Retail customers: the next generation

Retail customers’ and employees’ expectations are changing – so retailers need to change too.

Millennials. We know them as the largest and most influential customer group and the first true digital natives. Their behaviour has not only fundamentally changed retail, it has even shaped the behaviour of generations that came before them.

Our 2017 Global Powers of Retailing report discusses the need for retailers to master the ‘art and science of customer engagement’ and of a new world centred on designing ‘fresh experiences, enabled by technology’. As the pioneers of mobile and social, Millennials and now Gen Z have driven this need. They are setting expectations and shaping trends globally including the desire for experience and the omni-channel imperative.

Experience > materialism for customers

With this new generation of customers defining themselves less by number of possessions and more by their experiences, we are witnessing a growing awareness of how our purchases and choices define us as individuals and customers. The sharing economy and our drive for authenticity and transparency is resulting in customers using their spending power to enhance their own personal (and social/digital) brand.

The demand by customers to shop when, where and how they want has seen the rise of new channels, formats and operating models. It’s no surprise that this, coupled with the impending proliferation of exponential technologies means that most retailers are battling with how to engage this new generation of customers.

Employees’ needs = customers’ needs

Unfortunately for retailers, there is another hurdle this generation brings to their business – the changing needs of the millennial employee.

Millennials and Gen Z are entering the workforce in high numbers and similar to their shopping behaviours, they have very different expectations and workplace demands. As a cohort, they seek the elusive work/life balance and expect flexibility in how and where they work. In the same way this generation is more selective about which brands they engage with, as a workforce, they are also driven to businesses that have genuine societal impact with purpose and meaning.

Given workplace talent is the conduit that many retailers depend on to deliver their brand promise to an increasingly demanding customer, businesses are placing greater emphasis on agility, innovation and digital to increase their appeal to new generation employees.

Deloitte research found that retailers rewarding experience-driven behaviours and valuing more entrepreneurial employees are more adept at responding to the evolution in skills required from the industry. On the flipside, more traditional, hierarchical businesses with greater focus on loyalty and tenure instead of employee learning are finding their culture to be less attractive to this segment.

Who’s getting the ‘new’ experience right?

One retailer that recognises that millennials are fundamentally different to previous generations, both as customers and employees, is AllSaints. From the CEO that works in retail stores on the weekend, to the ‘shadow boards’ of young leaders, they are determined to understand and connect with this new generation of customers. Similarly, they have created a workplace driven by cause, not just financial rewards. It centres around real-time communication and feedback, complete transparency and a distinct lack of hierarchy where employee participation is vital to engagement.

Today’s retailers need to recognise the values that drive the next generation employee and the significant influence they have on the retailers’ ability to engage todays customer. Equally, retailers need to address the next generation customer’s desire for experience and brand connection. Striking a balance between the two could mean the difference between winning and losing in today’s evolving retail landscape.

The AFR National Retail Summit (in association with Deloitte) takes place in Sydney on 1-2 November. We’ll be discussing the changing face of retail customers and redefining the retail experience at the event. Check out our piece on Technology in Retail for a tips on how to use technology to enhance your customer and employee experiences.

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