Australian retailers are digital-relationship laggards: Capgemini & Sydney University study reveals

Australian retailers are building ever more digital connections with their customers yet many are failing to build long term relationships which can deliver enduring engagement.  

According to a new study called Australian Digital Commerce: a commentary on the retail sector conducted jointly by Capgemini and Sydney University, more than 50 per cent of Australians are digital buyers. That means they prefer to buy online where possible.

This in turn has lead retailers to make significant investments in digital channels such as social media. However the authors* of the report caution that social media needs to be integrated into business activities if it is to generate real value.

There is a “relational gap” according to the report and it is prevalent across all 19 retail sectors covered in the study.

“This means that Australian retailers forgo important opportunities to engage with customers, build loyalty and grow a sustainable customer base in the digital channel,” according to the report.

Australian retailers it seems have a long way to go to build the kinds of deeply engaged relationships that market leaders internationally like Amazon have achieved.

The best performers have long invested in one-to-one relationships via sophisticated digital innovations such as mass recommender systems according to the study.

Ben Gilchriest, Capgemini Digital Transformation venture lead told Which-50, “Many retailers have jumped into social as a channel without investing in the features that help to build a relationship with their customers first. They’re building an ever increasing number of connections with their customers through social but don’t have the mechanisms in place to use these connections to develop stronger customer relationships. It’s a real challenge.”

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(Image source: Australian Digital Commerce: a commentary on the retail sector)

But it’s not a technology challenge, according to Gilchriest, instead, it’s largely a process and organisational challenge. “For example, social media listening and sentiment analysis technologies and services will tell you something interesting about your customer and help you manage the volume. However, if there’s no process or organisational structure in place to integrate this into the business then it will add very limited value.”

He said closing the relational gap provides a huge opportunity for retailers.

No easy answers

Put simply one of the main reasons companies haven’t done this is that it is actually quite hard.

According to the report, “Building relational capabilities takes time, care and requires a sophisticated understanding of the mechanics of digital commerce. If done right, it allows a company to tap into the vast potential of big data analytics.”

Apart from an investment in digital systems the study makes clear that  constant monitoring of progress and tweaking of systems and customer communication is required.

The authors suggest that most retailers seem to take the ‘shortcut’ of moving straight into ‘social’, while having “neglected the relational dimension as the basis for successful engagement in the social channel.”

The joint research project  was based on an analysis of the utilization of digital commerce by 89 Australian retailers across 19 retail sectors. It examined the extent to which certain digital commerce features were available for the consumer although it did not attempt to qualify the result by making judgments about the quality of the execution.

The researchers studied digital utilisation from a consumer perspective using a list of 63 criteria to record whether certain tools, techniques or features have been implemented and then distinguished among four dimensions of digital commerce. These also reflect increasing stages of complexity and maturity: informational, transactional, relational and social dimensions of digital commerce.

Informational : Informing customers about product, service and business offerings. The informational dimension represents the most basic feature category in digital commerce. It covers the ways in which retailers provide information to customers about product portfolio and shopping experience. This dimension should be equally important to all Australian retail companies, whether they choose to engage in online transactions or not.

Transactional  : Facilitating and supporting the entire buying and fulfillment process : The transactional dimension is what turns websites into e-commerce. Features in this dimension allow transactions to be undertaken and business to be conducted through the web. They comprise shopping basket, delivery, payment and financing functionalities.

While basic transactional functionality is implemented by most pure-play virtual and Bricks’n’Clicks companies, overall less than 30 per cent of Australian retailers integrate offline and online channels by way of offering in-store stock availability information or in-store pick-up of online purchases.

Relational Building 1-to-1 relationships with customers, loyalty and repeat purchases. The Relational dimension marks the evolution from early-stage, transaction-focused e-commerce to engagement and relationship building with customers. Example features are website personalization, recommender systems, various user interaction features, loyalty and benefits schemes and other features that aim to build relationships and retain customers for repeat purchases. Australian retailers make surprisingly little use of this dimension. While Sportswear retailers are the most mature in this dimension, they still exhibit far less than 50 per cent coverage on average.

Social :Engagement with a wider customer group via integration of social media platforms. The social dimension is the latest addition to the digital commerce portfolio. It includes integration with various social media platforms and features that allow customers to create and review content, or recommend products to friends. The features most commonly implemented are Facebook pages, Facebook website integration, personal profiles and giving gift cards.

There’s a distinct difference between approaching social media as a channel, versus considering it as an integrated part of broader customer engagement according to Gilchriest.

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(Image source: Australian Digital Commerce: a commentary on the retail sector)

“What we find is that a lot of companies, not just retailers, are doing the former and jumping straight into social. Generally they’re using it to supplement marketing activity by using it as another outbound channel to promote discounts, new ranges or events.”

He said currently interaction is often limited to acknowledging great feedback or trying to manage negative comments off a public stream into private messaging.

Integration on the other hand  means considering social media as a platform to build an even stronger relationship with customers. “That means having capabilities and features in the relational dimension in place first. In operational terms this requires consideration of how social might be linked beyond marketing to sales and also service functions.”

He offered Audi Australia on their Facebook page, and Telstra across a range of social media platforms as examples of good practice in Australia.

Telstra offers customer service across Twitter and Facebook, plus peer-to-peer support through Crowd Support while Audi integrates their Facebook beyond marketing into sales and also service, he said.

“They’re good examples of companies that have considered social as platforms that need to be integrated across the business.”

According to Gilchriest,  companies that are doing well in the ‘relational’ dimension have made investments in how they build a relationship with customers.

“Typically this means that they’re investing in ways to not only capture information about customers, their past purchases and preferences, but they’re also using this to continuously enhance the overall customer experience.”

It is this second aspect that’s essential, he says. “For example, capturing data to better target promotions or advertising, continuously attempting to refine how specific this is, risks missing the real opportunity which is to build an ongoing relationship with a customer.”

This means thinking about features that are designed to genuinely drive mutual value for both the customer and the retailer, not the retailer alone.

Targeted promotions are often rationalised as being customer-focused in that they provide more relevant offers to customers.

“It’s not often genuinely designed to do this, it’s done to drive sales. That’s not to say it won’t still get results,” says Gilchriest, “But if designed in a way that has the genuine intent of delivering mutual value it will be far more successful at building a longer term relationship with the customer.”

He said this is becoming even more important as social media creates expectations of a transparent and balanced relationship with a retailer.

*Report authors: Kai Reimer, Jens Brunk, Uri Gal from the University of Sydney Business School, and Ben Gilchriest and Robert Order from Capgemini Australia

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