2018 Retail Lunch: The Future of Retail

28 September 2018

A panel of experts including Tim Mackinnon, Managing Director eBay Australia & New Zealand; Janet Bailey, Head of Retail Products and Experiences, Qantas Loyalty and Ingrid Maes, Director of Loyalty, Data & Direct Media, Woolworths Food Group discussed some of the burning questions facing Australia’s retail sector today including changing customer expectations, loyalty, using data for personalisation and the impact of Amazon’s entry to the marketplace. The event was moderated by Bruce Begbie, Executive Director – Telecommunications, Media, Entertainment, Technology & Retail, Commonwealth Bank of Australia.

Major event sponsors were Commonwealth Bank of Australia and King Living.

Supporting partners were NORA and the Israel Trade Commission.

Below are some of the key insights to come out of the discussion.

How do you engage with the consumer in a changing environment where there is increasing sophistication and competition?

Janet Bailey said the Qantas Loyalty Program has gone through significant change, it’s no longer just a travel program, it’s more a lifestyle program. She said we’re now in the financial space with a Qantas credit card, we’ve launched in the wellbeing space with a wellbeing app, we’re in insurance, we have the Qantas shopping platform to help make the journey as seamless as possible – we have a number of ways members can earn and spend points. We constantly ask ourselves the question: how can we diversify our proposition to increase engagement?

Tim Mackinnon spoke of selection and experience. He gave the example of food delivery: Deliveroo has a small selection but you have a great experience, whereas Menulog has more selection but doesn’t control delivery and often it’s not a good experience. Tim said having selection in a marketplace doesn’t guarantee success – those who are winning have mass selection AND offer a top experience. eBay has been in Australia for 19 years. For the most part it has been focused on selection and has been known as a used marketplace. Now it sells mostly new products – 80 of the top 100 retailers sell through the platform. eBay has gone from an auction house to a true retailer, with 64% of Australians having bought something on the platform in last six months. Tim said it’s not enough to be the site that has everything, you need to deliver a great experience. He said we now offer free delivery and free returns on millions of items, and our R&D team in Israel are doing work to ensure people shopping on eBay have a good selection and a great experience.

Ingrid Maes said Woolworths has an unwavering focus on putting the customer first and designing everything around their needs. She said we have invested heavily in data and are totally committed to using data technology for a personalised and seamless experience. We are a high velocity, high frequency retailer with a treasure trove of data. We use machine learning and AI to monitor what customers do and how they respond, and then we recalibrate our approach so we can give them what they want, when, where and how they want it, at a price they want.

Woolworths online sales are low – what metrics is Woolworths using to understand human behaviour?

Ingrid said it doesn’t matter how they shop, it’s all about putting customer at the centre and shaping the organisation around the needs of customers. It’s important to have the guts to change, don’t fall victim to incremental approaches, be prepared to overhaul everything. She said we need to improve both online and in-store to increase engagement – everything is designed around the individual. Data and technology are king and we’re leveraging data in the interests of our customers. Ingrid said we’re moving away from mass metrics as AI and machine learning have made one-on-one personalisation possible.

eBay doesn’t do one-to-one segmentation, it groups customers into eight ‘people’ and sends about a million emails a week, whereas Woolworths is higher volume and higher frequency, and sends around 50 million emails a week.

How are you doing personalisation?

Janet said it’s a key priority for Qantas. We have a broad range of data about our members, not just their travel but also their behaviours, and we target our offers and messages accordingly. She said we tailor the messaging and the channel depending on the audience and we change tone, imagery and whether the offer is points or price based. She conceded we still have more to do in that space.

Tim said eBay is currently number five globally in terms of personalisation, but feels there is a gap between what you want personalisation to be and what it actually is. He spoke of different shopping occasions: mindless shopping (lower value, more frequent purchases) and mindful shopping (a one-off gift.) He said mindless shopping is easier to convert – you send shoppers one email when the price comes down. But he said no one is doing mindful shopping well as we don’t have the same data sources. eBay is trying to get people to tell us what their interests are. Tim said we now have one million people who have put a car in our virtual garage; we know what car they have, so we only show them auto parts that match that car.

Personalisation: striking the balance between being helpful and being ‘creepy’

Janet said consumers expect us to know them, but we have to be thoughtful about how we manage what we know about people. She said you need to be mindful about how much you send to customers, and Qantas is careful about adding value to customers. For example, if we know a customer is going overseas, we will offer them travel insurance, ask if they want an Uber to the airport (Uber is a partner), and point to an in-store offer for luggage. The feedback we get is that they appreciate us knowing what’s relevant to them.

Ingrid said data is a precious gift and you have use it in the interests of the customer. She said we monitor how they respond and recalibrate our approach accordingly – what is creepy to one is not necessarily creepy to another!

What’s the difference between spam and a well-targeted offer?

Janet said it’s about understanding the customer and tailoring the message and the channels. It’s important to give people choice around how much they want to hear from us.

The impact of Amazon in the marketplace

In answer to the question ‘what’s changed since Amazon has launched in Australia,’ Tim said that price competition has intensified and there is more discounting by retailers. Ship time has come down 10-15% compared with this time last year, with many retailers increasing their delivery promises. He said there has been a change in behaviour from retailers.

When asked ‘are you doing anything differently to if Amazon wasn’t in there,’ Ingrid said no…and yes. She said because of the nature of our business (groceries), we need evolve a little slower than other retailers. However, we do have an increased focus on providing an integrated experience, and Amazon and eBay are driving this. She said they are also driving online shopping.

Difference between Australian consumers compared with US/UK from a behavioural or loyalty perspective

Tim said Australia is a great market for eBay; because of the size of the country, the expectations of ship speed are different to other countries – the UK and Germany expect next day delivery. eBay did a survey and designed its subscription service, eBay Plus, around the results. We found that what people wanted most was for shipping to be included free of charge, followed by a guarantee/certainty about when goods would arrive, and shipping speed came in third. He said we expect this will change though.

Trust in business is currently having a re-set – how are you thinking about trust, and therefore loyalty?

Tim said trust is fundamental; for a marketplace it’s the whole reason the business exists. We now have businesses like eBay which are essentially a trusted intermediary that enables transactions to occur from a seller across the world, and we trust that what we buy will arrive. He said Airbnb and Airtasker have the same challenges, trust is the biggest thing. We need people to believe that we have the capability to deliver what we say we will, and that we have the consumer’s back when things go wrong. The question is, how do you build trust through the whole purchase journey? With online shopping, after purchase but before delivery the consumer goes into a funk, has buyer’s regret and loses trust in the brand. Tim said we could do better at reassuring the consumer along the way that the thing they bought is going to arrive. Thankfully, trust goes back up again when they receive the goods.

eBay has a Flybuys partnership; many customers have linked their eBay and Flybuys accounts. It also has a subscription model, eBay Plus. Tim said you build loyalty through great experiences, and there are three levels: Trust – that the purchase will work out and the goods will actually arrive; Ease – remove frictions for the purchaser and Delight – offer something unexpected like fast delivery or a handwritten note from the seller.

Janet said we are blessed to have a trusted brand, but it comes with responsibility. Having a trusted brand has allowed us to move into other market sectors. In retail, we have a responsibility to curate our offers and our partners to suit our members. She said we have the same challenges as everyone – we depend on partners for delivery. The key is communicating back to customer what’s going on – Qantas has just introduced track and trace, and has found that customers are accepting to a point when you let them know what’s going on.

Strategies to reduce churn and retain the customer

Janet said people are interested in instant gratification. What keeps a customer sticky is if they’re striving for something more; that’s where loyalty comes into play. It’s important for shoppers to be aspiring for something more. She said this is a tool we use to miminise customer promiscuity.

Tim said with mindful shopping people tend to stick with brands, but they do shop around for smaller purchases. There are light users out there but it’s important not to get caught up with them. He said it’s about mental and physical availability – be there all the time to build loyalty. With eBay, if we get people to buy three times, they tend not to churn, five purchases mean they’re very sticky.

Ingrid said traditionally you had to rely on mass marketing as you couldn’t do a targeted approach, but now, with AI and machine learning, you can do retention marketing at scale. She said technology has evolved, don’t limit yourself to mass marketing.

Final thoughts

Janet said there are three key things we need to focus on: Wise up (about the customer), Speed up (make the journey easier and faster) and Show up (be in the right places with the right channels.) And it’s important to build trust in your brand.

Ingrid said you cannot get way from using data and technology in retail today – data is a gift, and must be used for the benefit of the customer.

Tim spoke of the selection/experience trade off. He said if you want to create an enhanced experience, what percentage of your offering can you do that with?