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Why Australian retailers need a phygital strategy

Aussie shoppers want value, but they also crave a great experience. That’s the key takeaway for SMEs from the Shopify Australian Retail Report, which shows a growing focus on customer experience, particularly through phygital strategies, to attract budget-conscious consumers.

Phygital combines the physical and digital worlds to create a more immersive and personalized user experience. This seamless integration of in-person and digital interactions is the key to phygital marketing.

Shopify’s latest Australian Retail Report, conducted in partnership with industry research firm YouGov, reveals how retailers can invest for lasting success in today’s economy. The study includes quantitative data from over 1,000 Australian consumers and more than 200 senior business decision makers in retail businesses with 50 or more employees, alongside qualitative insights from leading Australian merchants and partners.

“In the last 12 months, we have seen marked changes in consumer shopping behaviours, driving a shift for retailers,” said Shaun Broughton, Managing Director, Asia Pacific and Japan, Shopify. “With increased demand for value and a stronger preference for in-store shopping, retailers are focusing on efficiency and innovation. Although cost remains a key factor for consumers switching brands, retailers are choosing to compete on enhanced customer experience instead of slashing prices.”

Key findings from the report include:

Consumer Shopping Priorities

  • Value Seeking: Over half (54%) of Australians prioritize finding the best value, up 10% from last year.
  • Brand Switching: 92% of consumers have switched brands, mainly due to cost, with 57% switching for better prices or discounts, up from 49% in 2023.
  • Quality and Treats: A third (34%) seek quality products that last, and 23% still indulge in occasional treats despite financial constraints, indicating opportunities for retailers.

Retailer Strategies

  • Customer Experience: Retailers are heavily investing in customer experience, with 62% of business leaders focusing on marketing measures, including targeted marketing (26%) and enhanced customer service (25%).
  • Omnichannel Focus: Over two-fifths (43%) of consumers prefer in-store shopping in 2024, up from 38% last year. Meanwhile, 31% prefer online shopping, and 26% enjoy both equally. As a result, retailers are investing in both online and offline channels, with 49% planning to enhance their omnichannel experience and 57% focusing on in-store experience.
  • Loyalty Over Price: While 92% of consumers would remain loyal to a brand for consistently low prices, half (51%) value high-quality goods, and 45% appreciate loyalty points or rewards. A seamless user experience could increase loyalty for 32% of shoppers.

Operational Efficiency

  • Staff Retention: Poor staff retention and high turnover are significant challenges, affecting 29% of retailers. Efficiency issues, including inefficient supply chain practices and complex business systems, impact 61% of retailers.
  • External Challenges: Higher supply chain costs (49%) and operational costs (42%) are top external challenges, with 88% of retailers citing inflation-related issues.
  • Tech Investment: To address these challenges, 65% of retailers plan to invest in employee attraction and retention programs, and nearly two-thirds (65%) will increase investment in business intelligence technology. Automation investment is also expected to rise, with 64% of retailers planning to boost their spending in this area.

Innovation and Technology

  • Innovation Focus: Nearly all retailers (99%) plan to invest in innovation, allocating an average of 18% of their annual revenue to it. The role of the chief technology officer (CTO) is crucial, with 91% of retailers acknowledging its importance in business evolution and revenue growth.
  • Cost Considerations: The total cost of ownership for digital infrastructure is a key consideration, with 43% of retailers focusing on operational, platform servicing, and support costs. When evaluating ROI for commerce infrastructure, retailers prioritize profit margin (34%), revenue per customer (30%), and total online revenue (30%).

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Yajush Gupta

Yajush Gupta

Yajush is a journalist at Dynamic Business. He previously worked with Reuters as a business correspondent and holds a postgrad degree in print journalism.

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