Episode 11: Why customer acquisition and loyalty are retailers’ biggest challenges today

In this episode of Retail Untangled, Amie talks to Toby Cumpstay, senior merchant success manager at Shopify, to discuss the challenges of acquiring new customers-and keeping them- in the Australian retail environment. 

Transcript

Intro:

Coming up on this episode of Retail Untangled…

So we know that customers can come from any channel and it is essential therefore to optimse the experience across every channel that your business is showing up. You want to ensure that the brand can maintain that consistent and localised presence in different markets without overwhelming operations, back of office staff and warehousing. What it means to that consumer is all about that tailored and really refined experience which I think is exciting.

Amie:

Welcome to Retail Untangled, my name is Amie Larter and this is the podcast where we speak to retail industry experts and find out business hacks that help them succeed. You won’t find these gems anywhere else, and we have some superb stories from the coalface as well as helicopter insights from retail industry leaders. The retail landscape is experiencing heightened competition, making customer acquisition a critical challenge for many retailers. Not only are consumers tightening wallets, but there has also been a rapid increase in market share globally. This means retailers are not just competing with more online retailers, but also there are more global juggernauts than ever before. Today, we will be exploring how retailers can navigate this evolving environment and identify new growth opportunities. I’m joined by Toby Cumpstay, Senior Merchant Success Manager at Shopify to explore how retailers can navigate this evolving environment and identify new growth opportunities. 

Toby, in this competitive climate, what are some of the biggest obstacles retailers are facing when it comes to securing new customers? And are there common mistakes you see retailers making that hinder revenue generation? 

Toby:

Obviously retailers today face several major obstacles when it comes to securing new customers and really growing their revenues. 

I think I'd boil it down to two at the moment that I'm seeing. One would be customer acquisition and loyalty. So where do I find my new customers and how much do I have to spend? And then keeping them loyal, keeping them repeat purchasing. And, what does that look like? I think the second would be then, the efficient use of technology to achieve that aim. 

So, what does the technology I'm using look like? Am I unifying my systems and that unified commerce perspective comes in and how is that leveraging the cost to make the best profit when I'm looking to acquire new customers as well? So if we dig into that, customer acquisition, we know customer costs are increasing, and this is what we're hearing from brands across the board. 

We've got consumers also being more selective now more than ever about where they're spending that next dollar and where they want to spend their disposable income, especially. So I think it's really crucial in this space for retailers to focus not just on the acquisition space, but now more so than ever, how they're retaining their customers and really creating those loyal customer experiences as well. 

We know that loyalty is hard to earn, but easy to lose. One of the reports we've recently put out found that in the last 12 months, a staggering 92 percent of consumers have now bought from different brands than they normally do. And this is primarily driven by cost. 

So with 57 percent of customers now switching for a better price or a better discount or promotion, they're switching brands just due to that fact alone. I think retailers therefore need to look at how they're more competitive in this space, more than ever. So how do we just provide, not just price, I suppose, but value to the consumer. And what does that need to look like? I think it can come from a wider range of products and enhanced customer experience and also showing up where the consumers want you to be as a brand, rather than where you may have traditionally been as well. I think in this space too, post COVID, we know that the state of shopping has changed and the way consumers want to shop has also changed where they want to shop and what they prefer to shop for. 

So then looking at the channel mix as a strategy as well in this acquisition space is really important as a brand and it's a key to success in this space. So we know that customers can come from any channel and it's essential therefore to optimise the experience across every channel that your business is showing up. I think it was Marshall McLuhan who famously said, “the medium is the message”. And this was, I think back in the sixties, which means you need to work with the channel and not against it. 

For instance, if you're using social media, TikTok, essentially, how you show up on that platform and acquire customers on that platform is actually going to be dictated by that platform. So we know that social media, it's all about face to camera, personal experiences, social selling, and influencers. On the other hand, traditional media, which I would say we're seeing a resurgence in at the moment, is all about bringing the brand to that platform, bringing the values and the unique selling points to that platform. 

So again, it's being really critical around what your channel strategy is as a brand at the moment. I've recently seen a few of our brands do this brilliantly and looking at that strategy. So a good example would be July luggage. They've just launched their most recent store in James Street in Brisbane. 

And obviously a lot of social media buzz, a lot of local ads trying to get a lot of attention and foot traffic in the door on the first open. But the way they also did this was to use it as an acquisition strategy. So they created a ‘guess the combination’ luggage competition, we've all forgotten our luggage combination, I'm sure at some point. 

So, I related to this one, also they then were asking people to come in, sign up to their mailing list, and then they got the opportunity to guess the combination to the luggage, which I thought was an excellent acquisition strategy. They were able to use their point of sale, which is Shopify point of sale to log all of those new acquisitions into their single system. 

And then what, I was there, the line was insane. It wrapped around the block and they had an incredible turnout. Not to mention it was great weather in Brisbane, but it was a great way to see the brand bring the community together, create a social and shareable moment for the brand as well. 

So we saw a lot of people using this as a filmable moment, and then they could double down on the brand experience as well by inviting them into the new store and showcasing the products as well. So a really good acquisition strategy there as well as conversion, obviously loyalty and repeat purchase down the track. 

The other one I've seen recently is Who Gives a Crap. So you would know these guys for being excellent during COVID selling a lot of toilet paper when all of our supermarkets were sold out. they used a really unique strategy in London. So they are a global seller and they were looking to really drive brand awareness and acquisitions in the UK. 

And what they did is set up a pop up shop for one day only, in London and got shoppers into this incredible space that they'd created. And what they were also doing, similar to July, was, looking to acquire new customers and send them a box of toilet paper for free, essentially, yeah, you just have to give over your email address and your address to get it delivered. And what they were able to do was really give a unique experience not only to talk about toilet paper and toilets, but some of their incredible work they're doing with charitable organisations and increasing sanitation and hygiene across the globe as part of their efforts, more broadly. So a great opportunity there as well to see brands using tech, environment and opportunities to connect with the community as well. 

Amie:

If we delve into some potential solutions, internationalisation, so going global is a hot topic for leadership right now. And I think Shopify has identified it as a major opportunity for 2024 and beyond. 

Are retailers often hesitant to embrace cross border opportunities due to logistical challenges, currency issues, and the complexities of regulations? I'm keen to understand how you believe they can address those issues and expand abroad. 

Toby:

I think internationalisation presents not only, you know, a tremendous opportunity for growth, but yeah, as you say, many retailers are hesitant due to a variety of concerns. 

And I think they do include logistical challenges, currency issues, navigating the complexities of taxes and duties, because obviously that comes with it. And yeah, it can all feel a little bit daunting. 

Amie:

It’s a bit unknown. 

Toby:

And there are a lot of unknowns. I think there's the known in the home country. And then, how do we go more broadly, globally? I think what I'm seeing too is retailers are really addressing this by using Shopify markets, which is our solution to sell from one store globally. This really simplifies the process, so cross border selling them becomes quite easy to manage selling centralised inventory. 

To address this, retailers can then leverage Shopify markets, which really simplifies cross border selling by centralising the inventory, shipping duties, tax compliance, all on the one platform. And it ensures retailers can manage international sales, and customer experiences efficiently without getting bogged down in the complexities of each individual market or even having to manage them across separate systems, which a lot of the time we're seeing business has come to Shopify for. This is also an out of box solution, so it's really simple to use and comes pretty much standard and ready to set up. 

A good example, though, if I go back to Who Gives a Crap, which I mentioned earlier, would be their setup where they've managed to create multiple storefronts and automatically, therefore, display the business products in the customer's native currency and language. And they're loving the ability to manage multiple storefronts, languages, currency, all from one backend, which then allows them to see the entirety of their business all in one place. 

But most importantly, it creates a seamless customer experience as well. So wherever I'm shopping across the globe, I can shop with Who Gives a Crap in my local currency, language and even subscribe to their products as well, which is all powered through our partner recharge. So recharge.

Amie:

So you've got Who Gives a Crap, and I think another, we've just done a case study series together, and I saw that Boody has also had a successful international expansion based on these experiences, what are some of the key takeaways for other brands looking to expand globally?

Toby:

From my experience, working with brands like Who Gives a Crap, Boody, also LSKD, July Luggage, and most recently I've been working with Bared Footwear. They've just opened their first retail store in New York City, which is great. So they're expanding into the U. S. I'd say there's several key takeaways for brands looking to expand globally. 

Firstly, I think it's all about getting the basics of global selling right. So, obviously on a scalable platform like Shopify supporting multiple storefronts is first, but then looking at languages, currencies and shipping, you want to ensure that the brand can maintain that consistent and localized presence in different markets without overwhelming operations back office staff and warehousing part of this is also ensuring that you're shipping and fulfillment is set up for success from day one as well. So deciding whether you'll be shipping from Australia or then looking at possible third party logistics providers, which could really speed up transit times and time to customer as well. 

After getting those basics right, I'd say the second part is then tailoring every part of the customer experience, wherever you can from top of funnel to bottom and even post purchase to make sure that you're showing up in those markets, how the customer needs that brand to show up. So I'll give some examples of that, and I think this is where it's really important to have a strategy in place if you're going to succeed globally. 

We know with July luggage, for instance, that the U.S. don't have the same carry on cabin baggage requirements that we have here in Australia, which is, I think last time I was traveling from Perth to Brisbane, they weighed my luggage and I was just under, which was like a godsend, but I didn't know what I was going to do otherwise. 

So we know that this is not the case in the USA. And so with a retailer like July, they have, U. S. customer who's much more favorable towards larger carry on luggage. That's the size of their trunks, and so they're merchandising these more heavily to that market and really pushing that at the top of funnel as well. 

Whereas in Australia, for instance, where we do have some more tighter regulations, they don't want to push that product in the market as well. So it's really tailoring the product, the messaging and then the pricing around that product per market. They're able to do that seamlessly from one platform, which is great. 

And then I think similarly, if we look at, say like the LSKD or Boody or Bared Footwear with those brands, it's all about a unified customer experience. So how can we make sure that in each region we've unified gift cards, returns, exchanges. So all of that pre and post sale experience for the customer, where it's all still in the native currency language and they're not having to switch between different experiences or feel like it's a bit jaggy.

Amie:

Which would be so easy to do, I think, if you're trying to get all of these separate steps done yourself?

Toby:

Yeah, it can feel like a lot to manage and also all of those different points in the customer journey, really refining those or having to set them up from day one. Whereas using a system that's really robust and ready to go you don't have to worry about that either. 

Amie:

Your research suggests B2B sales, often perceived as a little bit more traditional, represents a significant opportunity for brands. If the potential is so great, why aren't more brands focusing on this space? 

Toby:

I would say because it has been so traditional, I look, I come from a traditional B2B seller background myself. And I would say sometimes you need to move the needle as much as possible as a retailer as you can, but you're not always going to get your brands or your customers to come with you as fast as you'd like. 

I think though we are seeing a shift in this space. So it's really exciting to see that more B2B systems tooling processes are moving digital and online. And this is not only being pushed by platforms like Shopify, which has great B2B features, but it is coming from the customer as well. They want integrated, unified experiences, even in the B2B space where, you know, I was selling via fax machine when I started selling B2B and then having to go from fax to email, and I've seen the complete evolution of B2B selling. I think what's at the heart of B2B selling that will never ever change, is that people buy from people and the relationships are so critical and so important. If the tech is there and it's doing its job, I want it to get out of the way and just be as seamless as possible. 

Amie:

What questions should a brand ask to really hone in on if B2B sales are the right opportunity for them? 

Toby:
I think, first of all, does your product lend itself to being, if you're not in the B2B space already, is it something that the B2B naturally would work with? 

So are other retailers interested in your product? How should that go to market as well? And, what's that pricing strategy, et cetera. So there's a lot of questions there. We also have great integrations now with Fair, which is a great B2B marketplace within the Shopify ecosystem. Which can enable you to test and learn in that space as well, which I think, I think is a great opportunity. 

Secondly, it's looking at your platforms and making sure that if you are in the space I was in with fax machines and emails, how you can really leverage the tech to take your business to the next level. Because regardless of whether you've been a B2B seller previously, or you're looking at this space as an opportunity to improve the tech can really help get the message out there, get the product more widely distributed and really make purchasing easier for everyone involved. 

Amie:

Now, if retailers are to look internally for growth, one of the big topics right now, and you've mentioned it today already, and we've talked about it quite a bit on this podcast is unified

commerce. So how, in your opinion, can brands leverage this to unlock revenue potential? And who are some of the examples of brands excelling in this space? 

Toby:

It's obviously something very top of mind for a lot of retailers today. I think it's probably good to just step back and define what is unified commerce, because we do talk about this a lot, it has come a ways. We've moved from single retailer channels to omni channel or multi channel to omni channel and now to this unified commerce piece. 

What I look at is the two different dimensions here. One as a business, what does it mean to me as a business? But really, what does it mean from a consumer perspective? So I would say, first of all, as a business, we mean unified customer profiles, which is understanding your customer wherever they are, wherever they shop, across one platform. 

Centralised inventory as well. So the ability to see what's available across all platforms. All locations, whether that's in stores, in warehouses and in between. And then centralised data. So, knowing that all of this customer data, these transactions, et cetera, can all be accessed in a centralised place and then reported on for better decision making. 

And those are some of the benefits. You've got elevated omnichannel experiences on the customer side because of this, operational efficiencies for the business and then better decision making with that unified data piece. So I think as we zoom out and we look at what unified commerce is, it definitely has a huge advantage for business operations and logistics decision making as well. 

And then it has, probably the most benefit is gained by the customer because I can shop wherever I want, whenever I want and I know my order history is there, I know every gift card I've purchased is going to work and I know that the promotions are seamlessly integrated across the platforms as well. 

Amie:

We've sort of shifted from a space where we were in an omni channel mindset, which I believe was very much just selling on different platforms as opposed to this unified approach. I'm keen to understand, in terms of customer expectation, do you feel like we're going to quickly be moving towards a land where this will be almost expected? 

Toby:

If you look at the customer's expectations around promotions, marketing, pricing all of that are the above and what we've been speaking about, we're already in that space right now. I think what divides good from great in this space too is that it is really more readily seen as well. So I might be able to use gift cards and returns and you can ship from store for me, et cetera, but ultimately that's good. Great. Looks like the next level, which is what we call clienteling. 

So knowing what's on my wishlist, when I last shopped online, when I walk in store, it might be knowing my loyalty status and who I am and what I prefer in terms of clothing size or color. And really having these tailored and unique customer experiences on top of those systems. It has to start with the unified commerce piece, but then what does it mean to the consumer is all about that tailored and really refined experience, which I think is exciting.

Amie:

On the flip side of that. I feel like we're becoming more sensitive to bad, where you've differentiated the good and the great, I feel like, and this is might, might just be me, Toby, I'm not sure, but when it's bad, it's, it's gone to really bad. 

Toby:

Yeah, look, I would agree, and I think we've got some incredible brands in Australia doing some wonderful work in this space. I think LSKD, uh, one that comes to mind and they continue to open more and more stores across Australia. And, they're doing some incredible stuff with how they bring community into the spaces they're creating. They create hubs really for their loyal fans and new customers. And so you do see the top end and you see how it works really well. 

I think the bad does stand out where you might have an experience where you can't return an item that you've purchased online in a store, for instance, and it creates a lot of friction, or there's even where you may have purchased a gift card in store and you can't use that online. So going both ways, yeah, there's those experiences which kind of add friction. The Uber business model is to blame in some ways for this, but also thankfully we've moved to it. 

So it's this frictionless, ‘you don't even realize you've paid’, kind of experience that Uber created. And how do we create that in a retail and commerce environment that makes it really enjoyable and of course a great experience for the business and for the customer. 

Amie:

You've mentioned LSKD, what are some other examples of brands excelling in unified commerce? 

Toby:

Another one that comes to mind recently is Elite 11. So they've been able to synchronize their in store and online stock and even their third party warehouse systems across all platforms to ensure stock levels, uh, able to be then given to customers wherever they are, and especially in store. 

So what that's enabled them to do is, turn on ship to customer services from in store. So we call this endless aisle, but the idea being that if your size or colorway isn't available and you would like it sent to home, that's really seamless and possible through the Shopify POS system and again, it's all about making it easy for the customer. 

And of course, a great experience for the staff at Elite 11 to make sure that they're enabled to offer that as well. 

Amie:

Given the current competitive landscape, I'm keen to understand what advice do you have for brands who are looking for this next growth opportunity? 

Toby:

I think we've spoken about a few things today that could really help shift the needle and bring that next customer in and really for brands to be able to find where that customer is obviously embracing the unified commerce piece is going to have a lot of opportunity and I think a lot of benefits. 

So integrating all of your sales channels into a single cohesive system is the way to go. In terms of total cost of ownership is reduced. Also, then you've got a unified experience for the customer. And as well, you've got operational efficiencies achieved by breaking down some of those business silos and that data and business analytics piece. 

Secondly, it's about exploring international markets. and whether you're large or enterprise, it can work across the board. So expanding international markets can, can provide access to the new customer bases and revenue streams that you may have never tapped into. But as we've mentioned though, I think it's always important to get the basics right. So that multi currency and language piece is really important. And then tailoring the offer to the international market. 

I think the next thing would be focusing on B2B if it does make sense for your brand and your product. So not to overlook the potential of B2B and managing the wholesale relationships that we talked about and integrating them all into the single system as well. This is where we're seeing a lot of brands move from pen and paper or Excel spreadsheets and that kind of space and bringing the B2B relationship together into Shopify and creating some really unique and incredible experiences. So Who Gives a Crap are using that, Archie's footwear is another one and we've got a Boody, et cetera. So there's a lot of brands using B2B to manage those relationships now. And I think finally, for me, the biggest thing to tap into and to continue working on is enhanced customer experiences. 

And I think at the end of the day, we know people are buying from people and it's the investment in this customer experience that's going to really set your brand up for long term growth and long term benefits as well. So creating those exceptional experiences across all touch points, all channels, and really making sure you're working with the channel and not against it. 

And lastly, making sure it's personalised. So loyalty loves personalisation and those interactions can be made really seamless across all of those channels.

Amie:

A big thank you to Toby from Shopify. If you’ve enjoyed today’s episode make sure you subscribe using your favourite podcast app and don’t forget to rate and review the podcast. 

Outro:

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