4 Tips for Capitalizing on Evolving Consumer Behaviors

Between the pandemic, shifting priorities, and a deep craving for instant satisfaction, buyer behaviors are evolving more than ever. The good news is that these changes can spell big opportunities to stand out, sway consumers, and future-proof your business.

4 Tips for Capitalizing on Evolving Consumer Behaviors

In this article, you’ll learn actionable insights from retail experts on how upgrading the buying experience can compel shoppers to spend—and come back for more—in the months and years ahead. You’ll discover:

  • Why flexible payment options are key to boosting conversions and bridging the gap between in-store and online shopping.
  • The benefits of joining forces with other reputable brands to catapult your reach and cement your reputation.
  • How “Buy Now Pay Later” solutions such as Afterpay are transforming the shopping landscape, particularly among younger consumers.

Content Summary

Gen Z swells as the largest consumer segment
Omnichannel shopping becomes the norm
Flexible payment options boost conversions
Researchers: Buy Now Pay Later (BNPL) Spend to Double by 2025
The last mile is now the make-it-or-break-it mile
Next steps for sustainable wins

Buyer behaviors have changed, again. Retailers that fail to meet new consumer expectations will see profits sink, say, researchers. The good news: New challenges spell big opportunities to stand out, sway consumers, and fuel revenue.

To that end, this resource explores four shifts in consumer demands that will affect your revenue in the coming months and years. By the end of our time together, you’ll walk away with actionable insights for upgrading buying experiences, compelling shoppers to whip out their credit cards and come back for more.

New wants = new revenue drivers

Between the pandemic, shifting priorities, and a deep craving for instant satisfaction, today’s shoppers make buying decisions in ways that render many pre-COVID-19 e-commerce practices irrelevant and ineffective.

Brand loyalty is out the window, with 76% of consumers changing stores, brands, or channels in 2020, McKinsey reported.

That’s good and bad news: On the bright side, the consumers you’re targeting today are actively exploring new brands and offerings. Hearts and wallets are up for grabs, and it’s a great time to woo buyers from competing brands. On the flip side, you’ll have to work harder to keep consumers coming back.

With that in mind, emerging studies point to four dynamics impacting your buyer relationships, for good:

Gen Z swells as the largest consumer segment

Gen Z shoppers are now the largest consumer segment in the world, accounting for 40% of global shoppers. “If merchants haven’t already adapted their e-commerce strategies for this younger generation, they should do so immediately,” admonished Melissa Davis, head of North America for Afterpay, an installment-payment platform that enables consumers to pay for retail purchases after receiving them.

Davis isn’t alone in that claim. “The overall ecosystem in which Gen Zs are buying is fundamentally different,” said Bo Finneman, a partner at McKinsey, in a recent episode of the McKinsey Podcast. Rising interest in brands with a conscience, peer input, anywhere/anytime access, greater convenience, and speed are some factors Gen Z values, representing opportunities for merchants. “We need to deeply understand the seismic shifts happening in the consumer base and what’s driving decision making, because it’s not marginal,” Finneman added.

Omnichannel shopping becomes the norm

Today’s consumers demand anytime/anywhere shopping, including easy checkouts via mobile and social platforms. Shoppable social media posts and “buy online, pick up in-store” are quickly becoming the norm.

It’s worth noting that young shoppers often use numerous channels at the same time, with 84% using their smartphones to look up reviews, product details, coupons, and more while shopping in-store, Google reported. This dynamic makes it critical for online and in-store experiences to be cohesive. “This can be achieved by matching inventory across online and physical retail, and by offering buy online, pick up in-store,” Davis said.

Last year, Afterpay launched in-store functionality to help merchants bridge the gap between online and in-store shopping. “We’ve found that Afterpay omnichannel shoppers shop 48% more frequently than online-only shoppers and spend 72% more,” Davis explained. “By offering flexible payment options in the physical store, the retailer allows consumers to use the service across channels, giving them more opportunity to engage in flexible, responsible spending — anytime, anywhere.”

Flexible payment options boost conversions

Budget-conscious and debt-averse, younger shoppers seek to balance instant gratification with responsible budgeting. It’s why subscriptions have risen in popularity, as have to buy now, pay later (BNPL) solutions that help buyers manage finances without incurring credit card debt or forgoing the goods they crave. According to PYMNTS, 87% of consumers ages 22 to 44 were interested in monthly installment plans.

Merchants offering BNPL report big advantages, both for first-time and recurring conversions. Reported benefits include an increase in average order value, an increase in basket size, and fewer returns — all high contributors to profitable campaigns.

Ted Rossman, an analyst at Creditcards.com, told The Washington Post that shoppers using BNPL tend to spend more and buy more frequently: “Open-ended credit card debt scares people, especially young people. They already have a lot of student loans and don’t want to take on more debt, knowing it can come with hefty interest rates.”

It comes down to choices: If consumers have more options in how and when they pay, they’re more likely to pull the trigger on purchases.

Researchers: Buy Now Pay Later (BNPL) Spend to Double by 2025

New data from fintech researchers at Kaleido Intelligence found consumers are actively looking to escape the credit card trap with alternative financing options.

Why do shoppers choose BNPL?

  • To avoid paying credit card interest: 39%
  • To make purchases that otherwise wouldn’t fit my budget: 38%
  • To borrow money without a credit check: 25%
  • I don’t like to use credit cards: 16%
  • I can’t get approved for a credit card: 14%
  • My credit cards are maxed out: 14%
  • I don’t have bank accounts: 3%

What do shoppers use BNPL to buy?

  • Electronics: 43%
  • Clothing and fashion items: 37%
  • Furniture or appliances: 33%
  • Household essentials: 31%
  • Groceries: 23%
  • Books, movies, music or games: 15%
  • Other: 7%

The last mile is now the make-it-or-break-it mile

Payment and delivery options, return policies and the overall ease of completing an order are last-mile components that can sway shoppers to spend more or repel them entirely.

The last mile is now the make-it-or-break-it mile

“Top reasons for failed conversions include sticker shock of the final, all-in price — either by itself or in comparison to other sites, shipping costs, slow delivery speeds, inability to put in promotion codes or gift cards, limited payment methods, and cumbersome checkout processes,” explained Aaron Cheris, head of Bain & Company’s Americas Retail practice.

Let’s tease some of those elements apart, starting with payment options. According to research by PPRO, 42% of U.S. consumers abandoned their baskets if their preferred payment method wasn’t available at the checkout, and over half stopped a purchase if the checkout process was too complicated.

Delivery speed and flexibility were two other biggies, with 88% of consumers willing to pay extra for same-day or faster delivery, PwC reported. Regular fulfillment updates and generous refund policies also add to consumers’ sense of comfort and control, translating into greater spending.

Next steps for sustainable wins

Where to go from here? We’ve asked our guest retail experts for actionable guidance in eliminating sources of friction hindering customers’ experiences, perceptions, and spend with brands.

They’ve responded with four directives:

Practice [real] customer centricity

Though not a new concept, putting customers first isn’t necessarily common practice — but it should. “Merchants who have a customer-first mindset and are authentic in their approach are thriving with shoppers,” Davis noted. “They prioritize meeting customers where they are, which means showing up on social media, rewarding shopping behaviors, and speaking to their audience in a way that feels real while creating an easy, seamless experience.”

Martin Newman, the founder of the Customer First Group, takes customer-centricity further, urging merchants to examine their board of directors. “When you consider that 70% to 80% of buying decisions are made by women, why would you have a board of directors that doesn’t reflect that?” — he asked. Similarly, “If you’re selling to younger generations, why would you not have some Gen Zs and millennials influencing decisions you make as a business?”

Aside from the board of directors, Newman also recommends customer boards that reflect ideal customers. “Imagine how much insight you’d glean from them regularly,” he added.

Get more value from partner relationships

“Many retailers keep partners at a distance when they could extract far more value from a closer relationship,” said Newman, citing access to industry intel, partner resources, and potentially game-changing connections.

Aside from the know-how, you could glean from partners, joining forces with other reputable brands can also catapult your reach and help cement your brand’s reputation. Take Afterpay’s Shop Directory, for instance. In December 2020, the directory sent 45 million referrals to partner retailers as consumers searched for shops where Afterpay is accepted. “It’s become a valuable tool for both brand and product discovery between our merchant partners and customers,” Davis said.

For Newman, that kind of partnership is a no-brainer: “If my target audience is starting their journey by going to the Afterpay Shop Directory, that would become one of my biggest marketing campaigns.”

Behave more like an independent retailer

Recalling a trip to San Francisco, Newman described walking by a Walgreens on Fisherman’s Wharf, where tourists shop and seeing buckets and spades in the window. In downtown San Francisco, another Walgreens store was adapted to appeal to downtown shoppers.

“The business had localized its product and experience at a micro level, which is so important,” Newman explained. When national retail brands dictate what local stores must sell or how to market themselves, they run the risk of growing irrelevant to local consumers. “You can have the economies of scale of a big, national retailer and still deliver more personalized localized experiences,” he concluded.

Invest in friction-removing, multichannel technologies

The future of shopping is “technology everywhere,” McKinsey reported: “Retailer leaders should act now — or risk falling very far behind.” If your brand’s e-commerce capabilities don’t yet allow for seamless, mixed channel experiences, you’ll want to prioritize that as competitors level up their game.

To make that possible, consider whether leaders in your organization truly take digital seriously, advised Dr. Geraint Evans, a leading marketing strategist, and researcher. “Do you have the right level of funding, partners, experience in your management team, and external perspective in developing a robust strategy? Are you constantly reviewing and learning from competitor activity, as well as tracking emerging consumer trends? Consumers will continue to seek easier ways to transact,” he explained.

All things considered, retailers looking to nurture profitable consumer relationships should evolve their value proposition now, Evans said. “Merchants that don’t will survive,” he concluded. “But they can if they adapt now.”