Despite the outlook for economic growth across the UK and in Europe more broadly remaining subdued, Shopify’s State of Commerce Report shows the battle to boost the economy via retail is far from lost.
With consumers and businesses continuing to face strong macroeconomic headwinds across Europe, the study has found a value conundrum exists between the two. Despite half (50%) of European consumers looking for the best value they can find, the majority (82%) of businesses are passing on some, or all, cost increases to the customer – this is slightly lower in the UK at 81%. The vast majority (85% in Europe, 82% in the UK) of consumers would be more loyal if brands were to offer them something, e.g. high quality goods or service, promotions, and surprises – but also still expect a human touch to their shopping experience. But only 6% of UK businesses surveyed said they were planning to significantly invest in customer experience this year, representing a missed opportunity for many businesses. It is vital businesses find ways to either reduce prices, or offer additional value if they are to maintain brand loyalty and keep consumers on side.
Revealing areas of consensus and conflict on topics ranging from the spending habits to new commerce technologies, the report uncovers what businesses are prioritising and what consumers across the continent currently feel and want.
Key European findings include:
- Discretionary spending has reduced over the last 12 months for almost half (46%) of consumers.
- Over half (53%) said a better price/value of a product was one reason why they have previously bought a brand different to their usual choice. Meanwhile 23% would switch to a rival brand if it meant saving money.
- Over two-thirds (67%) think it is important brands offer a good integrated experience between online and offline, growing to 74% of those who have increased their spend over the last twelve months.
- Almost half (47%) said they expect brands to offer a tech-enabled shopping experience, while 35% said they would be more loyal to brands offering them.
- Almost two-thirds (64%) believe AI will make at least one aspect of shopping easier. But businesses have concerns about delivering a less authentic or human experience to shoppers.
Deann Evans, managing director, EMEA of Shopify, comments: “This study – providing actionable insights and trends from thousands of retailers and consumers on selling and shopping in 2024 and beyond – shows surprising and delighting shoppers should remain a priority. While new technology, including generative AI tools, offer new ways to engage consumers and drive crucial efficiencies, brands should continue to maintain a personal touch, and deliver a consistent experience in every place a customer shops.”
Loyalty is no longer guaranteed, so businesses must rethink what and how they sell
Recession or not, the economic outlook is impacting spending habits with only 22% of consumers in Europe optimistic about the economy and their personal situation – this drops to 16% in the UK. At the other end of the spectrum, 35% are pessimistic about both – rising to 40% in the UK. It is no surprise then, that discretionary spending has reduced over the last 12 months for almost half (46%) of consumers.
As a result, brands must offer value and quality to gain and retain loyalty. Over half of consumers (53%) said that a better price/value of a product was one reason why they have previously bought a brand different to their usual choice; this is even more prominent in the UK with 55% revealing this. Meanwhile almost a quarter (23%) said they would switch to a rival brand if it meant saving money, suggesting that brands need to find a mix of good pricing and high quality to keep consumers coming back. In addition, two-fifths (41%) said discounts were a key driver for them.
However, it is not just what brands sell but also how, given that consumers now expect shopping options that not long ago would have been considered “nice-to-haves”. This includes free returns (61% of UK shoppers versus 56% Europe-wide), accepting digital payments (37%), and loyalty discounts (34%). Yet, businesses are missing an opportunity here as while 86% of merchants in Europe (87% in the UK) said customer experience was either important or critical over the next 12 months, just 7% in Europe and 6% in the UK plan to invest more than a fifth of their annual revenue into it.
Consumers want to shop across multiple channels – but businesses need to step up
Consumers are split on online/offline preferences, but are united in expectation of a seamless experience across both. Almost a third (29%) prefer shopping online, while 33% prefer in-store. Notably, over two-thirds in Europe (67%) and just under at 65% in the UK think it is important brands offer a good integrated experience between online and offline, growing to 74% both Europe-wide and in the UK of those who have increased their spend over the last twelve months – suggesting the more channels available to a customer to buy from, the greater their potential lifetime value.
“Having best-in-class customer experience is paramount to the success of Kick Game, particularly as we expand our online and in-store presence. For us, it’s a key brand differentiator that means consumers know they are getting a seamless service however they interact with us,” said David Franks, Co-Founder and CTO, Kick Game.
Agile merchants recognise the opportunity here: nearly a third in Europe (31%) and UK (32%) of businesses said they are trying to improve the customer experience by integrating online and offline shopping. For example, one in five (20%) have already invested or plan to invest in QR codes or digital display screens to help customers order online while they are in stores. However, when asked what their one priority or focus was in the next five years when it comes to growth, just 11% of British retailers surveyed said that improving their digital infrastructure to sell across channels is their number one priority – the lowest in Europe alongside France (11%), far behind leaders Germany (21%) and in stark contrast to what consumers are calling for.
But before brands can even think about expanding channels, they need to know where consumers are hearing about them. While some social media platforms across Europe, like Instagram (67%) and Facebook (66%) are high for product discovery, word of mouth still reigns supreme with a resounding 80% in Europe (78% in the UK) saying it is one of their top three sources, followed by TV (78% in Europe, 71% in the UK) and online marketplaces (73% in Europe and 68% in the UK).
How tech can enable the next generation of shopping
Almost half of all shoppers (47%) said they expect brands to offer a tech-enabled shopping experience, while 35% said they would be more loyal to brands offering them – while this is slightly lower in the UK at 39% expecting it, and 25% revealing they would be more loyal, it is still critical. However, the report found there is a disconnect between sentiment and actual usage: only 4% of consumers in Europe (dropping to 3% in the UK) said they are aware of and use VR or AR when shopping, while 7% in Europe (4% in the UK) said the same about virtual assistants.
Where tech-enabled shopping is most mainstream (52% use self-service checkout, 45% use mobile apps, and 32% use one click-checkouts) is where there is convenience at stake. Businesses positively recognise the importance of technology, notably AI, to help them serve their customers more effectively: 53% of businesses that have either invested in, or plan to invest in, AI this year expect to do so to enable better customer support, while 34% plan to use it for in-store automations such as self-service checkout. This is much lower in the UK with just under a quarter (22%) either currently investing in or planning to invest in AI over the next twelve months – perhaps surprising, given the UK’s position as a leader in the tech sector and the EU poised to legislate on strict AI regulation and compliance.
The recognition and adoption of AI is critical as there is interest among consumers as to how AI could make their shopping experience better. In fact, nearly two-thirds in Europe (64%) and a notable 55% in the UK believe it will make at least one aspect of shopping easier. For instance, over a third (34%) think it will help them find out information about products they are buying, while 32% think they will be able to use it to find deals. However, the chasm between what businesses think consumers want and what they actually expect remains marked. 16% of businesses in Europe as a whole, and 18% in the UK, raise concerns over delivering a less authentic or human experience to shoppers however – indicating a more connected commerce experience is driven by technology and people.
