special issue

Changing
Landscape:
The Retail sector in
the next five years

2 Introduction
4 Lessons from the battlefield – the retail
war
6 The Australian retail fight back
8 Cracking the geolocation code
10 Emerging from the shadows of giants
12 Subscription comes full circle
13 Understanding consumer behaviour

In partnership with
 2

Introduction
The cyclical and structural shifts in consumer activity is putting enormous pressure on traditional bricks and mortar retailers.

There is no question that the model of the last 80 years is now being challenged and adaptation to new systems and
processes is the key to a viable future.

Consumers are changing how, when and where they shop. New brands can be launched and scaled in a fraction of the time
that old brands were established, and consumer loyalty can be created or lost in a matter of clicks.

How are retailers coping with the change and what lessons can we learn from their activities?

Will retail be as we know it in the next five years?

Read on to find out.

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Building a smarter planet:

Smarter customers demand smarter commerce.

We’re making progress in how we buy and sell. The opportunity is enormous. According to a recent IBM®
Institute for Business Value survey, more than US$15 trillion in
Yet most sales, marketing, customer service, product inefficiencies comes from waste throughout the global commerce
development, services delivery and inventory systems are as system, such as inventory backlogs and failed product launches.
disconnected as supply chains were a quarter century ago.
Retail doesn’t have a real‑time view into inventory. Product The good news is that a large hardware cooperative is using
development isn’t led by customer sentiment. smarter commerce for its entire supplier network – contributing
to a 57% reduction in lead time and an 85% reduction in back
Today, it’s customers who are deciding when and where the orders. An international cosmetics company is relying on deep
buying process begins, when it ends, who will be part of that analytics to deliver personalised offers of its beauty products
process, what order it will follow, and how all elements in the – revenue per email increased 2,500%. A specialty retailer is
chain – market, buy, sell and service – will be linked. using multichannel selling that has increased traffic to their
site by 40% and growth of their business overall by 20%.
Smarter commerce optimises supply with demand, driven
by insights that are continuously replenished by the flow of Given the rise of new generations of empowered and digitally
information on an instrumented and interconnected planet. literate customers, it’s clear that the world’s commercial
Each individual’s data is the key to connecting the value systems have to become as smart as the individuals who are
chain to the customer – helping businesses understand now driving them. Fortunately, they can – and in the process,
and predict customer needs and to orchestrate partners will redefine how we buy, market and sell on a smarter planet.
and suppliers in greater responsiveness to changes in Let’s build a smarter planet. Join us and see what others are
buying behaviour. doing at ibm.com/smarterplanet/au

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© Copyright IBM Australia Limited 2012 ABN 79 000 024 733 © Copyright IBM Corporation 2012 All Rights Reserved. These customer stories are based on information provided by the
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 4

Lessons from the battlefield – the retail war

Will e-tail take over?

As Australia’s great duopolies Woolworths/Coles and Myer/

David Jones engage in a fascinating set-piece battle for
control of our wallets, another engrossing engagement is
taking place behind the scenes.

Technology is the weapon of choice.

Our lives have changed thanks to advancements ranging

from the barcode (first patented in 1952), which enables
product-stream-management, through to QR codes (those
eye-turning geometric designs which are read by mobile
phones), which facilitate customer orders. Instantaneous
mobile phone payment systems, such as PayWare or Near
Field Communication (NFC), are now dramatically changing
the purchasing process. and collecting music in our cloud libraries, it is all too easy
to forget that there is still a special place in our lives for
The retail world is now being revolutionised by home or office the retail store. Stores are where we learn what’s new, find
based shopping. According to recent research by PwC and inspiration and see other purchase choices we may not have
Frost & Sullivan, 9.6 million Australians aged over 15 years found online.”
will make online shopping purchases in 2012.
The battle between ‘bricks and clicks’ is widely debated,
Over the next 12 months it’s expected that 88 per cent of with traditional high street players such as Gerry Harvey,
online shoppers in Australia will maintain or increase their the driver behind Harvey Norman, unconvinced of the
online expenditure, indicating a solid momentum in the ‘e-hysteria’, saying it is all about categories.
uptake of online shopping. Such rapid growth both here in
Australia and overseas is driving structural changes in the “If you want to go into furniture, [in] which we’re very big,
traditional retail model. we’re the biggest in Australia. If you want to go into bedding,
we’re the biggest in Australia,” he says. “The sales on the
South Australian based economist and strategist, Theo internet are zilch, or so close to it, it doesn’t matter. There is
Marinis has said; “Money is like water, it always seeks the no internet business in furniture or bedding. Zero - practically
lowest point - so of course online sales of cheap overseas in the world.”
goods will continue to boom. As goods under $1,000 are
effectively GST free, they are even more attractive than their Certainly, overseas retail giants Amazon, Apple, Wal-Mart
local competitors, let alone the massively cheaper costs of and Dell, who are among the top five online sales brands, are
manufacture. all in very different categories to furniture and whitegoods.

“As sure as day follows night, e-tail will take over from retail In a potentially business re-defining move, Australia Post
as we know it; but to borrow from Mark Twain’s quip, reports has innovatively leapt at the opportunity of e-tailing. It
of retail’s death are premature. E-tailing will never obliterate announced in March 2012 the rollout of 30 new superstores
retail … when contemplating the future five years out, we and a new digital mailbox system, which would allow for
economists look at more than just the economic rational. the safe collection of online purchases. The iconic postal
service recognised that 70 per cent of its parcel business
“In the case of retailing there is also an enormous, was generated online, and that with changing household
unstoppable, emotional driver behind purchasing which is demographics, securely receiving these purchases was an
human engagement. This is why, in my view, retailers will issue.
still need a high-street presence. Never forget humans are
humans. We like to gather together for an experience, to Pioneering e-tailer Amazon is also trialling this approach by
try on the latest jeans, to explore and taste the latest food using a mixed distribution strategy. It has placed lockers
sensation or discover a previously unknown brand - and in secure premises of other operations such as groceries,
these days we then ‘guiltily’ sneak away to our homes to buy pharmacies and 7-Eleven outlets.
the same or similar thing cheaper online.”
Australian freighting business Toll Holdings has also adapted
Similarly, in the ‘technology is not everything e-tail camp’, itself to the prevailing e-distribution environment by creating
global chief executive of Interbrand, Jez Frampton, believes, Toll Online as a B2B (business to business) service to
“Humans are social creatures hungry for experience. As facilitate internet transactions. Based on a mix of its existing
much as we love researching products via QR codes, infrastructure and software which it claims will interface with
engaging with friends and retailers via our Facebook pages just about any client system, Toll has placed itself firmly in

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 5

the middle of the e-tail (r)evolution. Its ‘proof-of-delivery’

approach is designed to alleviate customer fears by ensuring
that its clients’ instructions are carried out – protecting both
parties from fraud and theft.

E-tailing is clearly here for good but as part of a multi-

platform, innovatively distributed and continually evolving
offering. The retail sector is the battlefront which is shaping
how the remainder of the economy best interfaces with
consumers.

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 6

The Australian retail fight back

Australian retailers are responding to the Global Financial
Crisis with innovative and creative digital solutions to
successfully grow their empires through these difficult times.

Woolworths (Australia) has trialled virtual supermarkets at

Melbourne’s Flinders Street Station and Sydney’s Town Hall
station through the use of QR (Quick Response) codes. With
a minimum spend of $30, customers are able to scan and
order groceries via their smartphones and can then choose
between in-store collection and home delivery.

This inspiration has clearly been drawn from global best-

practice. Tesco UK, widely recognised as the industry’s
innovator in the supermarket sector, claims considerable
initial success pioneering its virtual shopping approach
in Korea. It recently co-located a virtual supermarket in
Gatwick’s international air terminals, where consumers
can re-stock their fridges by pre-ordering groceries to be Not listening to the consumer on social media can seriously
delivered on their return. backfire, however it seems regardless of their experience
at the medium, negative opinions from consumers are
Locally, David Jones will launch its new eCommerce site later increasingly being flung at businesses and drawing viral
this year, and is improving its online consumer engagement. responses and observers.
Its Facebook page (with more than 168,000 likes) is already
leading the domestic market by offering beauty tips, A JWT Intelligence study of UK shoppers found that more
forecasting trends and highlighting competitions and events. than 40 per cent of men and over a third of women are more
This follows the path pioneered by US giant Macy’s, who last likely to buy something if a friend has recommended it on a
year reported a boost in online sales up 40 per cent to an social network.
incredible $US 2 billion.
The future of retailing will increasingly rely on “Omnichannel
Leading Swinburne University advertising and media Organization”. It’s a term coined by UK marketing expert
academic, Dr Scott De Francesco, believes the real frontier is Daniel Rigby to explain how retailers need to develop
social media. Little understood by the greying baby boomers, strategies to meet the consumer’s desire to browse and
the outlet provides retail marketers with both the greatest discover, browse and buy or just buy. A sale is not a ‘one-
opportunity and threat. off’, but a series of interactions that result in a purchase.
Thus, online browsing enables a consumer to access
“Consumers are looking for a two-way conversation. It is up information, trends and price points and decide to either
to marketers to listen, read and respond to that conversation act immediately or seek the social experience of personal
if they want to succeed”, said Scott. shopping.

“It is clearly marketing’s biggest challenge to successfully Sites such as Yelp and Trip Adviser are enhancing the
use digital technology to work in this continually fragmenting shopping experience; ‘deal’ sites like Groupon, LivingSocial
market. and Scoutmob deliver the “new” and create a sense of online
community.
“And this is a national economy issue. We need faster
broadband and better generations of smartphones to enable Importantly, though popular Australian brands may be
consumers and marketers to meet,” he said. drawing tens of thousands of people to their Facebook page,

Smarter retail for a smarter planet.

The retail landscape is changing. Customers are better informed and more
demanding. Let’s build intelligent systems that better service the customer.
Let’s build a smarter planet. Join us and see what others are doing at
ibm.com/smarterplanet/au

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 7

consumer ‘likes’ or ‘retweets’ do not necessarily mean they

are parting with their money.

Part of the problem may indeed be the retailer itself, their

online presence and/or their ability to fulfil the demands of
tech savvy consumers.

A May 2012 Sensis report of 803 Australian customers

and 1,944 Australian businesses found that 62 per cent of
online Australians are avid social media users, but only 14
per cent of small businesses, 25 per cent of medium-sized
businesses and 50 per cent of large businesses have a social
media presence.

The consumer survey claims 62 per cent of internet users are

also social networkers on sites such as Facebook, Twitter or
LinkedIn. Not surprisingly, social media mainstay Facebook
attracted 97 per cent of users.

Twelve per cent of social media users who responded to

the Sensis survey said they research products using social
networks, but just 36 per cent said that research attracted
them to buy the item. 70 per cent of online transactions were
for fashion, electrical goods, furniture and music.

One note of caution to ‘born again’ social media converts in

the marketing department – the Sensis survey also revealed
social media users are most interested in what retailers can
give in terms of discounts (57 per cent), giveaways (45 per
cent), event invitations (41 per cent) and product information
(41 per cent).

The omni-channel retail strategy approach adopted by our

retail giants is proof of the creative tussle between them for
the consumers hearts, minds and crucially, their dollars.

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 8

Cracking the geolocation code

Motels built in the 1960s may have been half a century
ahead of their time with their exotic double-door breakfast
cupboards, allowing a host to deliver his or her offerings in
heat-proof containers at their – and your – convenience.

Fast-forward to the second decade of the 21st century and

retailers are trying to reclaim this convenience model on a
mass scale. With a combination of barcoding, QR codes,
third party storage in purpose built lockers and a range of
social media tools including Foursquare and Loopt, retailers
are getting closer to achieving this goal.

Created in 2009 by Dennis Crowley and Naveen

Selvadurai, geolocation tool Foursquare is the current
leader in using digital technology to solve the customer
acquisition challenge. In a deceptively simple message for
a comparatively complex offering, Foursquare describes the competition, are still left with the conundrum of which
itself as allowing users to “keep up with friends, discover technology to back, with experience showing best does not
what’s nearby, save money and unlock rewards”. It is a cell always win out.
phone community application that tracks a subscriber’s
whereabouts via their ‘check-ins’ and matches that ‘Distribution is king’, as IT expert and blogger Brock Reeve
information with the people they have agreed to share with says in his call for more understanding of the entirety of
– and retailers who subscribe. The conversation is two-way, business. “When business people talk about distribution they
in that users can be offered incentives – and they can review are referring to not only how many stores the product is in
the retailers, for better or worse. Loyalty rewards are also but, as in the case of software, how many users are actually
available. using the product. The greater the distribution the more
valuable the business,” he says.
Using big data management, retailers can map consumers’
behaviour and target them directly thanks to Foursquare and With Foursquare reporting in late April 2012 a 100 per cent
similar geolocation technology in a classic ‘push’ approach. increase in users over the past 12 months to 20 million and
A special offer sent to a passing telephone for a 30 per cent with more than two billion check-ins recorded, it clearly has
discount is likely to entice a visit to your store and not a the ascendancy for now.
competitor. Similarly, the opportunity to meet up with a friend
whilst they shop doubles the potential market for the retailer. The more mainstream “pull” approach to being where a
customer wants them to be is being pioneered by major
An important aspect of keeping Foursquare, and many other supermarket chain Woolworths, through the use of QR
social media applications relevant, is the gamification options codes. Coles will no doubt be watching the take up closely,
which stimulate and amuse the ‘pixel’ generation, thereby and given the lack of barriers to entry, is likely to act quickly
engaging them more. They also sync with Facebook and should the concept succeed.
Twitter.
According to Nick Lane, chief strategy analyst at
However, in a classic rerun of the VHS/Beta video format MobileSQUARED, in his 2012 white paper, geolocation
war, geolocation tool early competitor GoWalla has been sold technology offers retailers “a compelling platform for brands
to Facebook and was closed, while Blippy has also ended, of all sizes to communicate with consumers.”
taking millions of dollars of venture capital with it.
“The proliferation of smartphone devices has led to the
Early movers in the retail sector, who want to be ahead of evolution and development of mobile coupons as a way

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Smarter computing needs smarter clouds.

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managed in the cloud.
Cloud computing offers more benefits than simply consolidation, data centre efficiency and lower costs. Leading companies
are already unlocking the deeper potential of cloud as a new way to manage not just their IT but also their businesses. They’re
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security and how they unleash innovation – while changing the way our world actually works.
Let’s build a smarter planet. Join us and see what others are doing at ibm.com/smarterplanet/au

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services marks of others. A current list of IBM trademarks is available on the Web at “Copyright and trademark information” at www.ibm.com/legal/copytrade.shtml. © Copyright IBM Australia Limited 2012 ABN 79 000 024 733
© Copyright IBM Corporation 2012 All Rights Reserved. IBMCCA1418_SCCLOUD_BUSSPEC
 9

to drive footfall into retail outlets and food places. Using

smartphones, consumers can receive mobile coupons via
MMS (Multi-Media Messaging Service) or in-application to
redeem in stores. The couponing boom has been further
supported by companies like Groupon, LivingSocial and
Foursquare who are investing heavily into building loyal
customer bases on mobile,” he says.

The geolocation code is gradually being cracked however,

with challenges to privacy remaining unresolved. A
NielsenWire report last year discovered 59 per cent of
women and 52 per cent of men who had downloaded an app
in the past 30 days, expressed concern for the sanctity of
their information. Consumers are also becoming concerned
about how they are leaving behind their digital DNA,
recording their every location, every purchase and every
social interaction.

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 10

Emerging from the shadows of giants

Fear of Australia’s supermarket duopoly, Coles and
Woolworths, has driven the peak industry body that
represents the smaller players, to call on the Australian
Competition and Consumer Commission (ACCC) for action in
its August 2012 report ‘Let’s have Fair Competition’.

The Master Grocers of Australia/Liquor Retailers Association

said in its report Australians will suffer dire consequences if
the regulatory authorities, the Federal Government and the
ACCC, choose not to act now. There will be no competition,
prices will escalate and freedom of choice will be a thing of
the past.

Meanwhile, the Australian Bureau of Statistics (ABS) has

reported retail sales figures that indicate there is life in the
sector, despite the negative headlines. According to the
ABS, the trend estimate rose 0.5 per cent in June 2012. This to grow and now includes more than 170 different products;
follows a rise of 0.5 per cent in May 2012 and a rise of 0.5 from fruit and vegetables, to a range of dairy, bakery, deli,
per cent in April 2012. The seasonally adjusted estimate rose meat, chicken, seafood, pasta and fresh gourmet meals.”
1.0 per cent in June 2012. This follows a rise of 0.8 per cent Similarly, farmhousedirect.com.au offers a range of cottage
May 2012 and a fall of 0.2 per cent in April 2012. In trend producers access to a far broader community of buyers.
terms, Australian turnover rose 4.1 per cent in June 2012
compared with June 2011. Several primary producers have also joined the fight against
margin squeezes caused by major retail chains. Linga Longa
So where is this growth in retail coming from? Farm at Wingham, four hours north of Sydney, has pioneered
its meatdirect.com.au website. Similarly online butcher
Director of merchant services at PayPal Australia, Elena meatinabox.com.au offers a range of value-ads beyond
Wise, said in the March 2012 paper ‘The Future of Shopping’, traditional meat products, including spit-hire and even
“[the] Australian online commerce market is still experiencing packaging the meat components of the CSIRO diet.
rapid growth as consumer aptitude for shopping online
continues to grow. The sector is forecast to hit $34.8 billion Meanwhile, the upmarket gourmet-deli concept has been
by 2013, up from $29.7 billion for 2011.” evolved thanks to businesses such as Leo’s Fine Food
& Wine Supermarkets. The niche player in Melbourne’s
One of the strengthening concepts of online commerce is affluent suburbs offers a gourmet range of foods, charged
led by web-based Aussie Farmers Direct who has declared accordingly, alongside traditional supermarket staples at
a stop to the days of bustling supermarkets and wondering similar prices to the majors in an ultra-clean and friendly
where your food comes from. Aussie Farmers Direct has environment.
reinvented the ‘milkman’, delivering fresh and 100 per cent
Australian produce direct to the doors of more than 130,000 Other ‘second tier’ independent supermarkets have decided
homes across six states. The business has branded itself to band together into the IGA (Independent Grocers
with the tagline, “bringing you the freshest milk, tastiest fruit Association) network. They enjoy the benefit of group buying
and vegetables and juiciest cuts of meat – in a flexible and power through the affiliation of offers and differentiating
convenient way to suit your busy lifestyle.” themselves through creative use of corporate sponsorship.
The ‘IGA Community Chest’ sponsorships, worth
This privately owned franchised business model seeks to cut $60,000,000, have contributed to Little Athletics and Special
out retailers and has grown its offering dramatically since its Olympics as well as a range of local store directed initiatives.
2005 launch. It claims: “Our range of fresh goods continues

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Let’s build a smarter planet. Join us and see what others are doing at ibm.com/smarterplanet/au

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marks of IBM or others. A current list of IBM trademarks is available on the Web at “Copyright and trademark information” at www.ibm.com/legal/copytrade.shtml. © Copyright IBM Australia Limited 2012 ABN 79 000 024 733
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 11

IGA has also retained some of the traditional grocery lines

cannibalised by generic products at the duopoly retailers.
In an attempt to separate its market position away from the
national chains, its marketing approach drives home the
slogan “How the locals like it” at every opportunity.

IGA is not ignoring the digital revolution, having developed

its own smartphone app, offering a shopping list, a store
locator and recipe ideas. However, the independent nature of
its ownership appears to prevent it from heading into online
shopping and home delivery for now.

But the retail giants of Coles and Woolworths are not

taking these threats lightly. According to consumer
watchdog CHOICE, “Coles and Woolworths are enormous
corporations, and they’re growing bigger, stronger, and more
profitable. It’s no surprise given Australians spend about
$1.04 billion each week in the big two’s supermarkets, who
combined have a huge 71 per cent combined share of the
grocery market.”

It is evident Coles and Woolworths are prepared to protect

their market, with both retail giants moving to lock in loyalty
through their respective launch and relaunch of their Fly
Buys and Everyday Rewards programs. Concurrently they
are continuing to aggressively discount petrol through their
co-branded outlets, saving consumers a few dollars in
exchange for their near exclusive business. Keen observers
will be looking to see how the ACCC plays this – if it decides
to move on these retail powerhouses or if it is happy to allow
the duopoly to continue at the expense of the competition.

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 12

Subscription comes full circle

From home delivered diet-food to razor blades, underwear
and condoms, subscription purchasing is filling a void for
cash rich, time poor consumers – and helping the retail
sector regain some of its equilibrium.

The internet is the modern incarnation of the catalogue

or mail order shopping. The latter was first pioneered in
Chicago by Aaron Montgomery Ward in 1872 and refined by
Sears prior to their opening standing retail outlets.

Clearly, subscriptions have come full circle.

Similar to how the catalogue entertained in the pre-wireless

times 150 years ago, the internet allows enormous creativity
to drive awareness and sales. Creative online advertising,
such as the viral Dollar Shave ad, have amused and created
awareness – and easy fulfilment. a certain extent, take away the hassle of making a decision
from the consumer.
For just $US3 per month the company keeps subscribers
stocked with razors – a commodity that can be tricky to find Birchbox describes its service as the best way to discover
and has comparatively low levels of engagement for the new grooming, beauty and lifestyle products.
consumer.
“Every month, you’ll receive a box filled with beauty,
Similarly, Manpacks appeals to the stereotypical male grooming, and lifestyle samples from both up-and-coming
aversion to shopping by providing replacement underwear and well-known brands. Each delivery will include a mix of
on a quarterly basis and a range of other opt-in products, categories, as well as lifestyle items. Samples are generously
ranging from shirts, socks, grooming, condoms, underwear sized, with enough products to allow you to figure out if
and even vitamins. they’re right for you. You’ll also want to take advantage of
birchbox.com, which is packed with product information
The Manpacks website tells consumers they need a and tips, including expert interviews, helpful tutorials, and
subscription because it’s easier than spending time ignoring engaging videos”.
the need to resupply their essentials. “Look, you’ve probably
been burned by a subscription before, and had something So what’s in it for businesses? Retailers benefit because
non-refundable auto-renew. It sucks, and that’s not how we they get a predictable and constant revenue stream from
do things. Like a subscription, our shipments are opt-out, subscribers for the duration of the agreement. This reduces
but we always remind you before a shipment and you remain uncertainty and removes risk, often resulting in payment in
in full control, with no obligation to buy anything ever. Some advance. Further, customers tend to become attached to
months you’ll restock a few things, and other times you’ll be the service and are subsequently more likely to extend the
all set. And yes, our return policy is pretty effing good.” relationship as well as becoming a word-of-mouth sales
force.
American retail commentator Jim Cramer believes the
success of direct selling is that you are in fact “sharing, not According to Melbourne based retail expert Neil Merola,
selling, with consumers”. “There is a growing place in the market for subscription
retailers, but it is only one of the eCommerce strategies
Founder of Australia’s giant success story in subscription which will be successful. The future of retailing is in being all
retail, Lite ‘n Easy’s Graham Mitchell, says, “We’re still things to all people, providing a bricks and mortar presence
Australian owned and operated. We’re still passionate about which is just as impressive as the online presence.
making it easy to eat well … whilst countless diets and fads
have come and gone, Lite n’ Easy has gone from strength to “The advantage of subscription purchasing is that consumers
strength by making it as simple as possible for Australians build loyalty with the provider and receive in exchange a
to eat well and lose weight … over the past 25 years, known quality and expected quantity - and are occasionally
nutritionally speaking, we at Lite n’ Easy have stuck to the delighted by surprise. The relationship sours when return
middle ground of good old fashioned common sense.” policies are weak and if the consumer feels trapped.
However, should a retailer get their subscription offering
The company’s marketing effort relies heavily on celebrities, right, they have a known income going forward and a warm
and satisfied consumers, sharing success stories. customer base to up-sell other products.”

Services like Lite ‘n Easy, Manpacks and beauty product

retailers Birchbox make a virtue of the fact that they will, to

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 13

Understanding consumer behaviour

Although big data management is widely recognised as the
game changer to the future success and growth of retail, it is
not the only strategy for success.

The question for retailers is: are you willing to take advantage
of the marketing intelligence social media and advanced
analytics offer?

Currently, data is readily available for those with the tools

to track their consumers. A recent survey of today’s
connected consumers, reported in the Huffington Post,
found that 82 per cent of surveyed global consumers aged
18 to 64 embraced connected digital devices, 65 per cent
of respondents aged 55 to 64 watched TV while they surf
the web and texted with friends, while even 49 per cent of
consumers aged over 65 report that they surfed the web and
30 per cent of them texted. For retailers the exciting aspect But how do we know what will work? What is merely a hunch
of this is that digital DNA is being deposited at every click. and what is enlightened forecasting of consumer behaviour?

According to Publicis Worldwide global planning director When it comes to understanding offline, real world behaviour,
John Woodward, retailers will have to become ‘perpetual researchers usually use contextual methods such as
marketers’. “They must learn to be channel and data ethnographic studies and user interviews. These methods
planners without losing human insight or creativity; to vastly are effective but time-consuming. Various factors – be they
increase the level of accountability and provide more relevant cultural, social, personal or psychological – influence the
experiences for customers,” he says. buying decisions of individuals.

So what is this consumer psychology that is driving customer A wealth of tools for understanding consumer behaviour are
behaviour? available, including software, demographic studies, surveys,
interviews, observations and focus groups.
According to Belch & Belch academics, it is defined as the
process and activities people engage in when searching for, Melbourne based business author Mark Laing says the key
selecting, purchasing, using, evaluating, and disposing of to understanding consumer behaviour lies in understanding
products and services so as to satisfy their needs and desire. what information a retailer already has and quickly filling any
gaps.
The challenge for retailers is to predict what consumers
will want in the future and to have the products in store (or “The basic rule of retailing is ‘knowing your customer’ –
online) when the consumer recognises the need. and it is amazing just how much about themselves they
are prepared to tell you if you actually ask them via social
Retailers can understand customer preferences and buying media and in signing up for loyalty or other ‘special’ offers
behaviour not only by tracking and analysing products and competitions. It is then a matter of intelligently sifting
purchased - including frequency and value - but also this data and using it to form a marketing approach for each
through a customer’s propensity to purchase based on web segment of your client base,” he says.
clickstream analysis. How segments react to promotional
offers or competitions also provides valuable information to “But retailers need to delve beyond the numbers and to
marketing teams. Crucially, they must adjust the offer quickly relate at a personal level to their consumers. People demand
in order to capitalise on new sales opportunities based on a more engaged relationship with a retailer in exchange for
this intelligence. repeat business these days, and that’s where a thought
out and dynamic social media strategy really changes the
California Institute of Technology neuroscientist Steven dynamic.
Quartz has said while consumers may try to hide their lust
for goods, their brains can’t. Quartz is an expert in the new “Understanding consumer behaviour should be the easiest
science of neuromarketing, a study which aims to measure thing in the world … we need a suite of modern, fast moving
subconscious reaction to stimulus. and deep ranging tools to get it right and truly engage with
consumers.
A whole industry, centred on identifying trends or ‘cool’,
has sprouted. This focus ranges from forecasting the future “If you are a retailer without a big data management strategy,
success of rolled up Mexican food (the ‘Tacone’ - a cone get one quickly, otherwise you will certainly be left behind.”
shaped, mess free, portable Taco) through to the rise of
‘manscaping’ stencils. In 2010, the world’s biggest book e-tailer, Amazon, saw a

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year-on-year referral traffic increase of 328 per cent, and

an overall 7.7 per cent overall increase originating from
dominant social media player platform Facebook. The top
200 internet retailers also saw a 203 per cent increase in
traffic from Facebook during 2011. Should Facebook resolve
its monetising challenges, it will revolutionise retail simply on
its referral power.

Those businesses which will thrive are those which truly

understand their customers’ behaviour.

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