Rising inflation and supply chain issues appear to have hit two major retailers hard this earnings season, with two bellwethers missing Wall Street’s earnings forecasts, plunging each company’s stock price downward on May 18. Target reported a 52% decline in profit during its first quarter, with executives putting the blame on customers reducing their expenditures on nonessential purchases due to cost inflation, as well as supply chain challenges. Similarly, Walmart’s stock had its worst day in 35 years the previous day, largely due to a poor earnings report, and a weak outlook based on increasing shipping and labor costs that are projected to continue in 2022.
According to the company’s earnings, Target shoppers are still buying daily essentials, helping to push overall sales up 4% from the previous period a year ago. But they are eschewing bigger-ticket items, which are considered discretionary purchases, as shoppers are worried about “the high and persistent inflation they’ve been experiencing, particularly in food and energy,” according to a transcript of the company’s conference call with analysts. Similarly, Target has been faced with higher costs due to the need to raise hourly pay to attract workers in both stores and distribution centers.
Walmart is also seeing its customers adjust their spending, largely due to cost inflation and concerns about the future economic landscape. According to comments made to CNBC by Walmart CFO Brett Biggs, a greater number of customers reduced spending on new clothing and general merchandise as a result of increased prices on gasoline and essentials, such as groceries, and some customers traded down to cheaper brands or smaller items to save money.
With worries about the decline in customer spending, retailers should not abandon CX efforts. Instead, they need to take steps to double down on service and customer experiences to ensure that even if customers are spending less, they do not abandon their retailer for a different store simply based on price.
In addition to connecting with customers by offering more value, often through target shopper discounts for purchasing bundled products, retailers should take the time to reinforce the reasons customers are shopping at their store.
- Train or remind employees to help customers find the products that meet their needs and budget on the floor, saving them effort when comparing products or seeking out more value-oriented products.
- Train or remind employees to greet customers and thank them for their business when the enter the store. Retailers – particularly big-box chains – are often viewed as largely non-caring entities that treat people who walk through the door as dollar signs, rather than as valued customers. Even small efforts such as greeting them can help build more affinity with customers.
- Ensure that customers are made aware of manufacturer discounts and coupons, and that they are easy to find and use. Significant customer frustration is often attributed to not understanding which items qualify for coupons or discounts, or difficulty with activating digital coupons at the point-of-sale within retail stores.
- Ensure feedback mechanisms are in place so that customers can let you know of the issues they are having in terms of finding specific products or brands, so you can adjust purchasing strategies. Collecting feedback can also be useful to understand other customer frustrations, such as points of friction in the in-store or online shopping experience. Soliciting feedback now provides customers with a place to vent frustration, while also helping the retailer demonstrate empathy with their customers.
- Streamline customer service efforts to ensure that details about any out-of-stock items are clearly conveyed, as well as expected dates for fulfillment. Be sure to use customers’ preferred channels (such as encouraging customers to sign up for product availability text alerts) to let them know of new products, products that are now available, and any promotions or sales. This proactive approach to dealing with challenges in the retail environment will demonstrate that the company is working to keep customer in the loop and provide them with as much visibility into the fulfillment process as possible.
Author Information
Keith Kirkpatrick is VP & Research Director, Enterprise Software & Digital Workflows for The Futurum Group. Keith has over 25 years of experience in research, marketing, and consulting-based fields.
He has authored in-depth reports and market forecast studies covering artificial intelligence, biometrics, data analytics, robotics, high performance computing, and quantum computing, with a specific focus on the use of these technologies within large enterprise organizations and SMBs. He has also established strong working relationships with the international technology vendor community and is a frequent speaker at industry conferences and events.
In his career as a financial and technology journalist he has written for national and trade publications, including BusinessWeek, CNBC.com, Investment Dealers’ Digest, The Red Herring, The Communications of the ACM, and Mobile Computing & Communications, among others.
He is a member of the Association of Independent Information Professionals (AIIP).
Keith holds dual Bachelor of Arts degrees in Magazine Journalism and Sociology from Syracuse University.
