The Hypersensitive Consumer
A retailer’s guide to 2009’s shop-shy shoppers
How to catch them How to keep them How to make them buy A decade of conspicuous consumption is over.
In the wake of the credit crunch and financial crisis, a new type of consumer has emerged: The Hypersensitive Consumer.
They see themselves as time and money poor.
They feel guilty about spending.
They feel retailers are privileged to have them in-store.
They’re less loyal than before, readier to go elsewhere or put off a buying decision if they don’t get excellent service.
In short, they need stronger reasons to shop.
This book is about giving them those reasons… “Some they ar Meet the Hypersensitive Consumer. Service should focus f
Simon What drives their footfall, and Head E Almost all retailers have increased their focus on what converts visits into sales. customer service.
pow em and s. ain vice Tr ser eat e 49 per cent of retailers have gr rvic r se ffe hip improved in-store design and O ons lati re ls facilities, and a third have improved d fa voi social aspects of their stores. A
. n o i . . t n s c e o . i a i t s c r i a e l e i t t o m i n : l p i r t i l o “If you look at the US retailers, a c . f s a t a n i n f i k n r c particularly in clothing, compared to o d e u o t o n t s c l m a e u e r r d d g the European retailers they have n f o r f o g a a i o r n s h s p a s e some very sexy stores. In the UK it is , e s i f g d m t e i o n n n e e i o l u y virtually impossible to do that l r u t t i Hypersensitive d o e r l a t n i u o S e b e i p a because of the cost of rent and rates.” Q l Consumers say k r p i a F a T O v A “Delight me” Simon Douglas, MD, Head Entertainment
Im s e p Hypersensitive I r l n v e e v i m n e c Consumers W h s e e t n d a a o n t r in c iv r c r u expect multiple k e m o n 75 per cent of retailers have invested in e d t s if f o u s o o o l channels o t a r multichannel infrastructure, and half have d n i l m t l c l r i h fa i n c v e a h p ll e n r invested in additional online features. . a i w fe n n c a e n i e l n t e g b u i l , r n s t e f . o r r f a s a f f . s e f t r ic r s u a ju c t n “Giving people an enjoyable s u d H t r a e s experience online is as important a C y n o d to them as walking into a store.” u ’d c
Justin Hampshire, FD, A Crew Clothing cce p pt t rom h otio …b n ut k K eep eep at rev titu isiti des ng rem ain Key “If consumers want the Drivers of footfall product they will buy it, but they are more discerning in terms of paying full price for Drivers of conversion a product than they were 12 months ago.” Drivers of footfall and conversion Paul Allen, CEO, Jacques Vert e retailers forget that re there for the customer. e to me is and always d be the number one for a retailer.” 50 per cent of retailers have increased seasonal. Douglas, MD, 77 per cent have increased “You’ve got to think of ways of Entertainment in-store events. encouraging people to come to your space. Theatre is a big thing now.”
iver del to Fle aff x o Alan Jacobs, r st pen ou Inc ing r y rea ho Jacobs Capital we al lau se ur son nc in-s s. er hes to ld p C an re bui on d eve at . sid eve nt th ing er nt s in es aff cel s. clu st eb din . on rity g ps ies en sea om do son con rse al e e me s nt.
Virtually all retailers have invested in Hypersensitive Hypersensitive R some form of loyalty programme. a e Consumers want n w Consumers need D d a p if s r a f p d better and better a reason to shop O r e t r e l f i c o f c e e n i y service u a a r l t l a i lt s r a e y o t v e m p e w r n o y i e o t t t d s h h u , u n i r n n c o e g t b t w s r “There are too many loyalty d a a ju s 71 per cent will look around i t n , f s a fe s d t d p programmes out there which for a bargain, are less loyal to r c d v e e i a c le s n c n specific brands t if a c Hypersensitive i r o don’t really win the buy-in of the a c u e ly d n c n d u a t i Consumers s n consumer.” Half now expect more Almost half feel they s n . e t d fo x o r c m t from retailers than they did have less to spend are less loyal a m lu e r a s r g t i e i Nicky Dulieu, v g o to brands e t r n . o u MD, Hobbs p s Who are the Hypersensitive . Consumers?
71 per cent will pay full price 74 per cent are less t u for the right item or a treat likely to buy as a result o . b s Hypersensitive a t n of poor service t e n Consumers are e m r a m 81 per cent want a seamless p o better informed s . r c u n e r multichannel approach, 39 per cent a c o r i y e t v r k m 50 per cent of retailers have simplified want consistent service and product s u a e c s e s n h n e d c o their pricing structures. e n c s a o t d e g n n t ’r i e a u ic n s o r r s y p e e , t n e t in e r c v u u i s e t Hypersensitive Hypersensitive d h i n t t E o e “I think people are using the internet r e p p s Consumers are Consumers are m U o more to research before they buy c canny about pricing hunting for value because they’re more concerned about value and not wasting money.”
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“It is much more than discounting, it is about the value of that product. It is about 60 per cent of retailers have how desirable and gorgeous we can implemented discount schemes. make that product. We look at an item and ask: what is our customer prepared 36 per cent have cut prices to pay for this? ” across the board and 23 per cent have made efforts to Patricia Alford-Burnett, MD, increase price transparency. The White Company 1 The Hypersensitive Consumer A retailer’s guide to 2009’s shop-shy shoppers
Capturing the Hypersensitive Consumer
After over a decade of relatively benign conditions, retailers – and shoppers – were So who is the perhaps becoming set in their ways. But the credit crunch ended all that. There’s 2 been a sea change in consumer behaviour, and retailers that can’t respond are paying Hypersensitive the price. In this report, we look at what’s going on, and what retailers can do to Consumer? succeed in today’s unprecedented conditions.
In previous recessions, wrenching the price lever up and down would generally do the trick. But that isn’t working so well this time around. Now there are more factors 3 Eight challenges for in play, and a broader response is essential. retailers and the strategies for success Today’s consumers are so sensitive, so well informed and so surrounded by choice that we’ve called them the Hypersensitive Consumers. To win their business, retailers can’t afford weakness in any part of their strategy. Brands, channels and formats may all need to be modified: the key to success is a multidimensional approach to the 4 Footfall challenges whole shopping experience. Hypersensitive Consumers To understand the Hypersensitive Consumer better we’ve combined specially need a reason to shop 4 commissioned research and analysis with insights from our Retail team: working with Hypersensitive Consumers retailers day in, day out, they see the pitfalls that await sellers who miss the mood of are less loyal to brands 6 the marketplace – and the rewards still available for those who get it right. Hypersensitive Consumers We hope this book will help your business to prosper by attracting those elusive are better informed 8 Hypersensitive Consumers, and convincing them to buy. Hypersensitive Consumers are hunting for value 10
12 Conversion challenges Rupert Eastell Hypersensitive Consumers Head of Retail and Wholesale want better and better service 12 Hypersensitive Consumers say “Delight me” 14 Hypersensitive Consumers expect multiple channel s 16
Footfall and 18 conversion challenges
Hypersensitive Consumers are canny about pricing 18
Strategies for success 20 in 2009 and 2010 2 The Hypersensitive Consumer A retailer’s guide to 2009’s shop-shy shoppers
So who is the Hypersensitive Consumer?
In short: pretty much all of us. The hypersensitivity that we’ve seen emerging since the credit crunch began is a response to two immediate factors: Consumers are more reluctant to spend – some because their incomes are down, but most because they’re uncertain about future economic conditions. They still have the money, but not necessarily the inclination. At the same time, they recognise retailers’ hunger for their business. Together, these make consumers more demanding, and readier to walk away (or click away) from any retailing experience that fails to meet expectations.
This sensitivity is sharpened by longer-term trends: consumers’ rising expectations, fed by steadily improving retailing experiences; and the fact that consumers are better informed about products and pricing, due largely to growing use of the internet for pre-purchase research.
As a result our consumer research found eight common traits in the marketplace, reflecting Hypersensitive Consumers who: Now need a reason to shop. They’re far less likely to impulse-buy than before, and expect to shop when it suits them. Are less loyal to brands. Their share of wallet is spread across more retailers. Mix and match shopping is now habitual: 71 per cent are happy to look elsewhere for the right bargain. Are better informed than in the past and will shop through the most advantageous channel or direct with the manufacturer. Are hunting for value. This is not just about price: they are still happy to spend on the right product, and 71 per cent say they’ll pay full price to treat themselves or for the right item. Want better and better service.
Say “Delight me”. They’re less forgiving than they were in the boom years, they expect an improving retail experience – and retailers must ‘get it right’ every time. Expect multiple channels. 81 per cent of consumers demand a seamless multichannel offering and 39 per cent expect service and product to be consistent across all channels. Are canny about pricing. They may be disinclined to visit or spend unless enticed by tactical pricing. 3 The Hypersensitive Consumer A retailer’s guide to 2009’s shop-shy shoppers
Eight challenges for retailers and the strategies for success
Each of these traits presents a challenge to retailers. In the following pages we look in more detail at the challenges – and strategies for addressing them. Here’s a summary…
Page Four challenges impact on footfall:
4 Need a reason to shop Increase in-store events including seasonal launches and events. Flex opening hours. Consider celebrity endorsement.
6 Less loyal to brands Reward loyalty with news, advance information, alerts when new stock is in, or special events – not just discounts. Differentiate your brand clearly and direct particular products at specific customer groups. Offer something different and exclusive.
8 Better informed Ensure customers see you’re transparent about products, pricing and service. Use the internet to check price competitiveness and customer comments.
10 Hunting for value Tell them what makes you good value Make sure you really are competitive… …but don’t undermine your brand with needless discounting.
Page Three challenges impact on conversion of footfall to purchase:
12 Want better and better Train and empower your staff to deliver great service. service Offer services that build personal relationships. Avoid false economies on staffing.
14 Say “Delight me” Take a long, hard look at: store design and facilities, queue management, friendliness of returns policies, opportunities for social interaction, and availability of product information.
16 Expect multiple channels Implement uniform product pricing, offers and service across all channels. Invest in multichannel infrastructure and enhanced online features such as customer ratings. Work to drive website traffic just as you’d drive footfall.
Page One challenge impacts on both footfall and conversion:
18 Canny about pricing Use pricing models designed to drive sales and accept the need for relevant discounting and promotions...... but keep them tightly targeted. Keep revisiting and reviewing: consumer attitudes remain volatile. 4 The Hypersensitive Consumer A retailer’s guide to 2009’s shop-shy shoppers
Challenge 1: Hypersensitive Consumers Footfall need a reason to shop
What’s going on Consumers’ shopping habits have changed. They may feel uncertain or guilty about “Press comment has spending, even if they have the money. They are less inclined to browse, and need real reasons to shop. decreased my
They also feel they have less time to shop, and want to shop at times that suit them. confidence and I only go shopping to buy This kind of mindset makes it more difficult than ever for retailers to drive footfall. They need to be more imaginative about enticing consumers into their stores. what I really need.”
Female shopper, 26-35, £60k+ Strategies for success Retailers must use all methods at their disposal to attract consumers. These range from getting the value proposition right to creating buzz around their offer and generating greater in-store theatre. Most retailers recognise this but worry about the cost and their return on investment. “Shopping has But creating buzz can be a cost effective way to drive footfall – PR and word of become part of your mouth can cost far less than advertising. leisure time so your Imaginative events can be relatively inexpensive. It needn’t cost much to offer coffee and doughnuts to the people you most want to reach, or to take your products to experience should be where your consumers gather. a leisure experience.”
Small resources can have a big impact on in-store theatre, and retailers such as Reiss CEO, focus on clever graphics on windows, or moving store layouts around to create Leading Department Store interest.
Would more flexible opening hours give some consumers more excuse to look in? The large number of people shopping on Christmas Day last year illustrates the potential impact of innovative opening hours. “You’ve got to think of What retailers are doing ways of encouraging Among the retailers we interviewed, making the shopping experience more people to come to memorable and enjoyable was the number one strategic focus. But many struggle to your space. Theatre is find the resources to create in-store theatre, perhaps due to the high rates and rents in the UK. a big thing now.”
50 per cent had increased seasonal events in the past 18-24 months. Alan Jacobs, 77 per cent had increased in-store events in the past 18-24 months. Jacobs Capital 5 The Hypersensitive Consumer A retailer’s guide to 2009’s shop-shy shoppers
Actions to consider
Increase in-store events. Invite customers to seasonal launches. Maximise seasonal and events based retail opportunities such as Valentine’s Day and Mother’s Day. Flex opening hours: for example late opening and Sunday opening. Use celebrity endorsement.
Worth watching
H&M and New Look have invested in celebrity endorsement with names such as Comme des Garçons and Matthew Williamson. Carnaby Street staged a Spring Shopping Event involving over 100 participating retailers. Attractions included 20 per cent discounts, evening opening, live music, complimentary treats, promotions and competitions. Rigby & Peller has begun staging corporate events, Mother’s Day promotions and mother and daughter days – offering pink champagne and exclusive shopping times. It also generated PR buzz by hosting an event in its new West London store in association with a major newspaper. 6 The Hypersensitive Consumer A retailer’s guide to 2009’s shop-shy shoppers
Challenge 2: Hypersensitive Consumers Footfall are less loyal to brands
What’s going on Hypersensitive Consumers are fickle. They’re less loyal to brands, and 71 per cent “I am not brand loyal said they are happy to look elsewhere for the right bargain. In pursuit of that bargain, particularly and will buy they’re willing to spread their spending across more retailers than in the past – and to team an Armani handbag with a Primark top. the offer or discounted product every time.” They will still buy on the strength of a brand’s reputation. But they are more demanding about what they get for their money. They want something exclusive, or Female shopper, 26-35, £30-45k clearly different from what they can get elsewhere. Some retailers report that while ‘regular purchases’ are being put on hold, consumers are still spending on more exciting new or innovative products. “Retailers need more loyalty programmes or Strategies for success better programmes than To win a greater share of the Hypersensitive Consumer’s wallet, retailers will have to are currently in place.” ensure they have real USPs. And they must use these USPs strategically to drive loyalty, through both brand-building and promotions. Female shopper, 18-25, £30-45k Loyalty programmes, whether card-based or otherwise, should offer more than just discounts. Buying loyalty in this way can be costly. The aim should be to create touchpoints between purchases, and to increase the frequency of visits or spend per visit. “There are too many loyalty programmes out If you simply want to understand your customers better, there are certainly more economical alternatives to loyalty cards: consult with your shop floor staff, host focus there which don't really groups with your customers and make use of off the shelf industry reports. win the buy-in of the consumer.” What retailers are doing Nicky Dulieu, MD, All retailers agree that customer loyalty is vitally important to drive footfall in tough Hobbs times, and every retailer we interviewed had invested in some form of loyalty programme over the previous 18 months. But they were divided on the best way to go about it. “Retailers need to align For some, it’s simply about getting the basics right – the right product, the right in- their loyalty programme store experience, the right brand. Align this with your customer base and loyalty will to their customer base. follow naturally. For example, Harrods Others favour more targeted schemes, although these vary widely in sophistication customers might prefer to and effectiveness. Tesco and Boots use their loyalty schemes to build a deep understanding of their client base and target specific segments with surgical precision. be able to get the latest There are risks: schemes based simply on discounting across a broad spectrum of fashions and to have customers can often lead to a spiral of ever larger discounts as ‘discount fatigue’ someone to meet them at reduces the audience’s sensitivity to the markdowns on offer. the door and park the car To reduce this risk, a broader offering which combines a range of benefits is growing rather than a 5 per cent in popularity. This moves beyond discounts to include exclusives, additional services or even partnerships with other brands for additional services. discount.” Ben Bresler, Head of Finance, Rigby & Peller 7 The Hypersensitive Consumer A retailer’s guide to 2009’s shop-shy shoppers
Actions to consider
A successful loyalty programme will probably combine five features:
Discounts and other special price-related offers for loyalty scheme customers. Added benefits such as news, advance information, alerts when new stock is in, or special events; and possibly partnerships with other organisations to offer further benefits, such as Airmiles, that complement the brand. Use of bespoke online channels to direct particular products at specific customer groups. An innovative and exclusive offering: consumers are looking for something different. And if you want to attract customers back, don’t forget that service is more important than ever – see Challenge 5 on page 12.
Worth watching
Tesco Clubcard, introduced nearly 15 years ago, now has 15 million members. Customers can spend Clubcard vouchers at face value in stores or increase their value up to fourfold through deals with Tesco’s partners such as restaurants and theme parks. A £150m relaunch this year – aiming to add another 1 million cardholders – now allows customers to double the value of vouchers on in-store deals. Amazon pioneered bespoke home pages based on customers’ previous purchasing patterns. ASOS are recognising fashion shoppers’ greater willingness to mix and match. They are specifically offering a broader range of brands – allowing customers to create their own eclectic look with a single retailer. 8 The Hypersensitive Consumer A retailer’s guide to 2009’s shop-shy shoppers
Challenge 3: Hypersensitive Consumers Footfall are better informed
What’s going on Hypersensitive Consumers are smart. They can make product and price comparisons “I can search online easily through websites like PriceRunner and PriceGrabber. Having sought out the best deals online, they’ll then shop through the channel that suits them. and compare prices. I And news, both good and bad, travels fast. Increasingly, consumers are sharing their am not loyal to experiences and product recommendations through online communities and blogs. particular brands, especially for Strategies for success Consumers are increasingly sensitive to retailers who seem to be pulling the wool commodity items, so over their eyes, or taking advantage. So retailers need to be more transparent about pricing is key.” products, pricing and service. And if you can’t (or won’t) be the cheapest, you need to show how other factors such as service make your offer competitive. Male shopper, 36-45, £45-60k Retailers need to stay as informed as their customers, keeping up to speed with opinions about their products and offerings. But the internet can be your friend, as well as the consumer’s. You can easily check how competitive you are on price; and see what people are saying about your products, brand and service. Think of it as free market research.
What retailers are doing Half the retailers we interviewed had simplified their pricing structures by implementing uniform pricing and offers across all channels. Some, notably the major supermarkets, have also introduced wide-ranging comparisons in their advertising and in-store.
“I think people are using the internet more to research before they buy because they’re more concerned about value and not wasting money.”
Nick Hollingworth, CEO, Austin Reed 9 The Hypersensitive Consumer A retailer’s guide to 2009’s shop-shy shoppers
Actions to consider
Ensure customers ca n feel you’re transparent about products, pricing and service. Use the internet to check price competitiveness and customer comments. Communicate the added value of your product eg delivery, extended warranty, superior specifications.
Worth watching
Supermarkets, notably Tesco and Asda, have led the way with aggressive and transparent pricing structures and advertising which compares the costs of ‘baskets’ of produce. Sainsbury’s now also displays price comparisons with other grocers in-store. Comet launched next-day delivery of large electrical items in March 2008, having previously taken two to five days. It offered four-hour delivery slots, as well as next-day installation so that customers could have products up and running within 24 hours. Currys has responded with a delivery service offering hourly slots, so that customers can receive their goods at the time that suits them best. Play.com offers online shoppers transparency through a simple price structure with no extra charge for delivery. Boden’s website enables consumers to leave feedback alongside each product. This gives the website a community feel and provides third party endorsement to future shoppers.
“There needs to be a commitment to realistic delivery times and UK- based call centres for enquiries.”
Female shopper, 26-35, £30-45k 10 The Hypersensitive Consumer A retailer’s guide to 2009’s shop-shy shoppers
Challenge 4: Hypersensitive Consumers Footfall are hunting for value
What’s going on Almost half of consumers (49 per cent) agree or strongly agree that they have less to “Price needs to reflect spend. So they’re hunting for better value. quality. I am still willing Perceptions of value don’t just influence where the Hypersensitive Consumer makes a to pay a higher price for purchase; they could determine whether the purchase happens at all. The Hypersensitive quality goods but, Consumer is more reluctant to buy, and needs a strong reason to do so. increasingly, high prices But this isn’t just about price: 71 per cent agreed or strongly agreed that they are happy to pay full price to treat themselves. no longer mean quality.” So what constitutes value for today’s consumers? It varies according to product. For Female shopper, 26-35, £15-30k utilitarian purchases, shoppers are now very focused on price and convenience. But at the other end of the spectrum, the broader shopping experience comes into play: it’s about the process as well as the product. The enjoyment – and perceived value – of the product is influenced by the way it’s chosen and bought. “The key is to make sure Customers of more mid-market or premium brands (such as The White Company or it’s not simply about the Hobbs) remain more concerned about quality than about price. discount percentage. We In general, Hypersensitive Consumers are as happy to buy a garment from a retailer such are trying to catch the as Primark or H&M, which may be made from less expensive materials, as they are to buy a premium-priced designer-label garment. But in either case the pricing must fit the imagination of customers product, and they must be able to recognise the quality differential. in other ways.” Strategies for success Julian Granville, CEO, Boden Consumers want to feel they are getting good value for money. This does not necessarily mean cheap, but today’s consumers are increasingly reluctant to pay the full price for anything. Retailers have to do what they can to change this mindset – for example by keeping customers better informed about quality and demonstrating the inherent value of their “It is much more than products. Consumers are increasingly interested in provenance and many will pay a discounting, it is about premium for fair-trade sourcing or, for example, details of the farmers who produced the wool for a garment. the value of that product. At the same time, retailers must also work hard to ensure their prices are competitive. It is about how desirable Mid-market and premium retailers have to walk a particularly fine line here. Overly and gorgeous we can aggressive price cuts could result in being seen as a discounter: if this devalues the brand, make that product. We lower prices could actually reduce the perception of value. look at an item and ask: Are you shooting yourself in the foot by reducing prices needlessly? It’s worth doing a value audit to ensure that pricing matches perceived value: as always in retail, the key is to what is our customer know your customers and what they expect from you. prepared to pay for this? ”
Patricia Alford-Burnett, MD, What retailers are doing The White Company Retailers are finding ways to add perceived value – and to ensure that consumers recognise it. Half of those interviewed have increased their focus on educating customers about the sourcing and production of their products to demonstrate value. 11 The Hypersensitive Consumer A retailer’s guide to 2009’s shop-shy shoppers
Actions to consider
Tell consumers what makes your offer good value. Make sure you really are competitive… …but don’t undermine your brand with needless discounting.
Worth watching
John Lewis has supplemented its traditional ‘never knowingly undersold’ promise with a particular focus on product knowledge and extended warranties that enhance perceived value. Radley aims to ‘give more’ rather than discount prices. So it has been adding a little extra value to every product with additional features. Crew Clothing aims to combine competitive pricing with quality. It has improved staff training to expand product knowledge across all parts of its operations, so that staff from shop floor to Head Office can explain the value of its offering. For online and direct marketing shoppers, sales material highlights quality details and the longevity of garments. 12 The Hypersensitive Consumer A retailer’s guide to 2009’s shop-shy shoppers
Challenge 5: Hypersensitive Consumers Conversion want better and better service
What’s going on Consumers may be more price and value sensitive, but their service expectations are “Excellent customer still high. In fact, the majority of customers say they’ve become less tolerant of bad service is vital. Retailers service since the credit crunch began: 74 per cent said they would not buy and would leave the store if they encountered poor service. must also recognise that the world has changed, it Strategies for success is simply not acceptable Retailers have little choice but to give Hypersensitive Consumers what they want: to have to wait in for further improvement in service levels. several hours and then This has as much to do with empowerment as with training. Consumers don’t like receive a call saying they robotic or oppressively over-attentive service: they want to feel that they are being understood and treated as individuals. are late.” It helps to have good knowledge of your customers (for example, their previous Female shopper, 36-45, £60k+ purchase preferences) and to offer services that build personal relationships with individuals. This is easier for retailers in the mid-market and upwards, offering less commoditised products, who can offer, for example, appointment booking or personal shopping arrangements. “There is nothing that When cost cuts are necessary, it’s tempting to cut back on staff training. But this could annoys me more than be a false economy if it impairs customer service standards or perceptions of value. not being able to find a A better option might be to flex your staffing model: how many people do you really need in-store before 11am, for example? But make sure you have ample staff to sales assistant to help me provide good service over lunchtime. because they are all Arguably, this is no time to be making economies with front-line staff. If you want stood around discussing them to deliver outstanding service, they need to feel well treated and incentivised. If their weekends. Also redundancies are unavoidable, manage them with great care: any impact on morale will ultimately affect customer service. they should know their product range and be What retailers are doing able to suggest The overwhelming majority of retailers we interviewed – all but two – have increased alternatives.” their focus on customer service to address rising consumer expectations. Between them they have put effort and investment into service, product knowledge, returns Female shopper, 26-35, £45-60k policies, empowering staff, and flexing staffing levels to match peaks in demand. Most also recognised the importance of individuality in the way service is delivered: the majority said that the key to good service is setting company standards but allowing individuals to express themselves and build rapport with customers.
“Some retailers forget they are there for the customer. Service to me is and always should be the number one focus for a retailer.”
Simon Douglas, MD, Head Entertainment 13 The Hypersensitive Consumer A retailer’s guide to 2009’s shop-shy shoppers
Actions to consider
Train and empower your staff to deliver great service. Offer services that build personal relationships. Avoid false economies on staffing. Improve home delivery service.
Worth watching
Jacques Vert has emphasised treating customers as individuals by investing in more personal shoppers. Hobbs has invested in a style of delivery offering similar benefits to a personal shopping service:‘by-appointment shopping’.This involves staff building-up relationships with individual customers to develop a knowledge of their preferences, so that they can offer the most appropriate garments and personalised service. Tesco’s Clubcard mailings show how even mass communication can be personalised. Mailings to the current 15 million cardholders come in 9 million variations to reflect customers’ individual interests. Crew Clothing has invested in increased training to raise service levels both in-store and through its direct channels. It has improved its returns policy and worked to raise employees’ product knowledge to help them demonstrate quality and value. John Lewis has benefited during the downturn from its long-standing partnership and profit-sharing model, which empowers and motivates staff. 14 The Hypersensitive Consumer A retailer’s guide to 2009’s shop-shy shoppers
Challenge 6: Hypersensitive Consumers Conversion say “Delight me”
What’s going on It’s not just better service that consumers are looking for. Half of them want the “Consumers are less whole shopping experience to keep getting better: 48 per cent say they’ve increased committed to shopping their expectations in the past two years. And they are less likely to buy if any part of the experience is substandard. and if they find Lack of changing rooms or having to queue are common complaints. On-shelf availability something doesn’t work is also a major issue – rather than wait for out-of-stock items, Hypersensitive Consumers or isn’t quite right, they will just choose not to buy. are far more likely to put Online retailers have had to offer excellent returns policies, to enable users to buy with it down and walk ou t.” confidence. This has raised consumers’ expectations and set a new benchmark for returns policies in-store. Nick Hollingworth, CEO, Austin Reed As well as providing a more enjoyable experience, many retailers are now providing a more educational experience. Training staff to offer more information about their products enriches the shopping experience and helps to address Hypersensitive Consumers’ concerns over: Reasons to shop – for example, the product will last a long time or is particularly high quality. “Our customers tell us Value – is it worth the price? they want to have much more of an experience Strategies for success rather than just a Retailers need to ensure their store design and facilities – such as changing rooms and shopping trip.” queue management systems – meet today’s standards. More investment may be needed – for example, in additional tills to cut queuing. CEO, Consumers are less tolerant of stock shortages, so supply chain management may need Leading Department Store to be sharper. And it’s worth reviewing returns policies to ensure they’re not deterring customers’ return visits. Consider ways to enrich the social aspects of your retailing environment – for example, by adding services that complement your existing offering, such as catering facilities, or beauty and wellbeing services. “There are few And look for opportunities to tell customers more about the origins of your products and retailers in the UK the sourcing, manufacturing and purchasing processes that lie behind them. This is an area who stand out.” that has been led by the grocery sector but has wider relevance across the retail spectrum. Paul Allen, CEO, What retailers are doing Jacques Vert Almost half the retailers we spoke to have recently invested in improving in-store design and facilities. Over half have improved their supply chain. The majority feel they now have strong returns policies; almost a quarter have recently made improvements. A third have focused on improving the social aspects of the retail environment, adding new services that complement their existing offering. And the same proportion have focused on telling customers more about the sourcing and production of their products. 15 The Hypersensitive Consumer A retailer’s guide to 2009’s shop-shy shoppers
Actions to consider
A successful programme to enhance the shopping experience will probably combine five features: Store design and facilities. Queue management. Friendliness of returns policies. Opportunities for social interaction. Product information.
“If you look at the US retailers, Worth watching particularly in clothing, compared to the European retailers they have some very ASOS uses its ASOS Life online fashion community to sexy stores. In the UK it is virtually build a richer experience for consumers, who can connect with fellow shoppers and ASOS insiders and impossible to do that because of the cost fashion advisers. It also offers live online catwalk shows of rent and rates.” when new stock goes on sale. Marks & Spencer, while continuing to invest in store Simon Douglas, MD, refurbishment, has focused on educating consumers about Head Entertainment the origins of its products. But does its recent trading experience suggest that consumers’ increased sensitivity to prices is pushing provenance lower down the agenda? Oasis has been hosting free Fashionably Late events in-store on Thursday evenings. These offer a chance to quiz the store's in-house stylists for fashion tips and advice, try on the latest collection pieces and experiment with different looks. There are beauty workshops and hair styling sessions, plus cocktails and other treats in the Love Bakery pop-up café. Competitions enable partygoers to win outfits hand-picked by the stylists and book personal shopping appointments. 16 The Hypersensitive Consumer A retailer’s guide to 2009’s shop-shy shoppers
Challenge 7: Hypersensitive Consumers Conversion expect multiple channels
What’s going on Hypersensitive Consumers want to shop through a channel that suits them – in-store, “Allow me a seamless online, or by catalogue. Because they feel they have less time and less money at their disposal, the impulse to shop may strike less frequently – but when it does, they want online and offline to satisfy it quickly and easily. experience. Bring More than four in five consumers (81 per cent) now expect retailers to offer a seamless real product multichannel approach. And 39 per cent strongly agree that service and products should be consistent across all channels. That means, for example, allowing goods sold online to knowledge and be returned in-store. enthusiasm in-store, This holistic approach drives revenue in stores as well as online, and retailers can risk with online pricing.” missing out on converting a sale if all channels do not have the same product offering. As with stores, consumers distinguish sharply between different retailers’ websites. They Male shopper, 36-45, £60K+ see many as clunky, difficult to use or lacking basic features offered elsewhere. For example, many sites don’t show them what other customers have bought or what else they might like to buy if they selected a particular product. “Multi-channel’s an Strategies for success absolute no brainer… If you’re not fully integrated across multiple channels, what’s stopping you? Even you cannot be a fashion sells successfully online these days, and bricks-and-mortar retailers who retailer today unless haven’t made online a priority have been caught napping. ASOS and NET-A-PORTER have shown that you don’t need stores to sell fashion successfully online, but can you you’re multi- run stores without an online presence? We’re not so sure. channel.” Implement uniform product pricing, offers and service across all channels; consumers no CEO, longer see much justification for pricing differences between channels, so if you’re Leading Department Store maintaining differentials they’ll need to be explained convincingly. The cost of a strong online offering does not have to be exorbitant. If budgets are tight, it may be worth considering a strategic partnership with another retailer to share back-end costs such as delivery systems. “Giving people an enjoyable experience What retailers are doing online is as important Three-quarters of the retailers we interviewed had invested in multichannel infrastructure – for example, delivery and payment systems. to them as walking Half had invested in additional features such as online systems to allow customer into a store.” ratings, reviews or blogs about products. Justin Hampshire, FD, Only a few had agreed new strategic relationships with other retailers to share Crew Clothing infrastructure. 17 The Hypersensitive Consumer A retailer’s guide to 2009’s shop-shy shoppers
Actions to consider
Implement uniform product pricing, offers and service across all channels. Invest in multichannel infrastructure such as integrated delivery and payment systems. Invest in additional online features such as systems to allow customer ratings, reviews and/or blogs about products. Use search engine optimisation (SEO) and work with affiliates and community websites to drive traffic to your website.
Worth watching
Argos has developed a multi-channel model that not only offers good value, but crucially is very easy to use. Lombok has internet terminals in-store to show its full range. If someone orders from a terminal, that store gets the commission. This avoids the risk that staff fail to promote the website to protect their commission, and then lose the sale because the product isn’t in stock. Rigby and Peller has launched a revamped site with the same offering as its stores, which includes more sophisticated services and fitting advice. Austin Reed recently moved both its websites onto a new platform which intelligently recommends products for particular customers. If a consumer picks a shirt, it will suggest a selection of three ties as well as other products, such as suits, which complement it. But Zara and GAP still have no shopping website in the UK. 18 The Hypersensitive Consumer A retailer’s guide to 2009’s shop-shy shoppers
Challenge 8: Hypersensitive Consumers Footfall and are canny about pricing conversion
What’s going on “Retailers need to Whether or not Hypersensitive Consumers are worse off than they were, they feel have a combination that money is tight. And they’re acting accordingly. of the right price and Almost half (49 per cent) of consumers feel they have less to spend; and of these, 80 per cent say keen pricing or discounts are the best way retailers can tempt them into buying. high quality service; This issue has divided the retail community in the last 18 months. After the extensive being the cheapest is discounting before Christmas 2008, many commentators warned that retailers risked not not necessarily the only damage to their brands but also ‘discount fatigue’, where discounts become the expected norm and consumers baulk at full prices. answer.”
Certainly, our research found symptoms of this fatigue. Of the 40 per cent mentioning Male shopper, 36-45, £60k+ price as the primary factor in their buying decisions: A third wanted generally lower prices. “Mid-season sales, And 43 per cent mentioned specific discounts and 2-for-1 deals as good incentives to buy. something we’ve never However, 18 per cent said they wanted reasonable and realistic prices which done before, have reflected the quality of the items on offer. And 71 per cent said they’d happily pay full price to treat themselves. been a great success. Fifty-five percent of Strategies for success our product was sold Retailers need to be as canny – and tactical – about pricing as Hypersensitive Consumers are. at full price, only forty If your customers want lower overall prices without compromising on quality, you’ll five percent was sold need to use pinpoint discounting with specific segments or products to create buzz at a discount.” without breaking the bank. Andrew Merriman, CFO, One area worth examining more closely is how far ahead you buy stock. Retailers Tie Rack such as Zara, Topshop, New Look and Primark have shown how shorter runs and buying cycles can make it easier to alter stock levels and type of stock to suit changing consumer desires. Could you follow their example to tighten-up? And could that “If consumers want reduce your need to discount next year? the product they will What’s retailers are doing buy it, but they are Almost two-thirds of the retailers we interviewed had implemented discount more discerning in schemes. Some 36 per cent had cut prices across their whole range, and 23 per cent terms of paying full had made particular efforts to increase price transparency. price for a product than they were 12 months ago.”
Paul Allen, CEO, Jacques Vert 19 The Hypersensitive Consumer A retailer’s guide to 2009’s shop-shy shoppers
Actions to consider
It’s easy enough to describe, but fiendishly difficult to get it just right: Use pricing models designed to drive sales. Accept that you’ll almost certainly need to include discounting and promotions. But keep these tightly targeted to minimise damage to margins and brand positioning. Keep revisiting and reviewing: consumer attitudes to pricing remain highly volatile at present.
Worth watching
The supermarkets Asda and Tesco have led the way with aggressive pricing and discounts, and price comparisons both in-store and in advertising. The other grocery retailers have had to follow suit. Even Waitrose has now introduced a more competitively priced ‘Essential Waitrose’ range – with significant success. Discount brands such as ASOS Red – some retailers are creating these secondary brands to clear inventory without damaging the core brand.
“You can offer really great discounts in specific areas and get people excited. We recently launched 'catch of the day' which was a 25 per cent discount on just one product each day. This created a lot of interest and repeat visitors to our website.”
Julian Granville, MD, Boden 20 The Hypersensitive Consumer A retailer’s guide to 2009’s shop-shy shoppers
Strategies for success in 2009 and 2010
To sum up, what should retailers’ strategic priorities be, if they want to win Hypersensitive Consumers? We’d recommend six:
Make this your year of retail surprise Refresh your loyalty programmes 1. and delight 4. Retailers’ opinions on the best approach to loyalty Resolve to work even harder on giving are divided. For some, loyalty results naturally Hypersensitive Consumers reasons to buy. from the right product, service and retail Enticing them in and giving them a pampering, experience. For others, loyalty programmes are a entertaining and educating experience is top of powerful tool to drive footfall, conversion and the agenda for many of the retailers we spoke understanding of their customers. Whatever the to. So it has to be top of yours, too. techniques you choose to deploy – from simple discounts to benefits such as by invitation previews or Airmiles that foster a more Make this your year of good concierge-style relationship – loyalty must stay 2. shopkeeping high on your agenda. Concentrate on getting the basics of retail right – right product, right service, at the right time for the right customer. Hypersensitive Choose the right KPIs Consumers are intolerant of mistakes in any of 5. You can generate large quantities of data these these areas. days – but which KPIs are most useful to you?
Know your customers better than Talk to BDO Stoy Hayward 3. ever before 6. For more on Hypersensitive Consumers, feel Consumer behaviour has changed very quickly free to pick our brains. Our Retail team would since the credit crunch began. You can’t afford be delighted to give you and colleagues a to misunderstand these changes and how they presentation on the Hypersensitive Consumer, impact on product and services. The retailers or simply to discuss current retailing issues who succeed in 2009 and 2010 will be those with you. Please call Rupert Eastell on who best understand Hypersensitive 020 7893 2378 or email Consumers’ needs. Appreciate that consumers [email protected] who feel uncertain or guilty about spending will need strong reasons to buy. Some will need to feel they’ve found a bargain, or are buying exclusives; others will need reassurance about product quality before they’ll pay a full price.
For a fuller selection of consumer and retailer comments, view this report online at www.bdo.co.uk/hypersensitiveconsumer About the research This report is based on research which involved:
Online interviews with 340 consumers. In-depth interviews with 33 senior stakeholders in UK retail: CEOs, MDs and FDs including: Austin Reed, Jacques Vert, Crew Clothing, The White Company, Hobbs. Insight from partners in the BDO Stoy Hayward Retail Sector team. Research conducted February-May 2009. About BDO Stoy Hayward BDO Stoy Hayward is the UK Member Firm of BDO International, the world’s fifth largest accountancy network, with more than 1000 offices in over 100 countries*.
With the largest market penetration of the retail sector outside of the Big Four, BDO Stoy Hayward plays a leading role through advising many of the UK’s retail businesses.We have strong links with the retail community in the UK and internationally allowing us to deliver the best possible service.We provide advisory, transaction and assurance services and our partners are renowned for their commercial and pragmatic approach to solving problems. How we can help you If you would like further information about this publication or our specialist knowledge of the retail sector, please contact Rupert Eastell , Partner, Head of Retail, on 020 7893 2378 or email [email protected] Alternatively contact your local BDO Stoy Hayward business centre:
Belfast Chelmsford London Southern region: [email protected] [email protected] [email protected] Epsom, Gatwick 028 9043 9009 01707 255 860 020 7893 2378 [email protected] 01293 591 000 Birmingham Glasgow Manchester [email protected] [email protected] [email protected] 0121 352 6212 0141 249 5234 0161 817 7534 Bristol Hatfield Reading [email protected] [email protected] [email protected] 0117 930 1511 01707 255 860 0118 925 4432 Cambridge Leeds Southampton [email protected] [email protected] [email protected] 01707 255 860 0113 204 1265 023 8088 1897
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