Loss Prevention Research Council Weekly Series - Episode 124 - Declining Consumer Trust and World Reaches 8 Billion People
With Dr. Read Hayes, Tony D'Onofrio, and Tom Meehan
How Retailers Can Win Customer Loyalty in an Omnichannel World
https://www.toolsgroup.com/resources/inventory-and-retail-customer-loyalty/
Let me start this week with new research from the IHL Group titled “How Retailers Can Win Customer Loyalty in an Omnichannel World”.
Continued supply chain disruption, rampant inflation, and an increase in selling and fulfillment channels have magnified the complexity of what it takes for a retailer to deliver an outstanding customer experience. Our consumer survey results reveal how smart retailers can not only survive but thrive amid uncertainty to win customer loyalty in an omnichannel world.
Poor inventory position is presenting a significant challenge, and opportunity, for the physical store retailer.
Inventory distortion (the annual cost of overstocks and out-of-stocks) has risen to $1.9 trillion in losses for retailers across the globe.
To put that into perspective, if inventory distortion was equated to GDP, it would be the ninth-largest country in the world – roughly equivalent to the total economic output of Italy.
Improving inventory position can help retailers secure consumer loyalty and capture impulse spending.
IHL’s 2022 consumer study confirmed that in a world with increasing online orders, the primary reasons consumers shop in-store are: they need the items now (75%) or they want to touch and feel or try on items before purchasing (57%).
In the last two years, these same consumers suggest that this has become much tougher as they are losing trust in their local retailer to have in stock what they want to buy when they want to buy it.
When consumers can’t find what they came into the store to buy, it erodes their trust in that retailer. And, that erosion of trust is increasingly driving them to other online retailers and marketplaces — including Amazon.
Across all segments, more than 25% of customers report decreased trust in retailers based on inventory levels.
When asking consumers if their trust in Amazon has increased or decreased within the past two years, 32.3% reported an increase in trust, and 26.1% reported that their trust in Amazon has declined.
According to a recent IHL survey of US consumers, 80% of US households have an Amazon Prime membership.
The memberships are as low as 70% for household incomes under $50,000, but over 94% of households with annual incomes over $100,000 utilize Amazon Prime.
What is fascinating about Prime members, however, is if you can get them into stores, they make considerably higher percentages of their total sales on impulse items.
The challenge is that when Prime members go to physical stores, they experience out-of-stocks up on up to 55% more of their shopping trips than non-Prime members. As a result, they’re choosing to shop less and less at their local physical stores.
How do Prime Members act when your store is out of stock? They take out their phone and purchase online from your competitor at 73% higher rates than non-Prime members. They are also 40% less likely to ask an associate to check other stores or your online site.
Customers report they will give up on your store after 2.5-3 out-of-stock experiences.
When three strikes is all it takes for Prime members to turn to the competitor, it’s clear that stockouts put customer loyalty at risk.
The study reveals, when people leave stores without buying what they intended to purchase, 14.5% of the time it was not due to empty shelves, but because the checkout lines were too long.
To put that into perspective, this means that in North America retailers are losing $27 billion in sales simply because the lines are too long, and consumers walk out the door. Adding items like self-checkout or scan-and-go technologies can convert those shoppers who are already in your stores and want to buy.
Another area where consumers find great disappointment is in the area of pricing disconnects.
Retailers are losing close to $90 billion in sales worldwide at the store level simply because the pricing on the shelves didn’t match the price in the promotion or online.
As we look at the entire inventory distortion issue, it is often hard to cut through the news to understand if performance is actually improving on an individual retailer basis when systems are deployed properly.
The most significant challenges to inventory distortion are the availability of workers and the disruptions outside of the immediate control of the retailer.
But $1 trillion of the $1.9 trillion inventory distortion issue is the result of inflexible inventory systems and over-reliance on production in a small handful of countries. Add a pandemic, port shutdowns, governments determining who is an essential retailer and who is not, and an unexpected war between two countries controlling raw materials significant to the economies of the world, and the job of getting inventory correct is extremely complex.
The World’s Population at 8 billion
https://www.visualcapitalist.com/visualized-the-worlds-population-at-8-billion/
Next up from Visual Capitalist, a reminder that in November we will reach 8 billion people living around the world.
In just 48 years, the world population has doubled in size, jumping from four to eight billion. Of course, humans are not equally spread throughout the planet, and countries take all shapes and sizes.
With 4.7 billion people in 2022, Asia is by far the world’s most populous region. The continent is dominated by the two massive population centers of China and India. In 2023, a big shift will occur, with India surpassing China to become the world’s most populous country.
North America’s population is 602 million people as of 2022. The continent is dominated by the United States, which makes up more than half of the total population. America’s population is still growing modestly.
The exact date that we will hit 8 billion I have seen in multiple publications is November 15.
When do we think we will reach the next milestone of 9 billion people in the world. Currently projections are that we will reach this major milestones in the 2030s which is not too far away. In fact, Earth’s population is expected to continue growing until it hits a peak at some point in the 2080s—possibly over the 10 billion mark. A decline in global population is projected starting in the 2090s.
Lots more global shoppers are coming, so get ready retail.
