Consumer expectations are changing and the industry needs the latest technologies for a real insight into what they are, writes Helen Gregory Just when you were getting used to calling your staff colleagues, there's another buzzword on the way ­ customers are now being labelled "guests". At least, that's according to the latest thinking from retail experts in the United States. The Land of the Free likes to think of itself as at the cutting edge of business trends, and its gurus are advising that retailers and manufacturers there ­ as well as in the UK ­ need to shape up their inter-personal skills if they want to hang on to customers. In short, treat them like kings. Now it's not enough to print a helpline number on a packet or direct confused shoppers to the baked beans' aisle ­ you have to build a relationship with a customer if you want to succeed. Get intimate with them, says the new wisdom ­ offer to "be their host". Our American counterparts ­ heard recently at the National Retail Federation annual conference ­ insist that in this fast-moving, anonymous, digital age, customers now need to be treated as individuals with an offer tailored to them. The key message is: find out what your customer really expects and make sure you can offer it to them consistently. And equally important: make sure you're only promising what you can deliver. Focus groups, they say, must ask people not only if they are happy with what they have, but what they want next. Mary Delk, a partner in Arthur Andersen Retail Consultancy Services, says consumers are currently an intangible asset. "Most stores aren't good at building new and lasting relationships with customers. They don't monitor the retention of their best customers as religiously as the products that do well. You can't manage what you can't measure and you can't have a relationship with someone you don't know." She asserts that it is not enough to conduct all the normal types of consumer research ­ real insight is needed to understand what the consumer will want in the future. "Size doesn't count the way it used to. Too much focus has been put on building new stores. In the future, brand and selling culture will become more important." Katherine Lemon, from the Harvard Business School, adds: "The notion of who sells and who buys has been turned on its head. With new technology, people are able to tell us that they are open for business. Engaging the consumer will be the most important thing in the future. Expectations are rising and tolerance is going down ­ the window of opportunity has shrunk." According to a report by Cap Gemini Ernst & Young, Consumer Relevancy ­ Connecting with the 21st Century Market, the meaning of the five foundations of commerce, namely price, product, service, experience and access, have changed: It believes that: - Consumers are not concerned about getting the lowest price, they want prices that are fair and consistent - Customers don't always want the best ­ they want the product when they expect it, whether it's top of the line or just good enough - Special services mean nothing if the company doesn't serve its basic everyday requests - Customers don't equate access with location but with navigation - they don't want to be confused by clever layouts - Customers don't want to be entertained, they want to be treated with respect and dignity ­ the basis of a long-term relationship "It's not about locations or money," says John Torella, senior partner with the J C Williams Group, "but the relationships you create". He believes brands build relationships with customers and keep them coming back. And he adds that it's not about age or income, but about attitude. "The great retail brands help the consumer find out who they are and how they want to live their lives. Great brands are a shorthand for trust." Torella says firms need to be fanatical about every aspect of their company's branding ­ even how staff answer the phone. "Brands simplify choice, enhance people's self-esteem, save time and provide aspirational benefits." A strong brand is a good platform from which to lever other initiatives and Tesco is lauded across the pond as a good example of a chain which is proving successful in areas such as insurance and banking. Jevin Eagle, a partner with McKinsey & Co, says companies with a good image instil trust in consumers. According to him, a staggering 60% of US consumers believe Wal-Mart has the skills to branch out into other industries; 71% think it would do an equally good job as most restaurant chains if it opted to go into the catering business. In other words, they believe that "Wal-Mart would probably be the biggest retailer of cars if it decided to branch out in that area". He predicts that successful retailers will eventually become eco-systems ­ offering an integrated set of services revolving around the consumer. "Maybe DIY stores will soon be able to do everything relating to buying a home ­ such as offer to connect your phone and sort out your mortgage ­ serviced by lots of different vendors. Consumers are aching for something like this." If US consumers are yearning for multi-purpose stores, they are already well used to shopping in a multi-purpose way on the web. Believe it or not, the computer is more popular than the TV in most old people's homes in the US. And the web is not only used as a recreational tool by American families ­ Wednesday is the busiest day for most internet sites, with a lull in buying at weekends, indicating that most shoppers are using it at work, as part of their everyday routine. A lot more shoppers in the US are also using the internet as a research tool, to find out what there is around before going out to buy it. Mark Goldstein, president of K-Mart's on line service BlueLight.com, says more than 35% of what people buy at the store has been directly influenced by what they have seen on the internet. Revealing statistics show that computer-users in the US spend 58 minutes a day on the internet, but that while 30% of US people buy on line, only 3% of retailers sell on line. Yet more research shows that online shoppers expect to see at least the same number of products as in stores and catalogues, while 61% expect online clothes to cost less than stores and 47% expect food and drink to be cheaper. Consumer and retailer perceptions were also found not to match up ­ 64% of shoppers said good merchandise was the reason they shopped on line, but the companies questioned believed they shopped online because they liked the convenience. Ernst & Young's survey of nearly 4,500 consumers in 12 countries and 74 companies found that online shoppers are starting to look almost identical to shoppers who buy in stores; 60% of online shoppers are women, they have an above average income, and come from a broad age range. The shoppers had made 13 purchases in the last year and spent $896; while frequent buyers had spent $2,315. Books, CDs and computers were the most popular items and Amazon was still the favourite site. However, as a result of this online buying, a staggering 57% of on line buyers are starting to shop less in stores. Stephanie Shern, global and US director of retail & consumer products markets at Ernst & Young, says retailers now know that online selling is a requirement not an option. "The brand is king. A multi-channel strategy is the key to success. Consumers want consistency and their demands will push technology forward." Shern says the success factors in the future will entail having a multi-channel strategy, along with consistency in merchandising and speed. "We predict that by 2005 on line shopping will account for 10%-12% of all sales in clothing and toys and up to 25% of books and music. Cannibalisation will occur." Kathryn Cullen, director of e-business at Kurt Salmon Associates, believes that the real barrier to e-commerce is the unwillingness of manufacturers and suppliers to share information. "They think it will put them at a competitive disadvantage, but it's not true. You need to share information ­ it will become the platform for innovation." Even if suppliers and retailers aren't playing ball together, big retailers are linking up in the US to help build their businesses. Toys R Us has teamed up with Amazon.com to sell its products through Amazon's web site, while Barnes & Noble book store customers who bought over the firm's web site at Christmas received an email saying: "Congratulations! Your recent purchase at Barnes & Noble.com has qualified you to receive a Gap Code good for £10 off a $50 purchase at gap.com". By doing this, retailers are using the channel to market their brand in new ways, as they know that only a few major players will dominate every category in the future, so increasing their chances of being on the winning team. E-commerce is a given part of everyday life in the US, and m-commerce is the next big thing, with more companies predicted to join the rush to target consumers over their mobile phones. And it is predicted that companies who had held back from joining the internet revolution will be quicker to get involved in e-commerce with some of the technological trends in retail utilising mobile phones. Some firms are trialling systems which allow consumers to punch a code into their mobiles as they walk up to a vending machine which sends a signal for a product to be released and automatically charges the user ­ without cash changing hands. Meanwhile, shoppers can sample audio clips through their phones using Barnes & Noble bookstore's listening wall. Palm pilots are also big news and it seems that it won't be long before UK retail staff will be walking round clutching inventories, sales figures and customer records in the palm of their hand. The biggest electrical retailer in the US, Best Buy, now has staff equipped with palm pilots which give them information to respond to shoppers' queries, and allows them to write up sales during the day. President Brad Anderson says future scenarios include shoppers' records being called up on the palm pilots when they come into the store which could then give staff details about previous purchases and help them sell related products. Alternatively, customers could scan promotional leaflets at home and then feed the information into a computer to order goods on the internet. Store managers could also benefit from new technology that lets them see what's going on around the shop on a palm pilot computer ­ a real-time video means that someone can watch a refund being given or check on security from a distance. And for home shopping, web sites Stateside look slicker and work faster. Among the advances in new technology, shoppers looking for clothes can now click on a jumper-wearing model on screen and the colour will automatically change to illustrate different varieties. One more click and you can see different angles of a particular product. Another software package links a shopping site with a datamining system ­ as shoppers navigate the site they are asked questions about their tastes as they buy and the information is then used for future marketing campaigns. The bonus is that shoppers are not bothered by campaigns irrelevant to them. Huge clothing retail chain Eddie Bauer is just one of the retailers testing out the new technology. It plans to test a data-collection method in its stores by placing a kiosk with a bar code scanner in dressing rooms. Customers who enter their email address can scan items and then later be notified when a product is reduced. In this way the chain can communicate on a personal level and has a ready-made audience with whom it can liquidate overstock. Meanwhile, catalogue and on-line retailer Lands End is scanning customers' bodies in vans cruising round the country. Once scanned, details in the form of a bar code, along with information on hair colour, eye colour and personal taste are loaded into a personal web page. So the next time a shopper goes on line, they can "try clothes on" their virtual model for a better fit. These ideas may seem from an X-Files age, but bear in mind that 10 years ago the internet was still just a gleam in a programmer's eye. Indeed, Marks & Spencer is rumoured to be about to launch the internet scanning system in the UK. US retailers are slightly further down the road and their advice, that a multi-channel strategy is the key to success, is worth heeding. It's now bricks, clicks, and mobile phones, and get to know your guests real well while you're at it. {{COVER FEATURE }}