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?