikTok and Instagram as search engines and expect to make purchases directly from those channels.
Whether this is a good strategy for you depends on many factors:
Are your customers purchasing from social media, and do they feel secure sharing financial data through the platform?
If this appears to be a direction your customers are heading, try a small pilot project first to gain insights.
Exceptional becomes the new normal for service
Almost three-quarters of consumers point to CX as an important factor in their purchasing decisions. Excellent CX is fast, friendly, and helpful whether in-store, online, by phone, chat, or social.
Customers want an easy, intuitive online experience and helpful, efficient staff in stores. They need truly useful chatbots and FAQs, and a quick way to reach a live person with product questions, inquiries about an order, or complaints about a product. Constantly collecting customer feedback can help you continuously improve your CX.
Optimizing returns efficiency is also a critical part of providing good CX, but it can be tough to balance customer happiness with costs. An increasing number of retailers are charging return shipping fees or restocking charges when consumers return products. Some experts urge caution here, as charging for returns could drive customers to competitors.
Intermediate steps may help control costs without pushing customers away. Make sure product descriptions are as accurate and detailed as possible. Try limiting the number of items that can be returned and the time period in which they’re accepted. Encourage in-store returns if that’s an option for you. And if you institute a fee, consider waiving it if the customer purchases a new product at the same time they’re making a return.
And as always, make sure that you are available to answer customer questions.
The role of outsourcing
With tight budgets and consumers resistant to price increases, it can be hard to make the investments you’d like. You have to prioritize what’s most important for your business and your customers while always keeping your eye on customer retention.
Outsourcing can help, especially if you’re not ready to go all-in on a new strategy or need help covering busy periods. Customer service is one obvious candidate for outsourcing because it allows you to scale up and down and deliver 24/7 service. A high-quality and high-performing CX program will also have well-trained agents and up-to-date artificial intelligence (AI) and interactive voice response (IVR) technology, so you don’t have to make those investments in-house.
Working with a solid partner can be key to making it through this time of economic uncertainty. If you’d like to learn more about outsourcing CX or other aspects of your business, we’d love to talk. Find out how we help retail, or contact us for more information.
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