With political as well as economic uncertainty over the summer, it’s no surprise consumer sentiment is difficult to gauge at the moment.
The top consumer concerns have been, for some time, job security and the economy as well as terrorism and immigration (Nielsen Consumer Confidence Survey 2016). Consumers still recall the economic pain and squeezed family budgets of the last recession, even if many are now financially better off with rising real income as a result of deflation, low mortgage rates, and falling energy and fuel prices.
As a result of these concerns, we can expect shoppers in the short term (the next 6 to 9 months) to look to save more or pay off debts rather than increase discretionary spend. This change in shopper behavior could have a ripple effect on many retailers, particularly in the non-food sector.
Empathy will go a long way to help spending intentions; however this will be more of challenge in non-food than in food retail. Retailers and brand owners will need to reinforce and message that they are ‘here to help’ – be it good prices, customer service or the feel good of the overall shopping experience.
For supermarket shoppers we can expect to see a renewed interest in cheaper brands, brands at lower prices and the safe haven of good value private label. Shoppers will be careful not to waste food and will only buy what is really needed on their weekly shopping trips. Shoppers will also look to make savings on groceries in order to maintain spend in other areas such as added value, indulgent and affordable treats, goods and services.
In the medium term (the next 12 to 24 months) as changes to monetary and fiscal policy become clear, and shoppers begin to feel the effects, retailers will need to accelerate the change strategies that many already have in place. This should include addressing the possibility of store overcapacity as result shifts in consumer spend, range simplification, better analytics and look to innovation in both service and product that provide shopper with real benefits.
It will be especially important for retailers to truly know their loyal shoppers in order to grow and retain their custom, and a good first step is to understand and continually revisit the meaning of `value for money` to these shoppers in terms of price, range and choice.
Nielsen research shows that 20% of shoppers claim not to have any spare cash – but this means that 80% of shopper do. Even if the retail pie does not grow as fast, gaining a bigger slice would seem to be an attractive strategy.
Big changes to the broad customer proposition should only be necessary for the minority as it’s adapt or die!