Price considerations, ethics and behavioural shifts are changing what consumers want from retail, particularly against the backdrop of Brexit.
For many retailers, the question ‘How can our business keep up with the needs of the modern consumer?’ has never been more prevalent.
To help answer it, Retail Week Connect gathered experts and retailers at a Consumer Breakfast in February.
Hosted in partnership with DWF and sponsored by iptiQ, the event expanded on findings from The Global Consumer 2019 report, which interviewed 10,000 consumers across 10 different markets to gauge what they intend to spend their money on and where.
Combined with advice from behavioural science expert William Trump of iptiQ, analysis from Richard Lim, chief executive of Retail Economics, and insider insights from retail brands, the event illuminated what consumers think and want in 2019.
The impact of Brexit
Discussing Brexit’s effect on consumer spending, Lim said: “Inflation has been stickier than expected and real wage growth has failed to rise significantly in the last year, so retailers haven’t seen the benefits.”
Despite UK discretionary spending being at its highest level in years, with an average £200 a week spent on non-essentials, he noted that consumers are especially anxious right now.
“According to GfK’s barometer, consumer confidence is at its lowest for five years. It’s damaging consumers’ propensity to spend.
“A hard Brexit scenario would add £7.8bn to the cost of sourcing goods from the EU in the retail sector, and it’s inevitable that some of these costs will be passed on to consumers. The Centre for Economic Performance estimates average household income will fall by 4% a year, while, longer-term, households will lose 6% to 13% of their spending power each year.”
However, Lim believes there’s hope if the Government can provide clarity: “Consumers are fickle; they react to their own experience of the economy and are heavily influenced by job security and issues dominating the media.
“Consumer spending makes up two thirds of the economy, so a step change in the Brexit narrative and more certainty is likely to cement a positive outcome for retail.”
Do consumers want what they say they do?
Brexit aside, many other forces will impact consumer spending in 2019, such as irrational human behaviour.
Trump explains: “There’s a gap between human intention and action. We assume consumers are driven purely by rational things such as prices, features and information, yet they are often affected by forces such as what friends are buying.”
Trump believes retailers should adopt the following principles:
- Focus on framing. “When a retailer launches a brand-new product, consumers don’t know how to assess it. A few years ago, a US company launched a bread-maker for $270 and were disappointed with initial sales. When psychologists advised the brand to introduce another version for $420, so there would be a point of reference, sales of the cheap version doubled.”
- Don’t add features for features’ sake. “Avoid the phenomenon of ‘goal dilution’. When retailers launched TVs with VHS players in them, consumers decided they couldn’t be good at either function. It’s the same when I see a Thai restaurant that also serves pizza. Think about the one thing your product does better than anyone and don’t dilute it.”
- Timing is everything. “We offered insurance options over the phone and found we weren’t getting enough people to sign up to the upsell. I reviewed the script and noticed we introduced the offer at the end. Psychology shows people have switched off by this point. We moved the upsell to the middle of the conversation and sales went up 5%.”
- Some things never change. “Only 2% of people who own an Amazon Echo have bought something using it – and 90% of those never did again. The purchasing ability for Echo is a big USP, but it’s just not happening. There’s something inherent about purchasing that means you must still be able to see products – it’s why so many people still visit shops.”
It was clear that price remains king in 2019. Here were four common themes raised by attendees:
- FOMO > promo. “To reach consumers, it’s important to go for FOMO (fear of missing out) over promotions. Some luxury brands don’t need to discount because their items have become such commodities that consumers will save up for them. Try to tap into this social anxiety.”
- Discounting doesn’t discriminate. “40% of luxury brands do discount; we just don’t know it [because they do it discreetly]. Most retailers don’t have a choice because of the speed of trends and the need to balance stock levels.”
- Consumers have grown savvy to Sales. “Retailers used to promote a 15% or 20% discount and consumers would buy it. Now, if this threshold is lower than 30%, consumers hold off. Retailers are reacting, though; they’ll use a message such as ‘Up to 70% off’ when only 30% of products have this discount.”
- Shoppers love a bargain brag. “We tested removing the percentage discount amount, but sales dropped. Consumers want to know how much discount they’re getting so they can brag about it. This brag factor also applies to luxury items and ‘treating themselves’.”
Ethical retailing: do consumers really care?
Are consumers buying from retailers with ethically sourced products because they consciously want to – or because it’s trendy?
And are retailers focusing on sustainability because they want to help the planet, or just to garner positive press?
Our event attendees were sceptical, as these quotes reveal:
- “When we gave consumers the survey option of receiving £50 or giving £50 to charity, surprisingly only 30% said they would give to charity. This wasn’t real money, so they could have just said charity. What I think impacted their decision was that the giving would have been private. A lot of human behaviour is about doing things in public. For retailers to tap into ethical consumerism, they need to help people flaunt their eco credentials.”
- “You hear consumers say, ‘We want the world to be a better place, we love the environment’ but they regularly buy from fast-fashion retailers, which is a contradiction.”
- “The general consumer doesn’t have a clue about sustainability. If they want to investigate the environmental impact of an item they can, but they don’t scratch the surface. Faced with paying more for a product that’s ethically sourced or buying a cheaper product, consumers tend to go for the latter.”
- “It’s trickier to position yourself as a leader in ethical retailing as it’s then so much easier to fall foul when you get one thing wrong.”
To learn more about what consumers want in 2019, register to read The Global Consumer 2019 report for free today.