By Customer and growth lead at EY New Zealand, Michael Summers-Gervai
Online retail has experienced a rollercoaster period. The natural growth of online shopping accelerated beyond expectations during lockdowns.
We’re now seeing some return to traditional bricks and mortar stores as customers look for experiences that resonate, although an impressive two-thirds of New Zealanders engaged with e-commerce retailers in the last three months. Trust in businesses and how they treat consumer data is becoming a key factor in how people shop. This is emphasised further as they become more aware of technologies like artificial intelligence being used.
The latest Future Consumer Index report from EY, showed that while 55% of Kiwis have complete or moderate trust in how AI uses consumer data to tailor offers and promotions, the other 45% have no or minimal trust, demonstrating the split in perceptions.
Considering a trust-building approach is essential to sustaining and growing a loyal online customer base. The good news is that AI itself can help build trust – provided it is used well.
There are several strategies e-commerce retailers can implement.
- Rethinking what ‘loyalty’ means
Point-based loyalty programmes are encountering scepticism. Consumer New Zealand, recently pointed out that 75% of specialty loyalty prices in big supermarkets could be found cheaper elsewhere. It also highlighted the volume of data now being collected by retailers.
Brands must rethink traditional approaches. Loyalty strategies need to go beyond transactional benefits and prove the company’s commitment to their customers. Especially for those hesitant about the use of AI in their shopping journey.
AI can be used to develop a broader and deeper understanding of what customers value. Knowing how customers behave enables brands to look at comprehensive offerings that resonate. In theory, AI could use purchasing data to understand a customer’s preferences, and design a whole new product personalised to that customer. Not only would this speed up the product development for the business itself, but it would also keep that customer coming back.
The key is to emphasise genuine value. Customers often know when this week’s ‘special’ is last week’s RRP. They will reward businesses who don’t just know what they like but treat them honestly and with respect.
2. Transparent communication on AI practices
When it comes to the way businesses use data and technology, transparency is best. Data-driven technologies are new for many and can be a scary concept. Brands should prioritise open communication around AI operations across their e-commerce platform.
It’s worth noting that customers don’t so much mind the use of AI in the back end, like supply chain optimisation, or even enhancements to their e-commerce experience like helpful chatbots. However, there’s greater hesitancy when it is collecting their data or images.
E-commerce retailers should use this an opportunity to build trust and talk authentically about how consumer data is being collected, how it will be used, and how ethical considerations are being taken into account. Clear and open communication helps customers feel informed and confident in AI interactions.
3. Communicating brand values
Fifty-five percent of New Zealanders have minimal or no trust in online only retailers as this perceived facelessness can seem impersonal. However, AI offers new opportunities to enhance the online experience and make it even more personalised.
Through customer behaviour analysis and tailored content, AI can create an experience that reflects how customers like to be communicated with. For example, around the world, brands are already using AI to adapt messaging to users as they check out their online basket. By using emotional and conversational tones, they’re able to improve the conversion rate. Personalising the customer purchase journey has also seen a decrease in abandoned baskets. There are also personal AI assistants being created to help walk shoppers through the online shopping experience, guiding them to the products they need and improving the overall experience.
AI translation tools is another example. Not everyone living in New Zealand can understand basic English. What if they were more fluent in Mandarin? Translation tools can enable a website to be read in a customer’s own language, demonstrating a brand’s commitment to meeting customer expectations.
4. Understanding your business
AI has the power to enhance e-commerce business offerings. But you shouldn’t be using AI just for the sake of it. There needs to be strategic thinking behind its implementation.
We’re seeing examples where generative AI is being used to visualise products before buying. However, for a furniture store, customers being able to visualise their living room with a new couch, makes sense. But the same can’t be said for if you’re buying the weekly grocery shop.
Retailers must carefully consider the problems they aim to address and the areas where they can truly enhance customer value. Identifying the specific needs their products and services fulfil is crucial. Prioritising an understanding of the benefits they can offer should be paramount. Furthermore, leveraging AI technologies can revolutionise the delivery of these benefits, unlocking new possibilities that were previously inaccessible. For customers to gain trust in new and evolving technologies, they first have to have trust in the brand employing it. The retailers who prioritise building brand loyalty and look beyond sales, are the ones who will succeed the most.
