Shopping in person is the top choice for Irish consumers, says IBM retail boss

At IBM, Luq Niazi advises on retail and consumer packaged goods companies on opportunities and challenges in the industry, offering him a front-row seat on the big trends reshaping retail after Covid. He was in Dublin this week for the Consumer Goods Forum Global Summit, one of his first retail conferences post-pandemic after he took the job in 2019.

“We saw very rapid shifts to digital retail. It went from 30pc at best to, in the US, to at peak a 70pc penetration,” he says, looking back on the pandemic. “What happened in two years would have happened in 10.”

However, in Ireland, shoppers were not so easily enticed away from stores, reflected in the queues that gathered outside outlets, such as Ikea and Penney’s, when non-essential retail reopened. According to an IBM survey conducted by Mr Niazi’s team, Irish people have not swapped shopping trips for scrolling just yet.

“If you look at in-store averages, Ireland was 10 percentage points higher than the global average,” he said.

The survey of 19,000 global consumers showed 45pc of those surveyed preferred in-store browsing, while 72pc described their approach as ‘hybrid’, mixing both channels.

However, in Ireland, 56pc of Irish shoppers primarily visit stores, while 78pc opt for a mix of in-store and online.

Mr Niazi says the results reflect the Irish community spirit, with many staying true to the ‘shop local’ mentality adopted over the pandemic.

“They are more connected with the store environment being closer to the community,” he says.

Irish people were also revealed to be “knowledge hungry” in advance of a purchase, with shoppers likely to do research or take recommendations from friends and family.

“They were also higher in terms of how much engagement they would do on social media and with advertising for products,” he says.

This technology, powered by artificial intelligence, is growing more and more advanced as consumers become accustomed to – and begin to expect – targeted advertising and offers from outlets they frequent.

“They are targeting me on chino types, on t-shirt types and sneaker types as they know that’s what I buy,” Mr Niazi laughs.

Other technological advancements to the shopping experience include the rise of the seamless shopping experience.

However, Mr Niazi does not believe that the widely discussed Just Walk Out technology powered by Amazon will become the norm in Irish stores just yet.

This technology allows shoppers to scan an app or a payment card to enter the store. Shoppers then fill their bags and leave without needing to visit a checkout. The cost of the items removed from shelves and tracked by a series of cameras is then automatically deducted from the shopper’s account.

Amazon has opened 18 grocery stores powered by the technology in London, the first of which opened last March. It recently unveiled its first store outside London, in Kent, while in Dublin, Compass Ireland opened Market x Flutter store offering this service in February.

Tesco, Aldi and Sainsbury’s have also opened their own stores with checkout-free technology in the UK.

“When you look at the cost of putting the Amazon Go type technology into a traditional store, it’s pretty expensive and it’s about whether the return will ever work,” he says.

“It will accelerate but I don’t think the model will scale for 5 to 10 years yet.”

Soaring inflation and the accompanying price rises is also a factor that is beginning to impact the global consumer. “You’ll have less discretionary spend and you’ll have to make compromises,” he said.

This threatens to derail what Mr Niazi calls the rise of the purpose-driven consumer, a shopper who considers sustainability in their purchasing decisions.

Shoppers could reduce purchases of premium ‘green’ products in favour of own-brand items to reduce costs. However, Mr Niazi has noted that Irish shoppers are already savvier than their global counterparts, opting to try a product in-store before committing to a purchase and to save costs, such as shipping.

Recently, Zara joined retailers, such as Next, which now charge to return online purchases as returns skyrockets. This is also an issue for fast fashion retailers Asos and Boohoo, which both warned of soaring returns rates last week.

The rise in cheap clothing is a victim of its own success, according to Mr Niazi.

“It’s created a ‘I’ll buy, try and go back’ perspective. It’s doubling your distribution costs, it’s highly inefficient. Then you’ve got the doubling of final packaging costs. It’s got to be put back, cleaned, repackaged,” he explains. “It’s increasing costs in term of transportation and labour in fulfilment centres.”

Mr Niazi is confident the retail industry is making a real commitment towards a more sustainable future.

“[Millenial and gen-Z] consumers are going to expect the change,” he says, pointing to companies who reengineer their value chains as examples of those who will survive.

“Whether that will make them more profitable, I don’t know,” he concludes. “I do think it will enhance their brand and their value so they will sustain their business.”

Key retail trends in Ireland

Buy and try

Returns of online orders has emerged as the biggest challenge for fast-fashion retailers, with Asos, Boohoo and Zara all affected. As pandemic concerns subside, people are now buying more clothes for socialising or work compared with the previous two years. Due to the rising cost of living, shoppers do not want to miss out on getting a refund. Without the ability to try on, some shoppers may also order multiple sizing and return the ones that don’t fit. Now retailers face rising shipping costs, as well as increased time and labour required to process all returns. The item may not be placed back on sale, with the company sending it to landfill.

Back to town

Irish consumers love to shop in person, with 56pc of those surveyed by IBM stating they shop primarily in-store, 10pc higher than the global average. Irish consumers enjoy the social element of shopping, as well as the ability to browse and try out products in-store. It’s also to save money – 36pc of Irish consumers do not want to pay for shipping.

Inflation

Own brand products are rising in popularity as they are less expensive than branded items. According to Kantar, brands’ share of grocery spend has dropped to 49pc in the three months to mid-May, which is the equivalent of €29m. 62pc also plan to buy less food in general, with grocers hoping to prevent the loss of customers with discount vouchers.