Introduction
The retail landscape is no longer a battle between online and in-store. These two coincide to give customers the best shopping experience, wherein physical stores play a big role in the overall customer experience journey—understanding the customers’ behaviours, motivations, buying habits, and dream experiences.
Three macro-trends with profound implications for retailers and marketers drive the current market shifts—customer dynamics, segmentations, and the maturation of dominant retail concepts. These trends have accelerated the change that affects all of us.
Our recent Retail CX Insights 2024: Driving In-Store Sales report discusses the in-store shopping experience, examining variables that affect customer loyalty and brand power. It answers questions like, “What are the factors shaping purchasing decisions?” and “What are the expectations of today’s consumers?”
In this two-part series, we’ll explore key findings from our comprehensive study, offering insights that can guide retailers in refining their customer experience strategies and marketing approaches. With this knowledge, they can deliver better messages and offers to encourage long-term brand loyalty.
Key retail mindsets
Before we get into the details, let us introduce two shopper mindsets prevalent in today’s retail market. According to social scientist Dr Ross Honeywill, society is split into two groups of consumers with different mindsets: the Traditionals and the NEOs (New Economic Order). These mindsets, presented through two example scenarios, will give you an idea of today’s shopping behaviours.
Meet Alex
First is Alex, a 29-year-old successful tech CEO. With her six-figure income and substantial disposable funds, she’s a frequent shopper who indulges in practical purchases. Typically, she visits multiple stores with a smartphone in hand. She compares prices online, checks reviews, and sometimes makes split-second decisions.
Let’s say today, she made three purchases within an hour and ordered a custom-designed laptop bag for next-day delivery. Alex, who holds an MBA from a prestigious university, demands exceptional customer experiences and is more than willing to pay a premium for personalised service.
Meet Sam
Meanwhile, Sam, a 45-year-old machine operator at a local manufacturing company, makes his monthly visit to the department store he’s been shopping at for years. With his moderate income primarily allocated to essentials, he approaches shopping with careful consideration. Sam, who completed vocational college, methodically examines products, meticulously comparing prices and quality.
He spends a good hour in the men’s clothing section, patiently waiting for a sales assistant to be free so he can ask detailed questions about fabric durability and care instructions. Sam is on the hunt for the best value, scouring clearance racks and checking for any available coupons on his basic smartphone.
After thorough deliberation, he leaves with a single, well-considered purchase – a practical winter coat on sale, marked down 30% from its original price. It’s not the trendiest option, but Sam plans to wear it for many seasons to come, justifying the expense as a long-term investment in his limited wardrobe. He’s satisfied with his purchase, having found a good balance between quality and affordability without splurging on any premium features or brands.
Our research has identified looks at how these two distinct retail mindsets behave in the current environment. Let’s explore Alex and Sam’s stories to better understand these mindsets.
The Neo Mindset
Alex represents the Neo mindset. She’s tech-savvy, values high product quality over price, often makes unplanned purchases, shops more frequently, and willing to pay for a premium. On this particular shopping trip, we observe her:
- Visiting multiple stores daily, sometimes just to browse and stay updated on trends.
- Going to selected shops where she finds genuine brand authenticity, and sustainability commitment.
- Price is not a factor, but social proof and peer influence are.
- Choosing a slightly more expensive product known for its durability and sustainability practices
- Priotitises fast delivery
For retailers, catering to shoppers like Alex means embracing technology, emphasising product quality, focusing on service, and creating immersive in-store experiences that offer delivery options.
Discover consumption priorities for the NEO mindset
The Traditional Mindset
Sam embodies the Traditional mindset. He values essential spending, is price sensitive, and not willing to pay for a premium. During his shopping trip, we see him:
- Visiting the same store where he has found a deal
- Spending time talking to a sales associate about the quality and durability of different coat brands
- Compares products based on price
- Prioritise items based on where he will get the best deal
Retailers aiming to appeal to consumers like Sam should focus on communicating current promotions, and stock availability. For consumers like Sam, price is a massive deciding factor. He is attracted to sales, loyalty discounts, and the like.
Download: Complete run-down of retail customer mindsets
Understanding these mindsets is crucial for retailers. It’s not just about age or income anymore –it’s about values, priorities, and lifestyle choices. Tailoring your offerings and marketing to these distinct mindsets can significantly enhance customer engagement and loyalty.
Foot traffic trends: How often are customers visiting physical stores?
Moving on, the Retail CX Insights 2024: Driving In-Store Sales report also reveals some interesting patterns in in-store visit frequency:
- Overall, weekly visits are the most common, with 67% of consumers falling into this category.
- Daily visits account for 20% of consumer behaviour.
- NEOs are by far the more frequent shoppers, with almost 30% visiting physical stores daily.
The allure of brick-and-mortar
Despite the rise of e-commerce, physical stores continue to hold significant appeal. The top reasons customers prefer in-store shopping include:
- Immediate gratification (84%)
- Avoiding shipping costs (71%), less for NEOs and weighted more to Traditionals.
- Ability to try products (65%)
Interestingly, Traditionals value instant gratification more than NEOs. On the other hand, NEOs place higher value on the overall experience, staff assistance, deals/promotions, and supporting local communities.
Strategies for Success in the Age of NEOs and Traditionalists
As retailers, what new initiatives can you start implementing to cater to the NEOs and Traditionalists?
These groups, with their unique preferences and shopping habits, present retailers with both challenges and opportunities. Here are some recommendations for retailers to thrive in this new environment based on the insights gathered from the report:
Communicating brand values
NEOs, in particular, are drawn to brands that demonstrate authenticity and commitment to sustainability. Retailers should clearly communicate their values and ethical practices. However, this shouldn’t come at the expense of alienating Traditionalists, who may be more focused on value and reliability. So a starting point is to know what your brand stands and who are your ideal customers.
Embracing omnichannel Retailing
The future of retail lies in seamlessly blending online and offline experiences. Retailers must create a cohesive brand experience across all touchpoints. For example, click-and-collect is hygiene now and caters to both NEOs’ desire for convenience and Traditionalists’ preference for in-store interactions. But how can your store further stand out? The answer is to addresses the universal appeal of immediate gratification, which our research identifies as the top reason for in-store shopping.
Leading companies are already implementing innovative omnichannel strategies. John Lewis integrates online and in-store experiences, with 45% of their online sales picked up in-store via click-and-collect. They also allow shoppers to order items in-store for home delivery, bridging the digital and physical divide. Similarly, Lululemon creates a community around their brand through in-store events and online content, while offering personalized product recommendations based on customer preferences, ensuring a consistent experience across channels.
Hyper-personalisation via AI
Gone are the days of broad demographic targeting. Leverage AI to create individual customer profiles that predict preferences and behaviours. Imagine a store layout that dynamically changes based on who walks in, or push notifications that adapt in real-time to a customer’s mood and recent interactions.
Retail brand Lancôme utilises AI to create detailed customer profiles, providing personalised product recommendations both online and in-store, based on preferences, local trends, and skin type.
Leading cosmetics brand Sephora also employs AI and data analytics to personalise customer interactions, offering tailored recommendations and a cohesive experience across all channels
Elevating the in-store experience
Physical stores remain crucial, with 67% of consumers visiting weekly. Retailers should focus on creating immersive, memorable experiences. For NEOs, this might involve augmented reality try-ons or interactive displays. Traditionalists, on the other hand, might prefer well-organised stores with knowledgeable staff ready to provide detailed product information.
For example, Luxury brand Rebecca Minkoff has started incorporating RFID tags in clothing and interactive dressing room mirrors in their flagship store. This tech allows customers to receive recommendations and request different sizes or items directly from the dressing room.
Home improvement and decor retail brand Lowe’s also utilises AR devices in-store to merge the physical and digital worlds, enhancing the shopping experience with virtual try-ons and augmented product displays
Best Buy is also on an initiative to enhance in-store experiences with expert assistance, virtual interactions, and seamless integration with their mobile app.
Subscription-based retail
Move beyond product sales to ongoing experiences. Offer curated monthly boxes for Traditionals or AI-powered, continuously evolving wardrobes for NEOs. Turn one-time buyers into lifelong subscribers.
Emotional AI for customer service
Deploy AI that reads facial expressions and tone of voice to gauge customer satisfaction in real-time. Use this data to preemptively address issues and personalise interactions.
Personalising the customer journey
Data analytics and the rise of AI offer unprecedented opportunities for personalisation. Retailers should leverage this technology to offer tailored recommendations and experiences. For NEOs, this could mean exclusive, personalised services or early access to new products. For Traditionalists, it might involve targeted promotions based on their purchasing history and preferences.
Diversifying delivery options
Our research shows a clear divide in delivery time expectations between NEOs and Traditionalists. Retailers should offer a range of options, from same-day delivery to cater to impatient NEOs, to cost-effective, reliable shipping for more patient Traditionalists. This flexibility can be a key differentiator in a competitive market.
Companies like Walmart have started offering in-store pickup and same-day delivery, integrating its physical stores with its online platform for a more convenient shopping experience
Rethinking loyalty programs
Loyalty programs should be tailored to each mindset. For NEOs, exclusive experiences or early access to new products might be appealing. Traditionalists might prefer cumulative discounts or rewards that emphasise long-term value.
Avoiding pitfalls
In adapting to these new mindsets, retailers must be careful to avoid certain pitfalls. One-size-fits-all approaches are no longer effective. Neglecting either online or offline channels can be detrimental. Pushy sales tactics are likely to alienate both groups, particularly Traditionalists who prefer a more relaxed shopping experience.
Long delivery times are a significant turn-off, especially for NEOs. Our research shows that almost half of NEOs will visit a physical store if delivery takes more than 1-3 days. This underscores the importance of efficient logistics and delivery options.
Discover the factors that drive customers to switch retailers
The delivery dilemma: How wait times impact purchase decisions
Our research further shows an even distribution across different delivery time tolerances. However, some key findings emerge:
- NEOs have the least tolerance for delivery delays. Almost half will visit a physical store if delivery takes more than 1-3 days.
- Traditionals are less affected by delivery times, with 60% tolerating more than 5 days or not considering it a problem at all.
Retailers should consider implementing same-day or next-day delivery options to cater to NEOs. For Traditionals, retailers should focus on reliability and cost-effectiveness in shipping.
Implications for retailers moving forward
Overall, retailers must adapt their strategies to cater to both NEO and Traditional mindsets. This may involve:
- Developing targeted marketing campaigns that resonate with each mindset’s values and priorities.
- Optimising the in-store experience to highlight the benefits of physical shopping.
- Implementing flexible delivery options to meet varying customer expectations.
- Training staff to recognise and respond to different consumer mindsets.
In a nutshell
- Two distinct consumer mindsets – NEO and Traditional – shape retail behaviours.
- Physical stores remain relevant, with weekly visits being the most common frequency.
- Immediate gratification is the top reason for in-store shopping for both NEO and Traditional mindsets.
- Delivery time tolerance varies significantly between NEO and Traditional mindset.
Stay tuned for Part 2 as we explore deeper segmentation analysis between NEO and traditional mindsets.
Get first-hand insights on huge conversion opportunities. Pre-register on our Retail CX Insights 2024: Driving In-Store Sales report.
