BrainTrust Query: Are we seeing a diminishing need for trust in retailing?
Kenneth
A. Grady, President and Attorney, K.A. Grady PC
(www.kagradypc.com)
A recent survey of online retailers showed that they are improving when it comes to earning the respect of their customers, but that they haven’t done as well when it comes to building trust.
The report by the Customer Respect Group showed that in the Third Quarter of 2006, respect among customers for online retailers had increased to an overall score of 6.2 on a 10-point scale. Five companies — Sears, Payless ShoeSource, L.L. Bean, CVS and Wal-Mart — received an excellent rating. Of the 51 companies surveyed, about half received an exceptional score in communication which, according to Customer Respect Group, typically is the lowest scoring area for most industries. However, online retailers are not doing quite as well when it comes to trust. For example, the survey showed:
- Online retailers ask a lot of questions. About 20 percent of the companies surveyed asked their customers to complete 10 or more fields of information. Many online retailers required customers to login before completing the shopping experience.
- While sharing may be good in school, sharing of customer information without the customer’s permission is not as good. About 43 percent of the companies share their customers’ personal data with other companies, even though the customer did not give permission for the sharing.
- For many years, trust was a key concept in retailing. Yet today, many things retailers do arguably take away from a trusting relationship. Concerns about organized crime and other shrink drivers have lead retailers to use tougher security measures. Security tags, closed circuit TVs, tighter return policies, and more secure product packaging all help to reduce shrink. But many customers interpret these measures as saying, “We don’t trust you.”
Interactions between customers and store employees are fleeting and casual. Customers know that the clerk waiting on them probably won’t be working at the store in a few months (or even weeks). Customers don’t invest themselves in building a relationship with the retailer through its employees, which detracts from building a trust relationship with the retailer.
In discount stores, customers have fewer interactions with the employees decreasing the opportunities to build trust. While luxury retailers are more oriented towards building long-term trust relationships, even that model has changed as Costco and other retailers, whose model includes fewer employee-customer interactions, move into the luxury goods segment.
On a larger scale, customers have diminishing trust in companies as they see headline after headline announcing the latest scandal. Currently, option backdating has placed some retailers at the forefront of trust-eroding news. As the industry consolidates, frequent changes in corporate ownership and the change from “local stores” to national brands (e.g., Federated moving stores under the Macy’s brand) also influence the trust relationship.
Discussion Questions: With the development of multi-channel
relationships with customers, is the trust component of the relationship changing
character…and does that mean that the need for trust is diminishing? Is there
an opportunity for some retailers to differentiate themselves by focusing on
trust building in one or more channels?
I suppose that I don’t understand the question. How can the need for trust between retailers and their customers, retailers and their vendors ever diminish?
Every relationship is based upon trust. When I pull into a retailer’s parking lot, I’m trusting that the lot is safe for me and my vehicle. The moment that I walk into a familiar retailer’s store, I’m saying that my previous interactions have been satisfactory and that I trust that the experience will be repeated.
When I enter an unfamiliar retailer’s store, that retailer now has the opportunity to gain my trust. If they’re successful, then chances are that I’ll be back to spend my money. If my experience is unsatisfactory, then I will hesitate before returning.
How do you build trust? Clean, well lit parking lots. Attractive inviting store fronts. Clean well lit interiors. Pleasant, or no, smells. Fully stocked and well merchandised stores. Friendly and courteous interactions. Fair and consistent pricing.
When crossing channels, Brick and Mortar retailers want to try to impart the same experience online that cause their customers to return to their stores. Fast web page loading; easy to navigate sites; department groupings that make sense; fast checkout and then a smile and a thank you.
In other words… Good Retailing.
Of course I believe customers to be a tolerant group. Very few single experiences will turn me away from a favored retailer permanently. I’m willing to give a retailer a second or even a third chance to rebuild my trust. The good retailer can win me back. The marginal retailer won’t.
In today’s hyper-competitive retail environment, any retailer that doesn’t have trust as the linchpin of their relationship is ultimately going to find themselves in another business. That’s why I don’t understand the question. The moment that a retailer loses my trust, he will eventually lose my business.
Anger flashpoint: Multichannel retailers with inconsistent pricing or services between channels. For example, retailers with one price in the store and another price for the same item online won’t be appreciated. (Macy’s newspaper ads often use tiny type to warn people that their promotions might not be available at Macys.com, for example.) Worst difficulty: retailers with local pricing that meets local competitive conditions sometimes have trouble aligning the on-line pricing. Staples’ web site is priced by zip code and some online promotional items aren’t available in stores. Bricks and mortar retailers with web sites who don’t accept out of channel returns, coupons, and gift cards also make trouble for themselves. LL Bean’s margins afford a liberal return policy. Best Buy and Circuit City margins are too slender for a liberal return policy.
Yes, many people are tired of logging in to browse and they know their personal information is sold to all bidders. Some people are willing to give their loyalty to retailers who respect them, even if the prices are higher. No one thinks LL Bean is the low price leader and they don’t use that message. But LL Bean is far from the volume leader.
Trust between retailers and customers may be diminishing but the sustaining value of a trusting relationship has not. If so, why aren’t there more sincere efforts being made to build lasting trusting relationships among customers and retailers?
Trust is a plant of slow growth while retailing today has become a hungry plant of fast and forced acceleration. Many consumers have become cynical. Personal interface has given ground to impersonal technology; acknowledgements and human relations take time and are considered costly, particularly when Wall Street is breathing down your neck.
These are some of the by-products of the ever-increasing demand for material results from the marketplace. Perhaps that’s why I occasionally enjoy visiting customer-oriented CHEERS “where everybody knows your name” … but I’m just one customer and I’m not in a hurry.
It seems that part of the question is really asking: are the things that constitute “trust” changing? What do customers need in order to trust a retailer? What does trust mean? What does a retailer need to do to win the trust of its customers? Has any of this changed over the last five to ten years?
Our consumer data indicates that customer trust is made up of three core elements: treating customers with respect (a number of sub-components define this more specifically), being honest with customers (such as full disclosure, and ethical and equal business practices), listening to customer concerns and acting on them, and putting your customers’ wishes above your own when they are in conflict.
We started measuring these criteria twenty five years ago. Over the recent past, we have not seen the importance of any of these diminish, but we have seen overall trust scores in retail drop. There certainly is room at the top — the highest scores in retail are nowhere near the highest possible that are practical to achieve. It is interesting to correlate the decrease in scores with the increase in scores in certain components of the retail organization’s mindset.
Thank you Race for helping to clarify the questions. Yes…we’re asking about the nature of trust and how online experiences have changed that.
As an example: It’s common today for consumers to use a product comparison website, like Froogle, and click through to an offering based solely on its low price ranking. Although the online vendor may be completely unknown to them, there’s a presumption of trust based on the superficial design of the website and the impression that the retailer is following best practices for gathering account information and conducting the online transaction.
From another perspective, what level of trust is needed when ordering apparel when all you can see is an online representation? Are online retailers learning that they must be more exacting and detailed in their product descriptions to gain the kind of trust one would find in stores, or is it assumed by consumers that there’s a wider margin of error when ordering online?
I recently purchased a pressure washer. I won’t mention the retailer, but it was one of the major two where you would expect to find such an item.
The thing that surprised me was the HUGE notice inside the box: “DO NOT CONTACT THE RETAILER FOR ANY PROBLEMS WITH THIS PRODUCT.” It then listed a 1-800 help number. I don’t know which organization thought this notice was a good idea. Was it the retailer trying to reduce product service cost or was it the manufacturer trying to minimize returns? I only know that the effect it had on me was to reduce my confidence in the retailer. I, perhaps foolishly, tend to think of the retailer as my “first line of defense.” If I get home and the product doesn’t respond to turning on the switch, I am not going to call an 800 number. I’m taking the product back to the store for an exchange, regardless of what the slip of paper in the box says.
The biggest advantage “brick and mortar” retailers have is the personal contact with their consumer. The more they do to dilute the importance of this advantage, the less opportunity they have to retain the consumer franchise. I don’t know if it is already too late for some retailers, but in our emerging multi-channel environment, I think it is important that the advantage of consumer trust and personal contact not be lost.
Building on Bill’s point, I think retail chains often do things that erode customer confidence and trust, in the name of efficiency. I’ve seen a number of the slips that Bill talks about lately – they must be a way to minimize the number of returns, reduce costs, etc.
The multitude of abandoned shopping carts online and to a lesser extent offline is emblematic of the fact that consumers find it easier to abandon one shopping experience and go to another entirely than it is to find what they want, ask a question, or get some help.
Part of the problem in physical stores is the wide disconnect between store personnel and the executive suite. How many “clerks” have had real customer service training, are rewarded based on their interactions with customers, and have any regular contact with HQ management?
Amen to Bill and Race’s comments!
This issue will only increase in it’s importance as technology further enables retailers to use or abuse it in relation to customer strategies. As RFID and other consumer technologies emerge, it makes my blood run cold to think about them being abused to track consumers and data mine without responsible permission strategies. Yet, look at our history…the more people share that they like controlling their messages and data, the louder we yell and the sneakier we get!
Let’s hope we don’t repeat lessons learned and do right by people as the tools to connect with them become more powerful. We frankly can’t afford not to.