How Brands Can Retain Customer Loyalty Amid the Cost-of-Living Crisis
Data and Technology, General, Retail
By My Total Retail
Consumer anxiety persists amid soaring inflation. Consumer confidence slid in July to its lowest level since February 2021. According to the latest survey from the Conference Board, fewer Americans think conditions will improve over the next several months and more were pessimistic about their own financial prospects for the short term. To add to consumer worries, prices have risen at their fastest rate in 40 years, with U.S. inflation reaching 9.1 percent in June, the highest since December 1981. With shoppers having less in the way of disposable income to spend on items deemed nonessential, the competition between brands is heightened. Now, more than ever, brands and retailers must work hard to maintain customer loyalty in order to secure their hard-earned cash, while also being cost-conscious when it comes to their own operations in a turbulent economic landscape.
The Other Side of the Coin
Consumers are not the only ones feeling the pinch. Retailers are also facing spiraling costs across the board, including energy, transportation, staff and the cost of raw materials. According to the Council of Supply Chain Management Professionals' State of Logistics report, U.S. transportation costs rose about 22 percent, while inventory-carrying costs — which measure the value of the goods a retailer has against the cost to store them — jumped nearly 26 percent over 2020.
With no option but to pass these costs onto consumers, retailers and brands are expected to enter a vicious cycle that could see sales and profits drop for the foreseeable future. For many retailers, this comes at a time when finances are already strained as a result of the lingering impacts of post-pandemic recovery. In fact, beauty giant Glossier recently announced it was facing increased pressure to raise prices on some of its products due to higher production and shipping costs. Being aware of the impact it would have on its customers, Glossier also communicated that it wanted to give shoppers the chance to purchase their favorite products before prices increased. However, with the cost-of-living crisis placing increasing pressure on consumer spending, raising prices comes with substantial risk.
Balancing Cost Pressures With Customer Satisfaction
As the online marketplace becomes increasingly saturated, the face of brand loyalty has altered significantly, and consumers are considering cost a key factor to an optimal shopping experience. In fact, our own research found that when asked about the most important factors influencing their decision to make multiple purchases from the same brand or retailer, consumers were mostly driven by free delivery (37 percent) and competitive/attractive prices (33 percent). Brands must balance their own cost pressures with the satisfaction of their customers to retain loyalty and avoid customers turning elsewhere to find a better deal.
That said, this doesn't mean automatically cutting prices or devaluing products. Balance means finding ways to boost efficiency where possible, and in doing so minimize the impact of inflation on customers.
Optimizing Resources
The first option is to look for alternative fulfilment solutions. Existing infrastructures that require significant investment, for example, can be repurposed, ensuring space is being fully maximized. Brands can turn to a BPO to help offset inflation by looking beyond a centralized warehouse model and enabling existing physical store space to work harder and smarter. With the right solution, brands can transform their brick-and-mortar stores into mini distribution centers — making the space work twice as hard by fulfilling the needs of in-store shoppers while supporting online demand. This can also be effective in reducing the distance between product and customer, therefore cutting back on the mileage and costs associated with delivery.
Cloud-based order fulfilment picking solutions will also prove valuable here. These flexible order picking solutions can be easily integrated within existing systems and can help increase distribution efficiency, speeding up the picking process and increasing picking accuracy. Improved accuracy in these areas can ensure money isn't wasted from returning incorrect products, while also ensuring greater productivity per man-hour.
Renewing Consumer Confidence
There are steps brands can take to enhance resources, but cost increases are inevitable, and retailers will need to consider other methods for retaining customer loyalty during this period of transition. To do so, brands must become more strategic, leveraging other elements high up on the priority list for consumers, including convenience and consciousness.
According to our research, over half (54 percent) of consumers prefer to have the convenience of multiple returns options to keep up with their busy lifestyles. Meanwhile, 35 percent of consumers named sustainable packaging, delivery and returns options at checkout as key components of the ideal shopping experience. Brands may not be able to gain complete control over costs in the current climate, but they can ensure they keep up with these other expectations to maintain loyalty and trust.
Leveraging the startup mentality around personalization and value-added services can also be a great way of standing out from the crowd and remaining competitive during this time. From engraving to embroidery, even adding a personalized label to packaging, which doesn't come at a huge expense for the business, can go a long way in providing value to the customer.
The customer experience should also be a key consideration. In a recent survey by Deloitte, 80 percent of executives believe consumers will prioritize stock availability over retailer loyalty in the upcoming year. When cost pressure rises and consumers are shopping with an every-penny-counts mentality, tolerance around the service they receive will be at an all-time low. Higher levels of frustration may be felt if an order is running late for example, or a mistake is made and the wrong product arrives. Customer service teams must therefore be prepared to deal with questions and issues quickly and seamlessly — and from a range of channels. While there may not be internal resource available to do so, outsourcing customer care teams can be a cost-effective solution to this problem.
Consumer confidence has taken a beating. However, brands that can appeal to and retain loyalty while times are tough will continue to gain rewards in the future.
Article originally appeared on MyTotalRetail.com.
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