New research from Shopify reveals 99% of retailers plan to invest in customer experience in the next 12 months, investing 11% of total annual revenue on average.
This comes as the majority (79%) of Australians are cutting down on something to save money, and over half (54%) are seeking the best value in the current economic climate — from lower prices to higher quality products or experiences.
The latest release of Shopify’s Australian Retail Report, conducted in partnership with industry research firm YouGov, unpacks how retailers can invest for lasting success in today’s economy. The study includes quantitative findings from more than 1,000 Australian consumers and more than 200 senior business decision makers in retail businesses with 50 or more employees, as well as qualitative commentary from leading Australian merchants and partners.
“In the last 12 months, we have seen marked changes in consumer shopping behaviours, which are driving a shift for retailers,” said Shaun Broughton, Managing Director, Asia Pacific and Japan, Shopify. “From increased demand for value to a stronger preference for in-store shopping experiences, retailers have a renewed focus on efficiency and innovation. Although cost continues to be a key factor for consumers switching brands, it’s no surprise that retailers are choosing to compete on enhanced customer experience instead of slashing prices.”
When it comes to consumers’ shopping priorities, over half (54%) of Australians are looking for the best value, up 10% from last year. When asked about switching brands, 92% of consumers have bought items from a different brand than they normally do, predominantly driven by cost, with 57% switching for a better price or discount promotion, up from 49% in 2023.
But that doesn’t mean value and price are the only things consumers are shopping for. A third (34%) of shoppers are looking for quality that lasts, while 23% still treat themselves every month or so, even if money is tight. This suggests there is still space in the budget for life’s little luxuries, opening up opportunities for savvy retailers.
“The new challenges retailers are facing also bring about new opportunities — one of the reasons I love the retail industry, as there’s never a dull moment,” said Paul Zahra, CEO Australian Retailers Association. “Given the current market pressures, Aussie retailers should double down on what they are best at: delivering exceptional customer experiences, providing customers with high-value products, and staying attuned to local customer preferences.”
Further highlights and insights from the Shopify Australian Retail Report:
Cost of living concerns spark a hunt for value
Australians are pessimistic about the economy and their personal situation, with a third (32%) falling into this category, compared to 25% in 2023. Just over a quarter (26%) of consumers claim to be optimistic about the economy and their personal situation in 2024, a drop from 37% last year.
But that doesn’t mean value and price are the only things consumers are shopping for. A third (34%) of shoppers are looking for quality that lasts, while 23% still treat themselves every month or so, even if money is tight.
Retailers are focused on marketing, with 62% of retail business leaders surveyed indicating that their organisations are taking marketing-related measures, including a quarter (26%) engaging in more targeted customer marketing, and almost as many (25%) are increasing their customer service.
Unify experiences across channels or get left behind
Over two-fifths (43%) of consumers prefer shopping in-store in 2024, up from 38% last year, and proportionately more than those who like shopping online (31%).
A quarter (26%) of consumers like both in-store and online shopping equally, creating a compelling imperative for retailers to focus on both online and offline channels to suit shopper needs.
Just 1% of those surveyed are not planning to invest in customer experience in 2024, and those that are plan to invest an estimated 11% of their total annual revenue, on average, while 61% plan to increase investment in customer personalisation in the next 12 months.
Half (49%) of retailers surveyed plan to increase their omnichannel experience investment in the next year, and 57% in their in-store experience, further highlighting the returning role of physical stores in the retail mix.
Securing customer loyalty without competing on price
Over nine in ten (92%) consumers would become loyal to a brand if it offered them something, most notably consistently low prices (59%). The same proportion (92%) have also switched brands, often for a better price (57%).
Beyond price, the offer of high-quality goods would keep half (51%) of consumers loyal, while 45% of consumers cite loyalty points or rewards as an effective way to foster loyalty. Moreover, a third (32%) of shoppers would be more loyal if offered a seamless user experience.
Over six in ten (63%) retailers surveyed plan to increase investment in their product ranges in the next 12 months. Meanwhile, 62% of retailers are increasing investment in new revenue streams, and 59% plan to increase investment in expanding into new international markets.
Harnessing data for operational efficiency
Three in ten (29%) retailers surveyed are facing challenges related to poor staff retention and high staff turnover — the top single internal challenge faced by retailers in 2024.
Efficiency issues (e.g. lack of operational efficiency, inefficient supply chain practices, complex business systems, and manual processes) are a major contributor to retailers’ internal challenges, impacting three in five (61%) retailers.
When it comes to the top external challenges, higher supply chain costs (49%) were rated as the single most cited external issue, followed closely by operational costs (42%), higher cost of goods (40%) and higher cost of wages (38%). Unsurprisingly, inflation-related challenges were cited by 88% of Australian retailers.
The number one area in which retailers plan to boost spending to drive growth over the coming year is investment in employee attraction and retention programs to drive growth (65%)
And a big part of staff retention is in enabling staff to do more with less, as reflected by the nearly two-thirds (65%) of retailers planning to increase their technology investment in business intelligence over the next year, while 64% expect to boost their investment in automation.
Reshaping retail with more business intelligence, automation, and AI
Nine in ten (91%) retailers surveyed believe that the role of the chief technology officer (CTO) contributes to the evolution of the business and/or revenue growth.
Nearly all (99%) retailers plan to invest in innovation in the coming 12 months, allocating an average of 18% of their total annual revenue to it.
With this focus on innovation, the total cost of ownership (TCO) for digital infrastructure is a prominent consideration for retailers. In fact, the number one consideration when looking at potential technology investments is operational, platform servicing, and support costs, cited by 43% of business respondents as being among their top five such considerations.
When determining the ROI for commerce infrastructure, the most important metrics among retailers are profit margin, cited by 34% of retailers, revenue per customer (30%), and total online revenue (30%).
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