While three-quarters of retailers know they need to focus on their customers to drive profitability, a new report from LCP Consulting finds only 39% of retailers are actually talking to customers about their needs.

The report, ‘Integrating the retail supply chain’, warned retailers need to speak with customers to understand their needs in an ever-demanding retail environment where customer expectations around service and delivery are higher than ever.

“Customer expectations have been evolving at a rapid pace and you must keep up with these changes,” said Simon Ratcliffe, infrastructure director at Fat Face, who was interviewed for the LCP report. “It is important for retailers to genuinely understand their customer expectations, or the customers they are trying to capture. At Fat Face, we are just as interested in the 85% who don’t buy from us.”

Ratcliffe said the retailer’s service around returns is very important to its brand perception. “A poor service has a significant impact on the proposition of your business. Your returns service speed is very important to the customer (i.e. giving people their money back). Our view is that store returns generates additional footfall and a chance of selling them something else.”

Stuart Higgins, retail partner at LCP Consulting, added: “How can retailers hope to truly understand their customer needs and expectations, and respond with appropriate service models, if they are developing their entire customer understanding without looking outside the business’ existing knowledge base? There is a major risk in defining a customer offering based on an internal perspective of the customer, as it then becomes a self-fulfilling prophecy.”

Leave the herd behind

The report also found that retailers are stepping back from the strategy of matching the service offer of their competitors, noting that the pioneers in retail technology, are twice as likely to deeply analyse customers data (76%), compared to followers of technology (32%).

Ratcliffe commented: “There are concerns at an industry level about fulfilment and there is concern about offering so many of these services at a loss. I doubt whether that tide can be pushed back as the base hygiene standards have risen. That’s just evolution, that’s how it is now – what is to change is to get smarter on the choices offered and to lower the cost of delivery.

“We are product differentiated – your product had better be good. Make your strategic choice – don’t be all things to all people.”

The report interviewed over 100 retailers in the UK and US, including FatFace, Aldi and The White Company, to understand how retailers are interacting with customers.

Phil Clarke, COO at The White Company, insisted the retailer thinks of technology hand-in-hand with its customers.

“Retailers have to be very focussed on their technology for today and into the future,” he said. “Customers are increasingly demanding of the delivery to their homes. When we think of technology, we first think of what is important to our customers – now and in the future.”