Retail stores risk losing consumers to digitally prepared competition

18 January 2017

Meeting retail consumer expectations in the digital age is becoming increasingly difficult for executives to discern, a new Capgemini study finds. Failing to meet expectations, from improved in-store digital to tailored in-store experiences, means that retailers may lose out to manufacturers and pure-play giants.

The proliferation of digital channels, whereby consumers are increasingly offered new ways to access product information and make purchases, creates considerable consecration for physical businesses. In a new report from Capgemini, titled 'Making the Digital Connection: Why Physical Retail Stores Need a Reboot' and involving 6,000 consumers and 500 retail executives from nine countries (US, China, Germany, France, UK, Italy, Spain, the Netherlands and Sweden), the consultancy explores current trends faced by tradition retail players from sometimes rapidly changing consumer sentiment.

Percentage of Consumers Who See Shopping in Stores as a Chore

According to the study results, consumers’ behaviour around in-store shopping is being transformed by the possibilities opened up to them by digital technologies. Many of the technologies allow consumers to quickly check information, from product reviews to availability, while providing a convenient purchase process – as such, the firm’s analysis highlights, the traditional shopping experience appears more and more as a chore.

The surveyed asked consumers, in a range of countries, to evaluate their in-store shopping experience, in terms of whether they view the activity as a chore and whether they would rather wash dishes or clothes than go shopping. The results show that, particularly Swedish, French, Spanish and Italian shoppers view in store shopping as a chore, while around 40% of these respondents would rather wash dishes than go to the store. In the UK around 22% say that they would rather wash dishes.

Net Promoter Scores

While consumer Net Promoter Scores for retail shopping, across all survey respondents, was found to be very low, at 14 for grocery stores, 5 for fashion store, 6 for electronics and 11 for home improvement, executives of the stores themselves were found to be ‘out for lunch’ – scoring 32 for grocery, 40 for fashion 16 for electronics and 37 for home improvement.

The considerable disparity between what executives see, and what consumers actually think, reflects that consumers are not satisfied with their store experience and that retail executives are out of touch with the key concerns of one of their most valuable stakeholders.

What do Consumers Want from a Store?

The study sought to discern what consumers are looking for when they do venture out to stores. Top of the list is an ability to check product availability before visiting a store, cited by 75% of respondents, while 73% of respondents say that they expect same-day delivery of products purchased in-store. 70% of respondents cite a need to ‘touch and feel products’, while 62% cite an expectation to make prior appointments with store experts to fulfil their needs. Respondents were also looking for additional activities in-store, cited by 57%, and a social experience with friends/family, cited by 60%.

Top Frustrations Consumers face in Retail Stores

In terms of key frustrations consumers face in their retail store experience, a difficulty to compare products comes in first place, at 71%, followed by long queues at checkout, cited by 66% of respondents. Not being able to locate products came in their equal place with a lack of non-personalised promotions/discounts, at 65% respectively. A lack of in-store associated guidance/demos was cited by 64% of consumers as a faced frustration.

Consumers who will bypass traditional retailers

Dissatisfaction with current in-store arrangements may come at considerable costs to physical retailers, with large numbers of consumers (71% on average across countries surveyed) willing to bypass traditional retailers to buy directly from manufacturers or from online tech retail giants, such as Amazon and Google. Considerable variation between region exists however, in China 87% of those surveyed said they would consider bypassing traditional retailers, while in the UK and the US the results stood at 57% and 64% respectively. According to the report authors however, the “trend would essentially disseminate the traditional large-format retail store.”

Kees Jacobs, and advisor in Capgemini's Consumer Goods & Retail arm, says, “Brick and mortar stores of the future will need to be very different if they are to give consumers a reason to leave their computer, abandon their dishes and visit. What is clear from this report though is that they still have a big role to play, The industry is going to see a fascinating struggle take place in the next few years to decide what exactly the new breed of retail store looks like. The battle to create the modern retail experience, between traditional retailers with a long, successful history of high street store building and new digital entrants built around the internet and mobile technology, is finely poised.”


Four ways digitalisation is transforming car brands and dealers

16 April 2019

From changing expectations from the customer to new stakeholders entering the industry, the digital transformation of global automotive industry means it is facing the wholesale transformation of its business model. In a new white paper, global consulting partnership Cordence Worldwide has highlighted four major digital trends that are transforming the relationships between car brands and dealers with consumers.

With digital transformation drives booming across the industrial spectrum, automotive groups are no different in having commenced large digital transformation programmes to improve productivity, efficiency, and ultimately profitability. Falling sales figures mean the automotive sector is facing an increasingly difficult road ahead, something which means companies in the market are even more hard pressed to find new ways to improve their bottom lines.

While it offers major opportunities, the industry’s move to digitalise is not without complications. It has triggered a series of major internal changes, which have presented automotive entities with the challenge of becoming a “customer-oriented” industry. A new report from Cordence Worldwide – a global management consulting partnership present in more than 20 countries – has explored how automotive companies are navigating the rapidly changing nature of digital business.

New business models

The level of change likely to be wrought on the automotive industry by digitalisation is hard to overstate. Automation could well lead to significant reductions in the number of accidents, higher vehicle utilisation and lower pollution levels, while leading to a $2.1 trillion change in traditional revenues, with up to $4.3 trillion in new revenue openings arising by 2030.

As a result of this colossal opportunity, it is easy to see why almost all automotive groups now have digital departments, with generally strong communication within the digital transformation and the customer approach. The changes to society which this may have are potentially distracting automotive firms from the change it is leading to in its own companies though, according to Cordence’s paper.

The automotive market is dead, long live the mobility market

Because of this, the sector’s business model is set to transform over the coming decades. With digitalisation speeding up the appearance of concepts such as car-sharing, a subscription package model will likely become more palatable. At the same time, car and ride-sharing models will cater to the sustainability criteria of millennials, who will rapidly become one of the automotive market’s leading consumer demographics in the coming years.

Antoine Glutron – a Managing Consultant with Cordence member Oresys, and the report’s author – said of the situation, “These ‘old school industries’ are now working on creating new opportunities, but in so-doing are facing challenges and threats: new jobs, new technologies, new ecosystem of partners, necessary reorganisation, different relationship with customers, and even new businesses. The customer approach topic is in fact a real challenge for car companies as it implies changing their business model and adjusting their mind-set to address the customer 4.0: from product-centric to customer-centric, from car manufacturer to service provider.”

Digital customer experience

In the hyper-competitive age of the internet, even top companies face an uphill challenge when it comes to holding onto customers through brand loyalty. Digital disruption has resulted in changes to consumer behaviour, which is forcing a range of marketing strategists to reconsider their old, possibly out-dated strategies. As modern customers wield an increasingly impressive array of digital tools and online databases, they and are now able to quickly and conveniently compare prices, check availability and read product reviews.

The automotive sector is no exception to this trend, according to the study. In order to adapt to the needs of the so-called ‘customer 4.0’, car companies will increasingly need to change their business model and move away from product-centric companies to customer-centric ones, from car manufacturers to service providers.

Glutron explained, “As an automotive company, you can no longer expect customer loyalty simply with good products; you must conquer and re-conquer a customer that “consumes” your service. The offer now has to be global, digital and personalised. Your offer has to be adapted to this customer’s needs at any given moment. A key issue related to data control is to build customer loyalty by creating a customer experience 'tailored' throughout the cycle of use of the 'car product': purchase, driving, maintenance and trade-in of the vehicle.”

One way in which the sector may be able to benefit from this desire for a tailored experience is via connectivity. Consumers are generally positive about new connective features for automobiles, and many are even willing to pay upfront for infotainment, emergency and maintenance services. Chinese consumers, where the connected car market is set to hit $216 billion, are already particularly interested in paying a little more for navigation and diagnostic features in their future new car. This can also enable automotive companies to exploit a rich vein of customer data, enabling them to rapidly tailor their offerings to consumer behaviour.

New automotive segments

Digital transformation has also brought with it the rise of completely new application areas. As mentioned earlier, the most well-known example is the autonomous or self-driving car, where the last steps forward were not taken by major automotive groups but by technology companies such as Tesla. While this may have given such firms the edge in the market briefly, a number of keystone automotive names will soon be set to take the plunge into the market themselves, leveraging their car manufacturing prowess and huge production capacities to their advantage.

Before companies rush to invest in this market, however, it is worth their while to remember that the readiness and uptake for such vehicles differs greatly geographically. For example, following a study published in 2018, 92% of Chinese would be ready to buy an autonomous car, compared with only around 35% of drivers in France, Germany and US. Meanwhile, the infrastructure of different nations will also be significantly less accommodating of the new technology.

Use digital for steering thr activity

Elsewhere, Cordence’s analysis has suggested that hooking the cars of tomorrow into the Internet of Things is also likely to see a rapid change in the business model for car maintenance, providing real-time diagnostics for problems. This presents chances for partnerships to improve the connectivity of cars, especially with tech companies; for example, PSA partnered with IBM for a global agreement on services in their vehicle. Meanwhile, data could also be sold to other parties with an interest in this data, such as the government, which could use it to manage traffic levels, or ensure that only adequately maintained vehicles take to the road.

Glutron added, “With the increase in the amount of client data and connected opportunities, the recommendation is to set up data-centric approaches. The value is now in the customer data. The general prerequisites are to rework the data model and the Enterprise Architecture and generally build up a data lake including data from all sources (internal and external, structured and unstructured).”

From automotive to mobility

Relating further to the idea of connectivity, the report claimed that automotive firms must now adjust their models in line with the provision of end-to-end mobility, rather than treating the sale of a car as an end point in their relationship with the customer. In order to realise this transformation, transformations are likely to become more and more important.

A network of partner companies means automotive firms can provide a global mobility experience. As the vehicle is increasingly connected to its environment, new partners can also be cities, governments, and other service providers within the global mobility services industry in which the car brands want to take part.

According to the study, the target is clear. Companies must look to a holistic transport service, offering to move customers from A to B in a unique and pleasant way – otherwise they might as well take public transport. At the same time, they should extend the services reachable “on-board” (especially the enhancement of the connectivity between the car and smartphones or other connected devices), and reach high standards in terms of user experience (online sales, online payment, customised experience during and after the use of the car).

Concluding the report, Glutron stated, “These mobility market transformations could be considered a threat for the car manufacturers. Quite the opposite: if they take up the challenge and review their business model so that they become the service provider – communicating no longer to a driver but to a ‘mobility customer’ – they can then take advantage of their expertise and their position as a historical player. The most convenient means of transport are cars, and building a car is highly-skilled work.”