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Low Operating Standards Causes High Retail Defection

Sep 7, 2019 | Blog, Retail

Old shopping till

Low Operating Standards Causes High Retail Defection

ServiceChannel’s May 2019 report on the state of Brick and Mortar retail is a damning tale of incompetence and lost opportunity leading to high retail defection by customers. This loss of customer loyalty, largely through poor service is causing partial customer defection for the company time after time. The subtitle of the study is:

The real reasons shoppers aren’t returning to your stores or banks.

Specifically, the report analyzes what causes customers to not return to a retail location and warns that retailers who have not invested in their physical locations leave themselves prone to disappointing in-store experiences lower customer satisfaction and bad business consequences. Specifically for the latter, they mean defection.

What is the Opportunity?

The good news is that according to the report findings, 86% of customers still make more than half their purchases at physical stores. When retailers offer great in-store experiences, loyalty improves, shoppers spend more time in stores, make more impulse purchases, come back more frequently each month and think more favorably about the brand. Smart retailers view their physical locations and level of operations as a strength and invest accordingly to prevent retail defection.

Where is it Going Wrong?

In the survey, only 18% of customers think brands are delivering great customer experiences. In more detail, 70% of shoppers have had a recent negative experience in stores. This is causing customers to defect and a decrease in customer spending for the company. Loyalty is decreasing from a higher percentage of customers. The current retail model is just not working.

What this means is that retailers are not executing on the basic operational standards:

These basics include:

  • Empty or broken shelves
  • Poor service
  • Disorganized inventory or low items
  • Limited product range or low access
  • Dirty bathroom
  • Parking lot issues (lack of snow removal, potholes)

• 64% have walked out of a store because of the physical appearance or disorganization.
• 20% have encountered spilled products or messy floors.

In particular, women control 60% of personal wealth in the US and account for 85% of all consumer purchases but are much less tolerant of a mess. In fact, a majority of women say messiness would keep them from returning to a store.

What is the Impact? What are the Costs?

The impact to the company from customer attrition are catastrophic – especially to the bottom line:

After one bad experience, 52% of shoppers will leave without making a purchase. A big hit on the customer base.

Who can afford this partial defection? But it gets worse.

One bad in-store experience is all it takes for 69% of shoppers to decide not to return. For high-income shoppers (those earning more than $100,000 a year), expectations are even higher, with 76% citing they are less likely to return to a store after a single bad experience. This includes retail bank customers.

  • 64% have walked out of a store because of the physical appearance or disorganization.
  • 20% have encountered spilled products or messy floors.
  • In particular, women control 60% of personal wealth in the US and account for 85% of all customer purchases but are much less tolerant of a mess. In fact, a majority of women say messiness would keep them from returning to a store. A massive hit on customer defection.
  • We will add these stats to those we have mentioned before.

The retail bank must be included in this analysis. According to recent research, by the Journal of Consumer Satisfaction, retail customers are no longer loyal customers. Current customer frustrations are increasing, leading to customer complaints and the gap between customer expectations and delivery are growing in the wrong way. There is an increasing leakage of customers! Your primary stable bank is no longer so stable and revenue rates per customer are declining at the same time the defection rate is increasing.

Restroom Experiences are the Worst

Restrooms matter, a lot. We have said this before, and in fact, have a specific feedback application – Flushcheck. This study also concludes that getting the restroom right is critical – especially in the times of heightened COVID 19 hygiene concerns:

• 1 out of 3 consumers encountered a dirty bathroom in the last 6 months.
• 1 out of 5 would not return to a store because of a dirty bathroom.

After encountering gross bathrooms:

  • More than ¼ of shoppers leave without doing business.
  • More than ½ are less likely to ever return.

But if you achieve high restroom quality, 1 out of 4 say respondents they’d return to a store for a clean bathroom.

Conclusions and Action for Retailers

The store is a mess – service failure is real – and defection costs are high – so fix it! Get shelving, inventory, and cleanliness to high standards.

Retailers need to handle the basics BEFORE exposing customers to too much “bleeding edge” technology. In fact, four out of five shoppers would rather have a clean store than one that prioritizes tech, and two-thirds of shoppers think retailers are too focused on experimental tech vs. in-store basics. Profitable customers only express loyalty when the basics are addressed. Business models for retail stores must review this new critical reality and change.

Lots of great survey intelligence here to clearly show that improving the retail experience for customers by fixing the basics (including bad service) will pay huge dividends. Real-time customer feedback will help the company only if it leads to a demonstration of customer service improvement.

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