I was reviewing with interest the Christmas retailer trading results. These highlighted the significant shift in consumer behaviour, with the winners and losers split by the strength of their online operations.
Consumers have flexed their muscles and retailers have had to respond. The 1990s’ race to build hypermarkets has now moved online, supported by distribution centres to dispatch orders, and convenience stores. Companies quick off the blocks have done well and those who hesitated have the unenviable challenge of catching up.
Morrisons which was late to the party reported a slump in sales and its CEO, Dalton Philips, said that the speed in which business is moving to the internet and corner shop has surprised him.
In comparison, John Lewis has effectively transformed its traditional business. With a new £40m platform to support its online growth, strengthened IT and supply chain infrastructure, internet sales grew 41 per cent and now account for 25 per cent of trade.
The new phrase, used by John Lewis, is giving customers a seamless ‘omni-channel’ experience, which means providing consumers with the same brand experience regardless of the shopping channels they use.
To deliver this seamless retail experience requires all channels to use the same database, product range and prices, with real-time data to allow consumers to return through a different channel to finish their browsing or purchase from where they had originally left off.
John Lewis commented that nearly two-thirds of all transactions now involve customers visiting both shops and online channels. Click and collect is a key part of this change in shopping behavior. Even long-struggling Argos’s heavy investment in digital has succeeded with internet sales via “check and reserve” accounting for 46 per cent of its total.
Being at the leading edge of changing customer behaviour has also been the focus of Amazon. Jeff Bezos said: “We are genuinely customer-centric, we are genuinely long-term oriented and we genuinely like to invest. Most companies are not these things. They are focused on the competitor not the customer. They want to work on things that will pay dividends in two or three years and they prefer to be close followers rather than inventors, because it’s safer.”
So what does all of this have to do with protection?
In protection, the roles of retailers and manufacturers are confused – as the retailer can only give an indication of price and has to contact the manufacturer on each sale to confirm the price, acceptance terms and speed of delivery. In 2014 this is bizarre and therefore perhaps not surprising that new business has halved in the last decade and protection retailers have remained fragmented and marginally profitable.
The protection market also needs digital retailer leadership, with the vision and energy to deliver the experience customers now expect. Perpetuating existing dated practices is not the road to digital success. Retailers do not owe manufacturers a living and should stop dealing with those who hold back their own long-term business success – this year let’s throw out once and for all the primitive concept of ordinary rates, and the need to apply to many individual manufacturers on each transaction.
Jeff Bezos said “We don’t make money when we sell things. We make money when we help customers make purchase decisions.”
The new consumer is likely to research online, even start their purchase online, but may complete offline. Accenture describe this as hybrid behavior.
In future, successful protection digital retailers will have easy to use online research, comparison, buying and relationship capability. They will also provide a seamless ‘omni-channel’ experience, able to track customer activity in real time, whilst customers research, compare personalised terms and buy. At any point the online activity will be capable of being supported with online chat, or switching to offline, with the adviser seeing the full journey and being able to pick up from where the customer left off. After which the customer could complete online or offline.
This approach may also deliver the best of protection online traffic with offline completion rates.
The future is already impacting on protection and the industry needs to be led out of the wilderness. This is a great opportunity for networks, nationals, comparison sites and protection specialists, working alone or in partnership to deliver the best expertise.
As Accenture says: “To maximize value from digital, insurers will need to move from a product-centric culture to a customer-oriented mentality.” I couldn’t agree more.
Martin Werth is chief executive of Underwriteme