What Are the Most Important Learnings from the 2023 Report?
The report shows that consumers have adjusted their shopping habits to the current economic situation with high cost of living, inflation and uncertainties. In general, consumers have made more thoughtful shopping decisions in 2023 and less spontaneous purchases. Not only has this resulted in less items and lower shopping value but also lower return rates. When consumers spend more time thinking through their buying decisions it’s more likely they buy the right products in the first place.
Another trend connected to the economic climate is the increased usage of discounts and the savings captured by consumers, especially among women. In fact, women secure in average 45% more discount savings than men according to the Retail Radar report.
In addition, the report shares a lot of insights into differences in the shopping behavior between age groups and gender. While this isn’t something new it’s a good reminder that you can’t treat all customers the same.
The report identified general shopping characteristics for different generations:
- Gen Z (age 18-25) typically buy fewer, yet pricier items.
- Millennials (age 26-45) are among the most frequent shoppers, spending more than the average consumer.
- Gen X (age 46-55) often buy products for the entire household, resulting in more items and higher value per order.
- Young Baby Boomers (age 56-65) shop less frequently and have a preference for value.
- Seniors (age 65+) spend less per order and focus on selectivity as a result of tighter budgets.
What Surprised You When Reading the Report?
It’s not a big surprise but a good reminder that it’s now that the Gen Z consumers really start to affect the retail industry. If this generation is part of your target audience, you need to rethink marketing and communication strategies to include the right social media channels and leverage relevant influencers.
The report also points out that a new type of brands often focusing on this young audience have shown great success quickly. These online native businesses often have a better starting point than traditional retailers to attract the younger generation, because they have the right mindset and technology tools right from the start. But it’s important to note that you can’t look at these brands as a blueprint for success. Just because these have managed to attract the Gen Z shoppers, their tactics may not play well for your business. You still need to focus your efforts on strategies that make sense for your target audience.
How Should E-Commerce Businesses Act on The Report Findings?
There are three areas in the report where e-commerce businesses can take action today: target the right customers, provide more relevant communication and prevent returns.
Target the Right Customers
The report findings on differences in shopping behavior between age groups clearly shows the need for segmentation to ensure you target the right customers with the most relevant offering. You just cannot treat all customers the same.
Here, a lot of businesses struggle to gather and leverage data to better understand their customers. In the past, many companies only asked for an e-mail address to sign up for a loyalty program for example. But that won’t help you deliver relevant shopping experiences for each customer. Instead, you need to add data on things like age, gender, interests, family conditions and buying preferences in order to meet the demands of your different customer segments. When we work with businesses on data collection and segmentation we often start by conducting an audit to understand what data is already there, potential gaps and how to get more value out of the tools in place.
You don’t necessarily need more data, but you need the right data. That is, the data that truly helps you understand your target audience’s behavior and that you can act on right away. Once you’ve identified the data needs you should set a plan and strategy for how to obtain it. With the right data and a good CRM tool you can analyze your different segments to ensure you focus your efforts and resources in the most profitable way.
Relevant Communication
It’s hard to get through the noise and reach consumers that are hit with endless promotional messages in a variety of channels. When you have control of your customer data you can start adapting and personalizing communication to ensure more relevant messaging and offering to each segment. You can also prioritize segments where you get the most ‘bang for the buck’.
For example, in these times when consumers in general are interested in savings, you should focus on those customer groups where discounted offers are most likely to trigger profitable orders. You can also limit discount offers to members of a loyalty club to create more value of the membership and leverage the club to gather more data. And, dare to exclude customer segments from communication or offers. For example, it doesn’t make sense to send a discounted offer on shoes to customers who bought shoes from you in the past couple of weeks. That will create more frustration than value for the customer.
If the younger generation is part of your target audience it could also make sense to adapt your communication to include more information about sustainability, product details and comparisons since these customers in general make more thought-through purchase decisions. But again, always analyze your own customer data to ensure this is the right way for your business.
E-Commerce Returns
The fact that return rates are going down is a really positive thing. There has been a lot of buzz around e-commerce returns lately which has increased the awareness among both businesses and consumers. You can prevent returns by communicating more relevant offers, provide better product information and good quality search functionality on the site. All to help the customer find the right product at the first visit. Consumers are also more conscious about the negative sustainability effect of e-commerce returns. Plus, the economic climate drives fewer, more thoughtful purchase decisions which in turn leads to less returns.
In this area there’s also an opportunity to leverage data to better understand which customer segments are more likely to generate returns and why products are being returned. With these insights you can develop a return management strategy with the objective to drive down return rates in the long term. With the right return data at hand you can pinpoint areas for improved communication and product information to prevent returns or even exclude frequently returning customers from campaign communications.
Read the full Retail Radar report from Voyado here. If you wish to discuss how your business can adapt to the evolving consumer shopping trends, contact our expert team.