Retailers have faced a tough year. Stay-at-home orders and the resulting shift to online saw buyer behaviour altered. Consumers across the globe flocked online in numbers not forecast for a decade.
McKinsey’s UK Consumer Sentiment research highlighted that 63 per cent of consumers tried new shopping behaviours in the past year, and that they were primarily motivated by a need for value, convenience, and availability.
Retailers were therefore pressured to drive digital transformation at significant speed. The role of technology and its driving force to transform the retail sector became even more apparent. The brands that flourished, did so by digitally enhancing their omnichannel capabilities and operating models from front to back, creating new opportunities to thrive.
Customer loyalty up for grabs
Lockdowns caused shoppers to rethink their buying habits. Whether this meant searching for out-of-stock products via any means necessary or researching online for local retailers. Almost three quarters of consumers tried new brands or new ways of shopping and consumers switched brands at extraordinary rates. Gen Z and high earners were in fact the most prone to switching.
This shift alongside the increase in digital consumption created a perfect opportunity for retailers to tap into. The dominant brands that emerged quickly adapted to this change in behaviour. They understood what was happening and changed their plans early on to target consumers where they spent time – online.
This shift in behaviour generated a wealth of consumer data and provides a once-in-a-generation opportunity for retailers to acquire new customers and build loyalty. But they may also want to be able to understand customer wants and needs using granular analytics to determine when the demand will surge, and where. Understanding, interpreting, and acting on this data may help define how far retailers can grow.
The growth dream team
It’s the combination of consumer behaviour data in a data-driven test-and-learn operating model infused with creativity and purpose that will lay the foundations for growth. McKinsey’s recent research: ‘Getting tangible about intangibles: the future of growth and productivity’, indicates that retailers who grew their business over the pandemic invested eight times more in IP, creativity, research, technology, software, and human capital than low growers.
Chief digital and chief marketing officers should work hand in hand with the CEO to ground their differentiated strategy in purpose. Working in partnership they can bring together the creative and analytical muscles of their organisation to deliver experiences that matter and cement loyalty with new and existing customers. This will help ignite and sustain growth over the longer term.
The growth triple play
With the dream team in place, three elements are emerging as instrumental in delivering growth: creativity, analytics, and purpose. It’s what’s called the growth triple play. Further McKinsey research indicates retailers that integrate all three are logging two-to-three times the growth of their peers. Each element of the growth triple plays a role in success, and they strengthen reciprocally.
Creativity is part of the origin story of marketing, especially for retailers. The last revolution in marketing was about the fusion of creativity and data analytics. The speed and granularity delivered by analytics are far more powerful when integrated with innovative, breakthrough creative ideas and programs.
What is new today is the addition of purpose, the statement of a goal that is higher than just ringing up the next transaction, which resonates in a deeper sense with customers. Customer expectations of brands are shifting, and a brand’s purpose and values are now reasons for buying.
What these retailers do next, as optimism about the recovery continues, will set the playbook for the next decade. It’s going to take sustainable speed. Companies that surprised themselves with their ability to adapt in real-time in the early stages of the pandemic now need to graft this into their DNA and turn it into a competitive advantage. They also need a future-ready business model based on their resilience to absorb the potential future shocks and use them to build sustainable growth.
Orsi Jojart is an associate partner at McKinsey and Co