Customer Experience in the New Reality
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Customer experience in the new reality Perspectives from the grocery retail sector YOUR ORDER Global Customer Experience Excellence research 2020 home.kpmg/customerfirst 2 Customer experience in the new reality Introduction COVID-19 has driven customers online and brings the role of physical retail space into question. The leading food retailers in our Customer Experience Excellence research have linked immersive in-store experiences with advanced digital technologies to integrate the online and offline shopping experience but face a growing profitability issue if home delivery remains the customers preferred option. COVID-19 has accelerated several This is particularly true of the grocery Those that had an omnichannel macro retail trends: sector, where health and safety mindset and close proximity to their have driven new customer behaviors customer have made this journey — business model evolution — the rise of platforms is changing the and fundamentally changed the in- quickly, others who see digital retail landscape. store experience. and physical stores as separate channels now face diminishing — the value of purpose — customers numbers of physical customers and want to buy from companies who Digital ordering, home delivery structural change in the balance of stand for something bigger than and curbside pickup are now their business. profits. embedded buying behavior across all demographics. Grocery outlets — the focus on reducing cost — retailers take new approaches to have rapidly innovated in response, cutting costs and driving profitable accelerating ecommerce and using growth. creative ways to effect home delivery with larger supermarket chains — the increased power of the recruiting 1000’s of new staff to meet consumer — customers focus on the increase in delivery demand. availability over selection suggest discounters and platforms will thrive. © 2020 Copyright owned by one or more of the KPMG International entities. KPMG International entities provide no services to clients. All rights reserved. 3 Customer experience in the new reality The future experience The move online It took two decades for UK home delivery to reach 7 percent of grocery sales, yet in 8 weeks this rose to 13 percent. In Germany and Italy analysts believe that grocery ecommerce has doubled over this period.1 But at the heart of this switch as it avoids other shoppers. But no Business models online lies a profitability issue. process has zero risk. As per our Customers are moving from the most most recent ‘Consumers and the new Although some physical profitable channel, in store, to the reality’ survey, supermarkets are very stores will certainly return least profitable, online. Ecommerce focused on the health and safety of requires a huge commitment of both employees and customers but 80 to growth, it’s clear that resources It is estimated that it takes percent of those who have moved to the days of driving growth 4 years for a customer who switches shopping online because of COVID -19 to online to become profitable. the intend to continue doing so.2 through physical stores rise in costs is only marginally offset alone are over. Those by an increase in transaction size. With this as a backdrop ecommerce, with no existing on-line online shopping is likely to continue to Pricing strategies have compounded be the preferred shopping channel for or delivery channel will the issue, offers of free delivery and many customers. struggle to survive this coupon discounts have educated customers into believing that there is Experience versus ease challenging time. no cost for home delivery, a situation The challenge facing grocery retailers Over the coming year, that is patently untrue. is how to optimize the economics of instore and ecommerce. For some ongoing challenges with Trust and safety organizations this involves syncing supply, demand and Trust and safety continue to be digital with in store to attract customers business continuity will uppermost in the mind of consumers for the experience and for others it and is likely to be so for the foreseeable involves minimizing the costs of home force retailers to rethink future. A home food drop is less delivery. their future business risky than a trip to a supermarket models and in turn, spark a new wave of innovation and competition across the industry. 1 FT, Why supermarkets are struggling to profit from online grocery boom, https://www.ft.com/content/b985249c-1ca1-41a8-96b5-0adcc889d57d ) 2 KPMG COVID 19 Global tracker, Consumers in the new reality © 2020 Copyright owned by one or more of the KPMG International entities. KPMG International entities provide no services to clients. All rights reserved. 4 Customer experience in the new reality China’s Alibaba designed its 207 Consumers can see fresh bread Freshippo (Hema) supermarkets baking behind glass windows and with delivery as the main priority, choose from an extensive range rather than a later addition. Pickers of wines that features ratings and often outnumber shoppers in the pairing recommendations. stores, also known as Hema. they move between shortened aisles to They can head to the exclusive bar for pick groceries and send the items on a drink and select fresh fish that will conveyor belts to an in-store packing be cooked for them in the restaurant station. Orders are then delivered within increasingly poplar grocerants by scooter couriers, often in under (grocery and restaurant). It is all about 30 minutes. bringing the highest quality produce to customers within an immersive Some leading US stores such as setting, elevating the weekly shop Hannaford, are applying technology to so that far from being a chore, it manage and sync the supermarket’s becomes an experience — one that retail operations from the back-end — customers can look forward to. supply chain, stock replenishment and employee scheduling — all Retailers realize they need to the way through to the consumer encourage their customers into experience, tracking purchases and their stores and keep them there giving people personalized product for as long as possible using pop- recommendations in real time as up experiences and special events they shop. The technology drives including cookery classes to drive the in-store experience whilst also foot traffic and boost engagement. A facilitating ecommerce. report by The Wall Street Journal said that retailers such as Origins, which Concept stores are emerging has invested in getting shoppers which indicate that the future in- to linger in store, have seen sales store experience is perhaps more increase3 20 percent to 40 percent. theatre than retailing. Products are displayed beautifully. 3 Source: https://www.wsj.com/articles/the-slower-you-shop-the-more-you-spend-1445359614 © 2020 Copyright owned by one or more of the KPMG International entities. KPMG International entities provide no services to clients. All rights reserved. 5 Customer experience in the new reality The recovery pathway Grocery retailers face a new era in grocery shopping and an unprecedented change in customer behavior. Much of the new customer behaviors will likely stick. In a recent KPMG International survey, “Consumers and the new reality” 80 percent of respondents that had purchased online for the first time intended to continue doing so4 . As a result of COVID-19 grocers now face several strategic questions: The Six Pillar model was developed to provide a precise — What is the role of physical stores in the and practical definition of the kind of emotional outcome customer experience? a successful experience needed to deliver. Based on over 4 million detailed customer reviews, The Six — Is it a channel or part of an integrated Pillars have been validated in 27 markets this year and network of technology and experience? modeled against the commercial outcomes of retention — How do we integrate digitally front to back and recommendation. The Six Pillars are inextricably to meet changing customer needs and intertwined and, in combination, provide a powerful behaviors? mechanism to help organizations understand how well their customer experience is delivered across channels, — How do we harness technology to drive the industries and company types. The leading organizations in-store experience? demonstrate mastery of these pillars and are outstanding — What are the new activities we need to at all of them. Click here for more information. undertake to make the in-store experience more immersive and compelling? 4 Source KPMG International Research, “Consumers and the new reality”. Jun, Jul 2020 © 2020 Copyright owned by one or more of the KPMG International entities. KPMG International entities provide no services to clients. All rights reserved. 6 Customer experience in the new reality Digital ordering, home delivery and curbside pickup are now embedded buying behavior across all demographics. Grocery outlets have rapidly innovated in response, accelerating ecommerce and using creative ways to effect home delivery. The leaders in our research are using digital methods to support in-store attendance and give the customer options as to how they then want to make their purchases. Paul Martin Head of Retail UK In architecting new experiences, the Six Pillars provide a useful checklist: Integrity Empathy COVID-19 has accelerated concern Supermarkets everywhere have for the environment and for shown that that they care. They sustainability. It has also driven a have demonstrated kindness and desire for localness, not just local compassion for both staff and produce, but an active contribution customers putting people before to the local community and its profits. 71 percent of respondents economics. to the global Edelman trust index said they would refuse to deal with companies that did not do this. Resolution Personalization Customers will likely Advances in technology want to have access to with AI and machine the latest technology learning are now and interact with grocers enabling personalized in an omnichannel offers and content way. Many firms messaging at scale. demonstrated innovation and a problem-solving mindset as they reacted to COVID-19 continuing this will be key.