Resources

Part 2: The COVID-19 Effect: Building Familiarity & Trust Helps Retailers Win

August 10, 2020

The COVID-19 pandemic has affected direct-to-consumer (D2C) and traditional retailers in different ways, for different reasons. But it has made both online and offline shopping equally convenient and inconvenient.

Before 2020, an overly saturated retail environment turned convenience into a key differentiator. It was all about making it easier for the shopper—removing friction throughout the buying process. Think set-it-and-forget-it subscription services like Harry’s razor and Amazon’s Subscribe & Save. Convenience was primarily about easy—the number of clicks and time spent.

But once the pandemic hit in March 2020, convenience shifted from simply being easy to being well suited to needs. Well suited encompasses several things we used to take for granted:

  • The product is available when we want it
  • It arrives when we need it
  • It comes in a safe format
  • It’s produced in a safe environment

Marketers have to ensure that these new potential points of friction don’t intervene in the shopping experience.

For example, online subscriptions are now also about access, due to inventory shortages, and managing expectations, such as knowing when something will arrive, and in what condition. That likely won’t change in the foreseeable future.

Elizabeth Crawford wrote about COVID-19’s “fragmenting” impact on grocery retailing in Foodnavigator-usa.com. She shared the perspective of Fulton Fish Market CEO Mike Spindler.

“Before the pandemic, many consumers defined convenience in a way that favored in-store shopping,” due to the absence of fees, the ability to choose their own substitutes for unavailable products, and habit, Spindler said.

At the start of the pandemic, supply chain issues hurt both online and in-store shopping. But in Spindler’s view, as the pandemic continued, D2C online retailers and specialty product aggregators started doing a better job assuring inventory availability and quality. Better than traditional grocery retailers, online and off.

The making of a loyal shopper

For all retailers in this new world, cultivating loyalty is essential. A prerequisite for loyalty is ensuring convenience, making it easy while also meeting consumers’ needs. But in addition, loyalty is about trust. For us to trust the brands we shop, they must deliver on their brand promise.

Trust has two pillars:

  • Familiarity. Any relationship requires being familiar with someone or something. It’s a two-way engagement, with each party being aware and understanding the other.
  • Reliability. Brands must deliver something we can depend on, consistency over time.

Someone can trust a brand, but they won’t be loyal to that brand if it isn’t convenient. And, convenience without familiarity and reliability won’t create loyalty.

John Keenan, a founder of the insurance company Anthem and now Senior Vice President of Marketing Analytics at Quad, noted that loyalty has always been a difficult-to-pin-down concept, partly because it’s emotional. In this COVID-dominated retail environment, shoppers have been, and likely will continue to focus on familiar brands.

“We simply have less interest in trying new things,” he said.

The pandemic’s impact on shopper loyalty is one of the five themes McKinsey noted in its July 2020 insights:

  • Shift to value and essentials
  • Flight to digital and omnichannel
  • Shock to loyalty
  • Health and “caring” economy
  • Homebody economy

In this new environment marketing has to change. According to Keenan, marketers need to be more empathetic. “We don’t know where peoples’’ minds are. Brands must find ways to assure (consumers) they can continue to be trusted.”

Each time shoppers or prospects interact with a brand touchpoint—whether it’s an ad, an email, a call with customer service, unboxing the product, or a post on Instagram—it creates a shared experience. These shared experiences are the foundation of familiarity.

In a recent Retail Dive article “DTC brands struggled with profitability prior to COVID-19. Now what?” associate editor Caroline Jansen quoted both numbers and experts that indicated while online DTC sales have increased during the pandemic, most of those purchasers weren’t converting to lifelong customers.

“A lot of the customers they acquire are going to make one purchase and then not come back. So you don’t really make money on those customers,” Wedbush analyst Seth Basham and Michael Felice, principal in consumer practice at Kearney, who both suggested that “customer loyalty is driven by the overall shopping experience rather than heavy promotions.”

So, during COVID-19, brands that consumers are familiar with and trust are going to win. Brands that have invested in creating awareness and creating shared experiences are more likely to be familiar to people, and to be trusted.

In the current environment, historical, first-party data retailers have collected on shoppers—when they buy, how much they spend, frequency, etc.—can’t be relied on blindly. Shopping behavior has clearly changed. That’s why familiarity is so important. It can become a key building block of trust. Just knowing someone has tried a product or service before makes them a better prospect.

Takeaways

  • Subscription services are no longer only about saving money and being easy (set it, forget it) – they are about access, familiarity and reliability.
  • Convenience now extends beyond saving time and money; for something to be convenient, the entire experience must be frictionless and worry-free.
  • The playing field has been leveled between both offline physical stores and online shopping
    • Many D2C brands that relied on drop shipping from manufacturing locations ran into inventory and distribution problems and added friction to the online shopping experience
  • Customer experience has a stronger impact on shopper loyalty than relaying on heavy promotions.