Background and relevance

1 INTRODUCTION

This chapter introduces the research which is conducted on omni channel shopping behaviour during the customer journey of Dutch consumers. This chapter is organised in the following way. In the first section, the background and relevance of this research are discussed. Omni channel shopping behaviour and the customer journey are relatively new concepts; these concepts are explained in section 1.1.1 and section 1.1.2. The next section (1.2) gives insight in the scope of the research. With these insights the research questions are defined (section 1.3) and the research design is developed (section 1.4).

1.1 BACKGROUND AND RELEVANCE

In recent years, the number of purchase and orientation channels has increased. This creates widespread challenges for researchers and for practitioners involved in retailing. Because of these challenges, there is a need for studies about multiple channel customer management with the objective to increase customer value.

This customer value can be increased through proper customer acquisition, retention, and development (Neslin, Grewal, Leghorn, Shankar, Teerling, Thomas & Verhoef (2006). However, it is a challenge to understand the behaviour of consumers in an environment where consumers can shop anytime and anywhere. Thereby, it is important to understand the characteristics of consumer segments, in order to target and position online and offline channels well, to be able to reach new customers and serve current customers (Konuş, Verhoef &

Neslin, 2008).

1.1.1 OMNI CHANNEL

A few years ago, omni channel shopping behaviour was something no one knew about. Recently, the popularity of the concept ‘omni channel shopping’ has increased, but little research is conducted (yet) on omni channel shopping behaviour. However, research is conducted about multi channel and cross channel shopping behaviour (Konuş et al., 2008; Neslin et al., 2006; Verhoef, Neslin, Vroomen, 2007). Multi channel shopping is shopping on different channels, for instance in the brick and mortar shop and online on a website. Within multi channel shopping every channel has its own strategy. In cross channel shopping there is one strategy for all channels and consumers use different channels. Omni channel shopping is seen as an advanced form of cross channel shopping. Consumers use several channels during the buying process, both online and offline: channels such as websites, webshops, social media, brick and mortar shops, applications on mobile devices, catalogues, and many more. In addition, consumers switch easily and continuously between these channels and they experience all channels together as one complete channel. For instance, when consumers are going to shop for groceries at Albert Heijn they can use the ‘Appie’ application on their smartphone; this application can show consumers’ shopping list and a personalized shopping route. Consumers experience this application and the shop as one complete channel. This seamless shopping experience is called omni channel shopping.

Consumers consider the pros and cons of each channel before using them. The choice behaviour of consumers regarding channels depends on characteristics of consumers, products, shopping channels and the retailer (Zijlmans, 2010). Based on their wants and needs at a moment, the consumer decides which channel to use to search for information or buy products. For consumers, online shopping has, among others, the advantage that it saves both time and effort. In addition, information can be easy found and compared online (Kollmann, Kuckertz & Kayser, 2012).

Recent, new media have emerged, resulting in a closer connection between retailer and consumer. In the Netherlands, social media have integrated in daily life; almost eighty percent of the Dutch uses social media (Newcom research, 2013). Retailers’ use of social media has also increased. Research of EtailTrends has shown that social media use by retail formulas increased extremely last year, the number of fans and followers increased sevenfold in one year. Social media can be defined as media for social interaction, using highly accessible and scalable communication techniques (Markova and Petkovska-Mirčevska (2013)). Social media is, among others, accessible by personal computer, tablet and smartphone. In the Netherlands, the most used social media channel is Facebook.

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Tablets and smartphones are very popular. In June 2012, twenty-three percent of the Dutch population had a tablet and forty-eight percent had a smartphone. Smartphones are most popular among 18-34 years old consumers (71% has a smartphone) and 13-17 years old consumers (61% has a smartphone). Tablet owners are generally a bit older, which is presumably due to the price of tablets. Tablets are most used in the age groups between 35 and 49 years old (27% has a tablet), between 50 and 64 years old (24%) and between 18 and 34 years old (22%) (GfK, 2013).

New media and mobile devices have created a new type of shopper. The new shopper has a strong functional and emotional bond with his smartphone. The new shopper is always online; has fast access to information;

compares and evaluates prices actively; uses several channels, online as well as offline to search, shop and buy;

shares his product experience through social media, and at last the new shopper has high expectations for meeting his needs and wants, anytime and anywhere.

Nowadays, consumers have many opportunities to orientate, gain information and buy products. Many retailers have expanded their shopping channels, offline and online, to better serve their customers and to increase sales (Benedicktus, Brady & Dark, 2008; Verhoef et al., 2007). This is necessary because, cross channel shoppers are more profitable and more loyal than single channel shoppers according to the Cross Channel Integration study of Accenture (2010). More and more existing retailers are developing a strategy for serving shoppers across all channels. They want to improve the relation with their customers by expanding the touch points with customers.

1.1.2 THE CUSTOMER JOURNEY

In recent years, there has been an increasing amount of literature on online shopping behaviour (Javadi, Dolatabadi, Nourbakhsh, Poursaeedi & Asadollahi, 2012; Verhoef et al., 2007; Kim & Eastin, 2011; Jepsen, 2007). The popularity of online shopping is still increasing because of the convenience of the internet, the possibilities to compare price and quality, and the increased amount of information. Online shopping behaviour has changed consumers’ decision making process. Consumers’ decision making process in this research is called

‘the customer journey’. This is the journey a customer follows to purchase products and services, starting from need recognition to the end of the purchase and even after sales service (Engel, Blackwell & Miniard, 1995).

Consumers can experience the customer journey both psychologically and physically. Consumers use of online channels during their customer journey is increased, but online channels are not the only Holy Grail. Not all goods or services are suitable for online sales. Goods which need to be experienced personally are more suited for brick and mortar shops. Consumers’ online purchasing is different from brick and mortar shopping (Hogg &

Penz, 2008). Consumers like brick and mortar shops because of the importance of touch, feel, and service in their shopping experience. On the other hand, online shopping gives consumers an anywhere anytime convenience.

For retailers it is important to offer customers the right mix of information sources during the different phases in the customer journey. With insight in the customer journey and omni-channel shopping behaviour of consumers, retailers can better serve their customers. Consequently, they can beat their competition and gain extra market share.

1.1.3 THE CHALLENGE OF RETAIL

At the moment, most Dutch retailers experience tough times. They suffer from the economic uncertainty in the Netherlands. Consumers have less confidence in the economy; as a result they are more conscious about their purchases. In February 2013, consumer confidence dropped to a historic low, at -44 points (Figure 1) (CBS, 2013). In addition to the dropped consumer confidence, the retail market is saturated because of the continuous expansion in the last decades. This increased the competition between retailers (NRW, 2011).

Besides, turnovers of offline retailers decreased because consumers buy products more often online.

13 FIGURE 1, CONSUMER CONFIDENCE NETHERLANDS, SEASONS CORRECTION (CBS, 2013)

For retailers, a way to survive is by combining the best of both worlds. The Dutch Shopping Center Council (NRW) calls this ‘The new way of shopping’; retailers want to assemble the best of internet shops and brick and mortar shops (Hoofdbedrijfschap Detailhandel, 2011). According to the new way of shopping, internet shopping is not a threat but a chance for retailers. Therefore, retailers should offer consumers quality, service and experience offline as well as online. This new way of shopping can be conducted, among others, in shopping centers. The inner-city of Veenendaal has already implemented this concept; consumers can shop with their smartphone and pay online for parking (Jansen, 2012). Several shopping centers in the Netherlands have a Facebook page, and some have created an interactive shopping center app to guide customers to and through the shopping centers, which is another example of ‘the new way of shopping’ (Houwelingen, 2013). In July 2013, IKEA launched a new app, which allows users to try 90 products at home. This app makes it possible to create an augmented reality image of the furnishings in your own home (IKEA, 2013).

1.1.4 SEGMENTATION ON CHANNELS

Previously consumers came automatically to the shops, but those days are over. Nowadays, consumers need to be attracted to shops. Hence, information about consumers is needed to attract new consumers, and to increase involvement and loyalty. Eventually, this should result in more profit for the retailer. A method to study consumers and their buying behaviour is consumer segmentation (Gilboa, 2009). Consumer segmentation is the process of dividing a heterogeneous market into groups of customers which have nearly the same characteristics, wishes, needs, buying habits or reactions on marketing activities. Consumer segmentation assumes that consumers exhibit heterogeneity in product preferences and buying habits (Dibb, 1998).

Through segmentation, retailers can determine the most interesting customer groups to focus on. Current studies on consumer segmentation, do not consider omni channel shopping behaviour and the customer journey. While insight in omni channel shopping behaviour during the customer journey can help retailers and investors in retail real estate by developing a strategy to beat the competition.

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