News of store closings, the domination of a hand-full of ecommerce players, and executive leadership shake-ups are evidence of a changing retail landscape. However, in the midst of this shifting industry some retailers have continued to thrive. We wondered, what exactly is driving this change, and more importantly, what do customers really care about?
We put on our investigative hats and partnered with IPSOS for our annual consumer survey. We decided to focus our research on the niche we are immersed in day in and day out: Store credit and customer loyalty. What we found is the root of retail change is likely affected by the different preferences of Gen Z, Y, X and Baby Boomers.
In our most recent webinar we hosted a guest speaker from Forrester Research Principal Analyst Brendan Miller, to dig into how customer preferences from generation to generation are driving changes in buying behaviors and brand loyalty.
Here are the top 8 insights:
1.Consumers know more about retail credit than you think
In the age of new innovative payment methods, customers across the board are more aware of store credit options. In fact, 8 out of 10 (78%) shoppers today are aware of financing options that retailers offer, up from just 51% two years ago.1
Why might this be? First of all, buyer confidence is at an all time high. Secondly, according to Forrester’s April 2017 Boost Your Conversions With Checkout Financing report, newer non-traditional credit players are bringing financing to checkout, and driving more awareness, especially on the digital front.
We expect to continue to see awareness grow as credit card purchasing, consumer confidence, and transaction values stay up, and younger generations reach life stages that require them to make higher ticket purchases.
2.The right loyalty tools make all the difference
There’s a common misconception that millennials and younger generations are not as loyal to brands as their predecessors. However, our data proves otherwise. We found that 60% of millennials are more likely to shop at a retailer if they have credit with them and 85% of customers will return to that retailer to use financing.1
Based on these results, we can’t help but think that the problem isn’t that they’re averse to being loyal but instead that the right loyalty opportunities haven’t been presented to them.
What motivates this group of 20-somethings is completely different from what motivates older generations. For example, Gen-Zers say they value credit cards that are functional, have utility, and provide them with promotions in exchange for their loyalty, unlike Gen Xers who value prestige.1
3.In-store purchasing is not dead, so don’t neglect it
Across every generation, more than 1/3 of customers prefer to apply for financing in-store.1 Why might this be? This boils down to the fact that in-store offers the best credit experience today. Many credit application experiences aren’t optimized for ecommerce or mobile yet. Online applications can reroute customers to a new window, request too much information, or load slowly.
Retailers are recognizing these pain points as they are beginning to focus on improving these innovations. They know the value that mobile and ecommerce offers can have on loyalty, they just need the resources and expertise to speed up adoption.
While in-store credit remains top preference for customers, that doesn’t mean that there isn’t room for growth here. Many retailers still don’t do a great job of clearly marketing financing options, and waiting until checkout is oftentimes too late.
4.One size does not fit all when it comes to retail credit
Customers are looking for a variety of ways to pay for big-ticket purchases, It’s up to retailers to know their customers and enable choice. In the age of the customer one solution doesn’t satisfy every customer.
In adopting more credit options retailers will likely need to turn to financing platforms and third party providers to help them create a seamless credit experience.
5.Start investing in your mobile experience now
It should come as no surprise that mobile functionality is becoming more and more prevalent in our every day lives. However, retailers still have some catching up to do. Today only 16% of Gen-Z prefers to use mobile to apply for credit and less than 5% of all generations prefer to checkout on a mobile device if using store credit.1
With today’s technology there is no reason to wait to checkout at point of sale. If retailers don’t move towards the means of self-checkout then credit sales are going to be negatively impacted. As we move into the next 4-5 years, retailers that aren’t creating an efficient and optimized experience in a mobile environment will likely lose out. The next generation of customers will grow to expect the same consistent experience that they received in-store, online and on their mobile phone.
6.Experience –obsessed retailers are winning the store card battle
Retailers like Amazon and Target are winning the credit battle among the younger generations with, 48% of Millennials having an Amazon card and 38% of Gen-Z having a Target card in their wallet. We know these programs are huge loyalty drivers, as our data also shows that 90% of consumers reuse their store cards.1
What do Amazon and Target have in common? It boils down to a well-rounded experience that includes promotional offers, transparent terms, and a simple apply process.
On the other end of the spectrum, Macy’s has done a great job of maintaining their core baby boomer shopper but has struggled to make strides to cater to other generations. The fact of the matter is that 6 out of 10 millennials walk away from the retailer if they aren’t approved for credit. Additionally, 6 out of 10 didn’t apply for credit with another provider for another year after getting declined.1 Getting that rejection at an early age can damage that brand relationship for years to come. Retailers should keep this in mind as they focus on their customer experience.
Now it’s up to retailers to expand their program to appeal to all customers so as not to tarnish their reputation with one generation in the long run.
7.Simplifying the credit checkout experience is paramount
Our data shows that 50% of Gen Y and Gen X have applied for financing, either in-store or online, with Baby Boomers (36%) and Gen Z (24%) trailing behind.1 While these numbers are great, there is room for improvement.
When we look at retailer-by-retailer metrics you can see which have done a great job educating their retail associates, presenting promotional offers, and have strong placement online. These all factor into ultimately driving applications.
Consumers are savvier than ever today, so they expect every aspect of the application process to be straightforward, from how long it takes them to enter in their personal information to the terms they are presented with. Anything that takes more than a minute or two to complete or causes concern could result in a poor experience and an abandoned cart.
8.Retailers are reducing time to market and easing adoption by turning to platforms and third party providers
Customer’s expectations are constantly changing and the list continues to grow. For many retailers it can be challenging to manage and maintain a credit experience all on their own.
To keep up with customer demands, retailers should lean on digital investments and third party providers to help them create positive credit experiences. The value of working with providers boils down to enhancing the customer experience by extending more credit options to customers, creating an easy application process, and maintaining this experience across every channel.
When looking to work with any platform or provider, retailers should always evaluate costs and risks, and seek solution flexibility and ongoing support. Ultimately, retailers should know how these platforms and providers are pushing more customers through to them and helping to drive more purchase volume.
1. Vyze’s Consumer Preferences Survey, IPSOS 2017
To watch the recording in full, click here.