Manthan had the fortune to converse with Neil Saunders, Managing Director at retail research and consulting firm Conlumino, which focuses on all aspects of retailing and consumer behavior. He brings his wealth of experience in retail, business strategy and consumer research, to share with us his thoughts on the changing retail sector and the challenges it faces today.

MANTHAN: What is the biggest challenge that you feel today’s retailers are facing?

NEIL: The biggest challenge is that of adaptation. There are so many shifts in today’s retail sector and so many of these involve fundamental deep-rooted change that it can be hard for retailers to understand the implications and adapt their business models accordingly.

This is especially so for traditional retailers that developed and grew their businesses in an era before the internet existed. Those models are no longer fit for purpose.

MANTHAN: In this decade, what changing consumer behaviour has had the biggest impact on retailers?

NEIL: The rise of the multichannel consumer has, arguably, been the biggest change. This has made it much more difficult for retailers to understand how and where people shop, and it has given more power and choice to consumers. It has also made retail business models more complicated and expensive.

Serving the customer now involves more touchpoints than ever before – touchpoints that often need extensive investment.

MANTHAN: Which brick and mortar retailer do you think is a great example of effective personalized customer targeting and why?

NEIL: Bonobos is a great example of an online retailer that has pushed into physical and used personalized service to really differentiate itself.

They take information from customers’ online profiles to understand likes, sizing preferences, and other details. Assistants in store use this information to advise and select products they think will be of interest. In doing so they save the customer time and make the shopping experience more engaging and fun. For shoppers, it’s like having a personal stylist who understands your needs.     

MANTHAN: You’ve written about loyalty with respect to supermarkets such as Whole Foods and Market Basket. What would be a key takeaway for retailers looking to foster customer loyalty?

NEIL: Loyalty isn’t just about gathering data on customers and rewarding them for making purchases. That’s part of it, but fostering true loyalty is wider than that.

Market Basket inspired real loyalty because shoppers bought into the ethos of the firm: they liked what it stood for and believed in its values. Its staff lived and breathed those values and felt empowered to deliver genuine service to customers. To a certain extent Whole Foods does the same. The lesson is that loyalty is a science and an art. Too many retailers focus on the science or the numbers part, and not enough on the softer side. Great loyalty needs both.

MANTHAN: How do retailers largely feel about using analytics in their decision-making? Are they eager to apply advanced analytics or more inclined to go by instinct?

NEIL: Truth be told most retailers like to use a mix of both. Data and analytics are critical in helping to inform retailers about what’s going on, how shoppers are behaving and what is working and not working in their businesses.

Arguably having good analytics has become more important as the retail environment has become more complex. However, retail remains a very creative sector and a lot of decisions are made partly on feel or qualitative views. You see this especially in brands like Ted Baker where creativity has been critical in creating a strong and successful offer.  

MANTHAN: How will retailers need to evolve to stay competitive?

NEIL: There are so many! However, price and margin pressure is a key one. Retail has become more competitive and shoppers more price sensitive; this erodes margins. However, at the same time retail is more complex and most retailers need to invest more and spend more to stay ahead. That’s an uncomfortable dynamic that will lead to many failures and the re-configuration of many business models. This process is still running its course so retail will see much more churn and change over the next five or so years.

Thank you, Neil.