How changing customer needs will define retail this Christmas
Brendan Straw - Chief Sales Officer, Ovato
COVID-19 has accelerated the growth of online retail in Australia and brought the battle between landlords and retailers to a head.
And this is only one example of how retail has changed for Australians in the face of the COVID-19 pandemic. It has been undergoing a transformation for many years, with the reckoning of ‘digital versus physical’ finding shopping malls and departments stores slowly emptying as online continues to grow.
This Christmas is going to be unlike any we’ve had before and there are a variety of customer behaviours that must now be considered ‘normal’. To make sure you have a merry Christmas this year, here are the changes that you need to be across as a retailer.
Points of purchase shift
In 2019, Australia Post predicted that online shopping would make up between 16 and 18 per cent of all retail spending in Australia by 2025. However, by April of this year more people were shopping online than ever before – an increase of 31 per cent over the same time in 2019.
Australia Post has accordingly changed its thinking, and now expects online retail to command a 15 per cent share of the total retail market by the end of this year. Yet while Australian consumers have taken to the internet during COVID-19 to continue purchasing, there is still a place for bricks and mortar stores, especially as lockdowns begin to ease across the country.
Many retailers are using physical stores to service online orders, maintaining their store fronts for people who want a traditional shopping experience and staying front of mind for foot traffic. Striking the right balance between online and offline will be important come Christmas, so making sure there are offers that appeal to both spectrums that can entice purchasers will be important.
Cash and COVID-19
The use of cash has been falling in Australia for years, making up just over 30 percent of purchases in 2019, down from 43 per cent in 2016.
The COVID-19 pandemic has pushed electronic payments even more to the forefront. The advice from the World Health Organisation that cash may have played a role in the spread of COVID-19 caused many retailers to go cashless at speed. Even today, with evidence of the role of cash in spreading the virus mostly debunked, businesses are maintaining a mostly cashless retail model, just in case.
The decrease in cash use is also explained by the rise in online shopping. There’s less need to be walking around with a stack of bills in your wallet or purse. On top of that, digital wallets such as Apple Wallet and Google Pay mean that people can enjoy frictionless purchases wherever they go.
Buy now and pay later
Afterpay / Zip / Klarna and others have taken the concept of the lay-by and brought it into the 21st century.
Afterpay allows people to walk out of a store (or checkout online) with their goods and then pay them off over 4 instalments, including one at the time of purchase.
The dopamine hit of buying something is often tempered by the thought of how much it cost, or the interest you might have to pay on the purchase if you’re using credit. Afterpay’s no interest and no fees rule (except for late payments) means that many are shopping guilt free, and abandoning credit cards that can cost an arm and a leg if they aren’t managed properly. Offering Afterpay access will be an important step for many retailers this Christmas as it will show an understanding of the difficult financial situation for many shoppers while still enabling them to purchase.
The credit crunch of COVID-19
One somewhat surprising side-effect of the COVID-19 pandemic has been the impact on credit cards.
With less cash purchases and more online shopping, many could be forgiven for assuming that credit cards are running hot. However, the Reserve Bank Australia recently revealed that there has been a nearly 8 per cent decrease in credit card transactions since the pandemic began.
With other purchase options like Afterpay on the market, taking on unnecessary credit card debt is probably seen by many as a bridge too far. This, coupled with higher unemployment and recent economic contractions, has meant many consumers letting go of their once trusty credit cards.
This general move away from cards is further fuelling the need for retailers to offer alternative ways of purchasing to customers, giving them the option to buy the way they want to, not the way they feel they have to.
Bring that Christmas cheer
The key this Christmas will be to give the people what they want - an enjoyable holiday period. The changes made by brands this year in the face of the pandemic have largely been to make things less stressful and easier on people.
This Christmas we will see the new balancing the old, and it’s essential to remain mindful of the challenges your customers face and the different ways they will interact with brands. A considerate and personalised approach will allow you to accommodate new shopping behaviours while delivering the best possible service for your customers. And we will all hopefully have an enjoyable and safe Christmas.