Tech-Driven Consumer Appetite for Digital is Reshaping Retail’s Next Normal

Tech-Driven Consumer Appetite for Digital is Reshaping Retail’s Next Normal

Significant gap opens between shoppers’ desired experience and what retailers actually provide

A new report commissioned by Periscope® by McKinsey reveals how tech-driven consumers are reshaping retail’s next normal, with coronavirus concerns helping to accelerate consumers’ demand for digital. 

Periscope by McKinsey is a suite of marketing and sales analytics solutions that help companies achieve sustainable revenue growth.

Retail reimagined: The new era for customer experience surveyed more than 2,500 consumers in France, Germany, the UK, and the US, to closely examine where the biggest changes in consumer behaviour are happening. 

Conducted before and during the pandemic shutdowns, the report reveals three consumer trends: the appetite for digital is surging with no signs of slowing down, brand loyalty remains vulnerable, and a new premium on safety and convenience. 

In addition, the report shows a significant gap between what consumers want in a shopping experience and what retailers are actually providing.

Consumers Want Tech-Forward Shopping Experiences

Whether it’s digital tools such as screen browsing, easy mobile payments, or ordering online with seamless curbside or in-store pickup, shoppers clearly want technology to elevate their in-store experience. 

The flight to digital and increased customer expectations have created new challenges for how retailers serve their customers.

Yet, in the first run of our survey, more than 35 per cent of shoppers reported zero exposure to even the most talked-about or basic in-store technologies such as digital screen browsing and mobile or contactless payments. 

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In the second run of the research in June, consumers were then asked which forms of communication/experience they would like to see offered by retailers in the near future. 

The top three findings in each market revealed a clear difference in cultural preferences:

  • US: mobile payments—30 per cent; mobile app orders—28 per cent; apps to scan barcodes—25 per cent
  • UK: mobile app orders—34 per cent; mobile payments—28 per cent; self-identification at terminal—24 per cent
  • Germany: mobile payments—29 per cent; self-identification at terminal—21 per cent; apps to scan barcodes—20 per cent
  • France: mobile payments—22 per cent; mobile app orders—21 per cent; digital shelf labels for info—21 per cent

An End to ‘Normal’ Shopping Decisions

Rather than sticking to familiar patterns and brands, consumers have embraced change amid great uncertainty. In the four countries surveyed, 40 per cent of consumers said they tried new brands or made purchases with a new retailer between March and June 2020. 

Loyalty was particularly vulnerable in the US, where 46 per cent of consumers made the switch, followed by 44 per cent of their UK counterparts.

Consumers’ top reasons for making the switch across all four markets included competitive pricing and empathetic retailers that support their employees during the pandemic with initiatives such as increasing wages, giving extra sick leave, or paying for lost wages.

  • Switched due to competitive pricing: US—51 per cent; UK—48 per cent; Germany—41 per cent; France—36 per cent
  • Switched to a “caring” retailer or brand: In the US and France, almost a third of consumers (27 per cent and 26 per cent) cited this as a reason for switching brands while 19 per cent of UK and 17 per cent of German shoppers considered this important.

Safety and Convenience Become Even More Critical

New concerns such as safety and hygiene are now top of mind. More than 50 per cent of respondents say they want stores to follow guidelines to help keep shoppers and employees safe, such as the installation of plexiglass at the checkout, the use of masks, and availability of hand sanitizers, while 59 per cent say it’s important for stores not to be too crowded.

Also, the frictionless experience is now even more important. Consumers being able to find what they’re looking for quickly and easily has increased in importance in every country (by 14 per cent in the UK, 11 per cent in the US, 10 per cent in Germany, and 7 per cent in France) since March, and was ranked among their top three browsing priorities. 

This ability was especially valued by 65 per cent of US consumers, 59 per cent of UK consumers, 52 per cent of German consumers, and 47 per cent of French consumers. Additionally, 52 per cent of shoppers questioned in early June stated that fast checkout was an important part of a great purchasing experience.

New E-Commerce Expectations

E-commerce spending has surged during the shutdowns, as the appetite for digital and contactless ways of shopping has intensified.

In the US, it was up more than 30 per cent from the beginning of March through mid-April, compared to the same period the previous year.[1] In all four countries surveyed, we observed higher shopping activity in several categories during the shutdowns. 

Categories with the biggest uptick were apparel (in the US and UK), children’s products (US, UK, Germany), beauty (US), and grocery (US).

While free delivery and returns and fast delivery continue to be the important features for consumers when purchasing online, several digital attributes did skyrocket in value during the crisis. 

The importance of informative product descriptions and clear product images at a time when consumers couldn’t see, feel, or test products in a store ranked as one of the top three factors for a great online browsing experience in all the countries surveyed. 

UK consumers led the charge with 70 per cent of post-shutdown respondents ranking this as a key consideration (up 23 per cent from pre-shutdown), followed by 57 per cent in Germany (up 12 per cent), 56 per cent in the US (up 13 per cent), and 51 per cent of French shoppers (up 13 per cent).

“While disruption and fierce competition are certainly nothing new for retailers, the pace and intensity of COVID-19-related change and their effect on consumers is unprecedented,” said Brian Ruwadi, Senior Partner and Global Leader of Periscope by McKinsey. 

“This is a pivotal time where we’re seeing not only changing loyalties and a shifting leaderboard but an opportunity to really connect with consumers in new ways as they reformulate their habits and decision journeys.” 

“As retail leaders plot how they will bounce back, they also need to look beyond the immediate challenges and issues. In parallel to quickly recovering revenue, it is critical to engage in long-term planning and accelerate future growth.”

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read more about the survey’s findings, download the “Retail reimagined: The new era for customer experience,” report at https://mckinsey.com/reinventing-retail

Study Methodology

In early March, Periscope by McKinsey fielded consumer surveys across the US, UK, Germany, and France with more than 2,500 consumers to understand what they value most in digital and in-store experiences, as well as among the retail technologies that tie the two together. 

To see the impact of COVID-19 on consumer preferences and behaviour, the survey was repeated in mid-June. The surveys were conducted online in local languages. 

In each country, results are sampled and weighted for a representative balance of the consuming class, based on variables including age and socioeconomic status.

About Periscope® by McKinsey

Founded in 2007, and now a part of the McKinsey Marketing & Sales Practice, the Periscope® by McKinsey platform combines world-leading intellectual property, prescriptive analytics, and cloud-based tools with expert support and training. It’s a unique combination that drives revenue growth, both now and into the future. The platform offers a suite of Marketing & Sales solutions that accelerate and sustain commercial transformation for businesses. Periscope leverages its world-leading IP (largely from McKinsey but also other partners) and best-in-class technology to enable transparency into big data, create actionable insights and new ways of working that drive lasting performance improvement, and typically sustain a 2–7% increase in return on sales (ROS). With a truly global reach, the portfolio of solutions is comprised of Insight Solutions, Marketing Solutions, Customer Experience Solutions, Category Solutions, Pricing Solutions, Performance Solutions, and Sales Solutions. These are complemented by ongoing client service and custom capability-building programs.

To learn more about how Periscope’s solutions and experts are helping businesses continually drive better performance, visit www.mckinsey.com/periscope.

About Marketing & Sales, McKinsey & Company

The mission of the McKinsey Marketing & Sales Practice is to help leaders of both consumer and business-to-business clients create Growth that Matters through meaningful transformations and marketing-driven profit. The practise helps its clients set their strategic direction, develop their marketing and sales capabilities, and connect their organization to realize the full potential of today’s omnichannel opportunities. Clients benefit from McKinsey’s experience in core areas of marketing such as branding, customer insights, marketing ROI, digital marketing, CLM pricing, and sales and channel management.