Consumers are nervous but retail holding its own

Shopping patterns and habits may go in and out of style, but browsing is an innate human behaviour – whether we are scrolling through the app of our favourite store, or seeking out some treats in a local artisan bakery. Consumers may have migrated online out of necessity during the pandemic but the tactile and tangible experience of shopping is still one that is close to our hearts. The retail experience may be evolving but the fundamentals stay true – keeping customers happy.

Whether it’s Covid or Brexit, there are always external factors affecting Irish people’s shopping behaviours, according to director of Retail Ireland, Arnold Dillon. In more recent times, the cost-of-living crisis and soaring inflation has meant consumers are much more circumspect – the most recent Consumer Sentiment Index showed a modest increase but overall shoppers are concerned about the general economic outlook.

“Consumers are still nervous but it’s still significantly up from the floor, nowhere near the historic low seen last September,” Dillon says. “People are more likely to spend but are still wary after a period of inflation.”

And that spending is increasingly happening on the high street as well as online. Dillon believes that online and in-store shopping now happily coexist, complementing each other to provide a true hybrid retail model.

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“Over the years there has been a very steady increase of online activity as well as the amount of time and energy companies are deviating to ensure their businesses are fully digitalised and can make the most of those consumer trends,” he notes. But the spike in online shopping necessitated by the pandemic and its associated lockdowns has now settled. “We did see a very significant and fundamental shift in people’s consumption patterns and how they shopped,” Dillon says. “But there is now a real appetite for people to get back to the in-store experience. We have seen trends be almost ‘reset’ on a similar trajectory to what would have existed before Covid.”

Yet Covid is still having its impact. Remote working has led to reduced footfall in shopping areas in urban centres. Recognising the role of retail in ensuring our cities and towns are vibrant places to live, walk and socialise is key, says Dillon.

Retail businesses now exist in what is known as an “omnichannel” world. “An awful lot of businesses have long been adapting to the fact that it is both online and bricks and mortar,” says Dillon. “But their physical stores have to offer something additional; they can’t just replicate the online catalogue but in a shop. Retailers have to put in a lot more effort to ensure that they attract shoppers into the store.”

Keith Watt, head of retail and manufacturing with KPMG, says: “There’s also a desire to see and touch things before purchasing that online can’t currently compete with,” says Keith Watt. “However, in the non-grocery space, online shopping is often preferred as it’s perceived as cheaper and there’s a wider selection of products available.”

AIB Retail Sector specialist Ciaran Foley agrees the hybrid model of shopping is here to stay, with consumer behaviour having been irreversibly changed. “In our AIB Retail Card Spend Quarterly Reports we can see that consumers very much value that tangible, social in-store experience,” he explains, adding that an omnichannel presence is no longer “nice to have”; it is a key success factor for retailers. “A brand’s online customer experience has to match up to the in-store consumer-centric experience seamlessly.”

Foley also notes that while the online share of total retail spending is down on the pandemic years, it is still well ahead of pre-pandemic levels. And while consumers might want all-inclusive sales channel options, he warns that providing all options can cause retailers to spread their resources too thinly. “For example, door-to-door delivery services, which were essential through the pandemic, involve a significant cost to retailers in areas of labour and infrastructure development, and this cannot be fully passed on to the consumer.”

Technology has now entered the chat when it comes to the in-store experience – larger chains are embracing in-store tech to improve the customer experience, from managing fitting rooms, to instant stock checks and self-checkouts. New technologies in the hands of employees and direct automation, on the retail floor or within the supply chain, allow retailers to do more with less, says Cian Kelliher, management consulting partner with KPMG. “Self-checkout and returns, automated distribution centres and many more efficiencies will become commonplace,” he says. “Just as importantly, automation and other innovations can free employees from manual tasks and allow them to focus on what matters most: enhancing the customer experience.”

The same is true but in reverse for online, as it tries to replicate the in-store experience. “Some of our business customers are investing significantly in technology to complement the in-store experience by providing customers the ability to visualise how a product might look and feel from the comfort of their own home,” Foley says. “It could be how an item of clothing looks and fits using virtual try-on apps or how a suite of furniture looks in a consumer’s own sittingroom.” Innovative businesses are using online tutorials and product demonstrations to speak with specific groups of customers while developing loyal followings, networks and ecosystems, he adds.

The use of artificial intelligence (AI) is also on the rise in the retail world. “Customer service chatbots are already replacing mundane activities and, as the technology learns, it can provide better and more timely responses,” says Foley, although he notes that complex interactions and responses will still require human engagement.

Three Ireland stores are already augmenting their customer experience through digital add-ons. “We have invested in interactive technology in our stores where customers can self-discover while having our sales agents there to support them with any additional queries and allow them to test the physical product,” explains Ronan Gibney, director of sales with Three Ireland. “We have virtual queues in our store where this technology allows our customers to browse our stores while in the queue or go for a coffee rather than standing in line. These innovations in digital capability improve the in-store experience for both our customers and our employees.”

The future of retail may look dramatically different, however, as AI increasingly shapes and enables different retail store concepts and formats, whereby retailing and transactions could take place anywhere at any time. “As AI develops and people get more comfortable with it, we see it supporting customers to find the right product for them,” says Gibney.

“We expect that it will work hard in the online space enabling customers to get a more tailored experience with reduced steps to finding what they really want. In our brick-and-mortar stores, AI will enable us to expedite some of the operational processes for both employees and customers, again giving benefits to both.”

The reality is that AI already plays a significant role in our shopping habits, Kelliher adds. “The algorithms used on social media, YouTube etc that recommend us products, are AI-based, so AI is already influencing what we see and what we spend our money on.”