It would appear consumers are finally feeling the squeeze of inflation, as businesses and shoppers delay spending decisions before Thursday’s much anticipated general election and the start of Brexit talks.
Three new surveys suggest that spending growth is slowing on the high street and in the dominant services sector, dampening expectations of a strong rebound from a weak first quarter.
Paul Martin, UK head of retail at KPMG, said that retailers had been “brought back down to earth with a bump” after the Easter sales boost.
Barclaycard said that the consumers were paring back on non-essential items amid rising fuel prices and weekly shopping bills, with inflation rising to a three-year high of 2.7 per cent.
Separate figures from the British Retail Consortium and KPMG showed that UK retail sales had fallen by 0.4 per cent in May on a like-for-like basis compared with last year.
Tim Denison, director of retail intelligence at Ipsos Retail Performance, said: “May is the month in which we usually see weekly footfall progressively rising as the weather improves and shopping becomes a more frequent pastime. The upswing didn’t happen this year. That’s not to say it won’t, but it’s certainly late.
At a time when we find ourselves in political and economic no man’s land, it’s wholly understandable why shoppers are exercising more caution when it comes to spending disposable income. With four in ten shops managing at present to convert more browsers this year over last, it’s apparent that consumers are being more discerning and selective with what they buy.”
To further compound this, we also see a growing trend of consumers spending money on ‘experiences’ as opposed to buying ‘things’. In a recent Harris study, a whopping 78% of millennials surveyed said they would choose to spend their money this way.
So, how can retailers and brands fight back? As I posted here back in January, one option is to start making the purchase an experience in itself. That way, the customer gets the satisfaction of a product, as well as the excitement of an experience. Stores are now becoming destinations, where consumers want to come for inspiration and ideas. It has tangible products that you can touch and feel, not mid-quality JPEGs.
Take a look at the recently opened John Lewis flagship store in Leeds for example. Here, customers can grind and taste their own coffee, get immersed in a demo of the latest Bose speakers, design a new living room using their home design service and then take the weight off their feet with a pedicure in one of their Beauty treatment rooms. John Lewis recognises the customer may ultimately end up buying some things online, but they’re hoping that the in-store experience will ensure you end up buying from their website and not someone else’s.
So what does the rest of the year look like for footfall in bricks-and-mortar destinations?
It is widely predicted the Tories will retain the keys to Number 10 on Friday morning and, based on evidence from the last election which was only two years ago, this suggests that footfall may worsen after June 8 for the rest of 2017 (based on research by Springboard).
While no silver bullet on its own, the retailers and brands creating unique and memorable experiences that make their customers feel special, should ultimately reap the rewards with increased loyalty and brand equity.
We’ll be exploring all these trends in depth, as well as sharing new strategies for how retailers and brands can succeed in 2017 in our forthcoming Masterclass: ‘Using intelligence to win the retail war’. You can find out more information about the agenda and sign up here
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