Customer retention is pivotal in today’s apparel retail environment, especially as even the most successful businesses in years’ past have seen a steady erosion of their foot traffic. Given the acceleration of today’s apparel shakeout due to COVID-19, determining exactly which data points correlate with shopper tendencies can go a long way toward fostering long-lasting customer loyalty.
If there’s one metric retailers must begin to value if they’re not doing so already, it’s the “rebuy rate” of new consumers that have spent during the pandemic, according to Andrew Appel, president and CEO of IRI, a big data and predictive analytics provider that helps retailer and other companies grow their businesses.
“If I’m a brand and I just got five million new spenders, one of the KPIs within the organization is going to be a second buy, and the average spend of those new consumers over the rest of this year,” Appel said during a recent webinar hosted by Coresight Research. “That is an unprecedented opportunity for retailers to come and recreate their relationships with that many consumers.”
On top of the consumers discovering new retailers to shop at during COVID-19, there’s an opportunity for apparel retailers to rekindle relationships with lapsed customers. There has been an “explosion of consumers who have went back to brands in their history and who’ve liked it,” which could even be beneficial for apparel retailers due to what Appel described as an uptick in brand loyalty among shoppers throughout the pandemic.
Deborah Weinswig, Coresight’s founding CEO, echoed the sentiment. “It’s a huge opportunity now to not only keep customers who’ve shopped with you during the pandemic, but also those who have been with you over time but maybe discovered new retail recently―help them remember why they shopped with you so much.”
The retail industry at large doesn’t measure the customer lifetime value of the shopper the way a credit card company would, Appel said, signaling the immense partnership opportunities between retailers and credit card companies.
“There have to be a portfolio of consumers that if you make them loyal, they’ll stay loyal for multiple years at the same price as a consumer who you just get a second purchase out of,” Appel said.
In the webinar, Weinswig presented questions to Appel that discuss challenges and risks for retailers and CPG brands in the current COVID-19-stricken environment, the opportunities it presents and the actions that these companies can take to stay relevant.
While the conversation between retailers and manufacturers should be “how do we work together to retain those consumers?” there’s the element of figuring out the right assortment going forward. The IRI team is generally seeing retail partners reduce assortments, which has been easier to do since they can deprioritize “items that have been on the shelf for the last five days.” But the rapid change in consumer buying habits indicates that retailers and manufacturers alike may be missing the boat in assuming that a simplified assortment is the answer.
“There’s been at least an 8X increase in the velocity and variation of what consumers have bought in the last three months,” Appel said. “Up until the end of last year, you could take two competing manufacturers―one would grow at two percent and one would grow at three percent―we’re seeing those same two manufacturers growing at 33 percent and 16 percent. You can be growing at 16 percent and still be losing market share.”
There are a lot more factors driving this changing dynamic than there were pre-COVID, such as capacity issues, shifting consumer demand, the present migration away from urban environments and a possible recession. That means building an assortment that fits the present retail offering hinges entirely on getting the customer profile right.
“We’re telling a lot of our clients and retail partners that your whole consumer profile has shifted,” Appel said. “Instead of two percent of spend on certain CPG brand products, it’s now 20 percent. There’s going to be a lot of winners and losers in a way that’s never happened in the past five years.”
As far as the post-COVID expectations within retail, Appel still believes it will take three to four years before the in-store shopping experience reverts to a destination experience.
“The halo effect of this pandemic will make people uncomfortable for the same period thereafter,” Appel said. “If you’re a major player with a big click-and-collect capability, those are the consumers I think you want to understand. One, to make sure that you can create loyalty with them, but then service them really well, because there’s been such a spike in demand that the services also get choppy. You’ll have some consumers who did not have the click-and-collect experience they were hoping for.”