Why CX Matters

Why CX matters: Problems and Innovation in Australian Retail

In 1997, Steve Jobs was onstage at the Apple Worldwide Developers Conference when he got a rather insulting question from a member of the audience.

The questioner opens by telling Jobs that he is basically clueless and then asks about the demise of a format called OpenDoc.

Jobs’ handling of the answer reveals a lot about his core philosophy, a way of thinking that is still part of Apple’s DNA today.

He starts by admitting that yes, perhaps OpenDoc was superior to other things out there. However, he adds, being the best piece of software is not the most important thing. What’s important is figuring out how to make a piece of technology fit into a larger, cohesive vision.

“One of the things I’ve always found”, Jobs said, “is that you’ve got to start with the customer experience and work backwards to the technology.”

Apple is now worth around $107.1 billion, making it the world’s second most valuable brand. Google recently overtook Apple to grab the top spot ($109.5 billion) and Amazon, ($106.4 billion) – which will soon enter Australia – is placed third.

Although customer experience (CX) is a fairly new term, the roots of it go back to the 1980s, when American companies upped their game via Total Quality Management (TQM) to compete with Japanese manufacturers.

Learn more about the services Fifth Quadrant offers: 
Download a copy of our Customer Experience Strategy Insights Report

In 2007, The Harvard Business Review did a piece on CX in which it defined it as “every aspect of a company’s offering – the quality of customer care, of course, but also advertising, packaging, product and service features, ease of use and reliability”. It sounds crucial, but at the time the Review lamented that only “few companies” had “zeroed in” on it.

One such company was – and still is – Apple. Although it is readily apparent that Apple makes beautiful products that work well, people often overlook other aspects such as the Apple Store, the customer service and the product packaging. All of these things combine cohesively to create a superior CX.

Walk into any Apple Store and see for yourself. Every detail, from the steps of service (Apple uses an acronym for this: A-Approach, P-Probe, -Present a solution, L-Listen, E-End) to the placement of items form a synergy designed to make you do one thing: love the brand. Listen again to Jobs here, this time as he passionately describes the first Apple Store.

That love has translated into incredible sales and brand loyalty – what some call the “cult of Mac”. CNET recently reported that Research consultancy Brand Keys released its 2017 Customer Loyalty Engagement Index, and Apple topped every category, including smartphones, tablets, laptops and even music.

Today, an increasing number of customers expect the same levels of satisfaction and innovation from retailers in Australia. So how is that working out?

It’s no secret that the Australian retail landscape is a bit of a disaster at the moment. Local retailers Marcs, David Lawrence, Herringbone, Rhodes & Beckkett, Payless Shoes and Pumpkin Patch have all collapsed and others, such as Dick Smith, are on the ropes.

One of the main reasons for these failures has been the level of complacency that Australian retailers have shown when it comes to CX. “Australian retailers have been caught with their pants down because they just haven’t innovated quickly enough.” said Simon Morgan, general manager of brand loyalty agency ICLP, “Bigger, nimbler overseas competitors, who have come from even redder oceans than ours, are fitter and stronger.”

Amazon-front-door-sqr.jpgGiven that Amazon’s arrival is imminent and local retail is already in a sorry state, the question is: Are retailers doing enough to prepare for the future?

The Commonwealth Bank of Australia recently released a sneak peak of its Commbank Retail Insights Report, a wide-ranging analysis of the Australian retail sector.

The research is based on surveys conducted by ACA Research and DBM Consultants and seeks to answer a simple question: “What should you be doing now to prepare for the next 10 years so that your business can thrive in the very different world of 2027?”

The research shows that Australian retailers are more innovative than the average Australian business, but the financial return generated from their innovation is falling short.

The report tested the rate of innovation using a leading metric that measures 15 core elements around four key areas: products, process, marketing and organisation. Of the retailers surveyed, 74 percent cited revenue growth as the primary expected gain of their innovation activity while 47 percent said they predicted enhancements to service and CX.

However, there was also some disconnect between what businesses and the researchers consider innovation. When Commbank analysed individual retailers business initiatives, it found that while 79% of them claimed to be innovating, only 49% met the definition set by the study’s criteria.

While the results certainly leave room for improvement, a positive takeaway from the research is that Australian retailers are more likely to innovate than businesses in most other industries.

Less encouraging were the retailers’ responses regarding the arrival of online retail giant Amazon.

The report revealed that 30 percent of Australian retailers are unaware of Amazon’s plans to enter the Australian market, and of those that are aware, only 14 percent have a plan to place to effectively compete. Although this is definitely not a “wait and see” situation, almost half (49%) of retailers are “unfazed” by Amazon’s entry and 11 percent see it as a significant threat. On the other hand, 11 percent see Amazon’s entry as an opportunity for their business.

“Many Australian retailers remain unprepared for Amazon’s arrival, or may be understating the potential impact that Amazon’s presence will have in Australia”, said Jerry Macey, National Manager of Retail Industry and Private Banking at Commonwealth Bank. “This is somewhat concerning when you consider the impact Amazon has had on the US and other very mature retail markets.”

Much like Steve Jobs, Amazon CEO Jeff Bezos understands the importance of great CX. Is it the only reason that Apple and Amazon are successful? No, but it is certainly a huge factor.

Many businesses are still at the start of their digital transformation and only now realising that being online is essential, not optional. Last year, Customer Experience Management surveyed more than 50 CX professionals from different industries across the Australian and New Zealand region to explore the major challenges, trends and opportunities in CX.

More than 60 percent of those surveyed believe that they still have a long way to go when it comes to their organisation’s approach to integrating digital successfully into their CX strategy. When asked why, the most common pain points included budget, siloed organisational structures and a lack of understanding about the full power of data and analytics.

If Australian retailers want to thrive in the future, they had best acknowledge the arrival of Amazon and start implementing a plan to deal with it now.

Predicting the future is never easy, especially in a world in which disruption is the new norm. For example, who would have predicted Uber ten years ago? However, just because you aren’t sure what’s coming that doesn’t mean you can’t prepare to some extent: remaining agile is the key.

And the first step, as they say in therapy, is admitting you have a problem.

Brad Arsenault

Written by Brad Arsenault

Brad is the Head of Marketing at Fifth Quadrant. For over 16 years he's worked across digital marketing and content production. He actively publishes content on LinkedIn and Medium.

Topics: Customer experience CX Articles & Insights

You might also enjoy reading...