Retailers are squinting hard into their crystal balls for inspiration on how consumers will react to continued pressure on their wallets as we head into a critical trading period.
“How do I read between record lows in consumer confidence and resilient retail spending?”
“Why have people been buying so many big-ticket products when incomes are being squeezed?”
“Why did consumers cut back on their summer holiday wardrobe spend in July, but then jet off on more exotic summer holidays?”
These are all legitimate questions one hears being asked.
Against this uncertain backdrop, OC&C’s Retail Proposition Index, an annual body of research that asks 40,000 shoppers how they rate different retailers, was released this week. The Index provides a timely reminder that beneath all the noise, trust remains the single most important determinant of the retailers people choose to shop with.
In its 12 years of research, this has always been the case. But this year, it is truer than ever, as consumers have even more strongly gravitated towards the places that have their backs, provide “fair prices, and offer unbiased and reliable service. Indeed, those retailers scoring in the top 25% of trust metrics grew 10% faster on average last year than those in the bottom 25%.
It is entirely forgivable that the current primary focus for many retailers is to squeeze profitability out of tough trading conditions. However, for those tempted to eke out the extra margin on prices, sail close to the wind on stock availability, or nickel-and-dime customer service and delivery, this should create a moment for them to stop and ask themselves: in the pursuit of near-term profit, am I building or destroying the relationships I have with my customers?
What does the trusted retailer of 2023/4 look like?
First, they will provide ‘honest value’. This doesn’t necessarily mean being the cheapest, but it does mean offering consistent and fair prices that make it easy and transparent for consumers to keep track. Retailers adopting very Hi-Lo pricing models are finding the going tougher as a result.
Sainsbury’s represents a shining example of this in action – up in the top 10 most trusted UK retailers for the first time, and while not a price leader, it is dealing value to customers in a way they really appreciate.
Second, they will consistently deliver on promise. Offering ‘low hassle’ delivery and returns; ensuring consistent availability of the products that customers want; being prepared to back up quality claims with extended guarantees; and demonstrating superior knowledge of customer solutions, among other ways. Next has emerged very strongly in this dimension in recent years.
Third, they will actively support shopping ‘success’. This doesn’t mean claustrophobic service, but it does mean making the customer feel they can get their shopping needs met perfectly and easily every time. The winning retailers have a point of view, support easy navigation and also create moments of delight (or relief) along the way.
This has historically been an area where marketplaces have struggled to convince. Indeed, despite strong ratings on other dimensions, it is an area where Amazon has failed to hit the same heights. Waterstones, by contrast, remains the poster child for offering the perfect blend of self-discovery and helpful advice.
So, in a world where much is uncertain, and we haven’t seen the end of pressures on the sector, those retailers who emerge strongest will be the ones who navigate the chaos with their customers, and emerge with stronger and more trusted relationships as a result.
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