By Anastasia Lloyd-Wallis
Chief Operating Officer and Head of Consumer Insights, Retail Doctor Group
Consumer and retailer sentiment are two of the most important factors affecting the bottom line for retailers. However, the relationship between the two is rather complex.
Consumer sentiment measures consumers’ confidence about the economy and their own financial situation, while retailer sentiment measures how confident retailers are about the future of their business.
Positive consumer sentiment results in consumers being more likely to spend money, both on impulse purchases and discretionary items. When consumer sentiment is negative, consumers are most likely going to try save money and cut back on spending.
Positive retailer sentiment means retailers may be more inclined to invest in their business, expand their operations, and offer discounts and promotions to attract more customers. Negative retailer sentiment results in retailers being more likely to cut back on investment, reduce their headcount, and raise prices in an attempt to offset losses.
It is important for retailers to monitor both consumer and retailer sentiment in order to understand how it may affect their sales. By understanding the factors that contribute to sentiment, retailers can make informed decisions about their business strategies.
Retailer Focus for 2023/2024
Consumer behaviour relates to how people make purchasing decisions, how much they’re willing to spend (and on what), and where and how they prefer to shop. It’s important for retailers to focus on consumer behaviour because it helps them understand what customers really want and need in a shopping experience.
Understanding the factors that influence consumer behaviour helps retailers develop successful marketing strategies. This can have a positive impact on sales, boost profits, and build a loyal customer base.
The findings from the Retail Doctor Group’s Insights division 4-year study to track changing consumer and retailer sentiment, both here at home in Australia and internationally show that:
- Retailers in Australia and around the world have a greater focus on adapting to and predicting consumer behaviour and expectations.
- Managing through uncertainty is the second priority for Australian retailers (37%), while also seeking a sustainable long-term strategy (31%).
- For retailers worldwide, digitalisation is another important priority, along with optimising their store network.
Australian Retailers Pressure Points
Australian retailers face a number of pressure points in today’s economic times. These include increasing competition from online retailers who are able to offer lower prices and a wider range of products than traditional brick-and-mortar retailers.
This pressure to compete is accompanied by rising costs of rent, wages, and other expenses, making it difficult for retailers to maintain profit margins. This, coupled with declining consumer confidence and changing consumer behaviour, means that retailers are now also forced to adapt their business models.
Retailers’ Consumer Priorities
Loyalty has increased in significance for retailers and is now the #1 consumer priority. Loyal customers are more likely to spend more money, shop more often, and recommend the retailer to others. They are also less likely to switch to a competitor.
Variables related to personalisation are also important, and the personalisation of products shows a high increase. Stock availability and well-trained staff have remained key focus areas of retailers.
To download the RDG Retailer and Consumer Sentiment 2023 – Click here
Retailers’ Consumer Priorities – An Overview
RDG’s Consumer and Retailer Sentiment research indicates a number of consumer priorities retailers should not just be aware of, but actively managing to stay ahead in these uncertain times. These include:
- Stock availability: When products are not available, customers are likely to be frustrated and may choose to shop elsewhere. When products are out of stock, it relates directly to inconvenience, higher prices, and lack of choice.
- Well-trained and friendly staff: Retailers can improve the customer experience and increase sales by having the best team in place. Worldwide labour shortages may very well impact this, but upskilling and staff re-training are optional workarounds to manage the shortage in skills. When staff are knowledgeable, helpful, and friendly, customers are more likely to have a positive shopping experience and to return to the store in the future.
- In-store experiences: When customers have a positive in-store experience, they are more likely to shop at the store again and to recommend it to others. By improving the in-store experience, retailers can reap the rewards of a satisfied customer base and increased sales.
- Augmented reality and virtual experiences: AR is increasingly being used by retailers to allow customers to visualise products in their homes before making a purchase.
- Personalisation: There are many ways that retailers can personalise the customer experience. Some of the most common methods include:
- Using customer data to understand customer preferences, such as their purchase history, browsing history, and demographic information. This data can then be used to deliver personalised recommendations, offers, and content.
- Using location data to deliver personalised notifications that a nearby or favourite store has a sale on products previously added to an abandoned cart.
- Using real-time data to notify a customer of low stock on a product they purchase at regular intervals.
Personalisation is a powerful tool that can help retailers to improve the customer experience, increase sales, and reduce costs. It also increases brand loyalty, improves customer retention, and reduces customer churn.
Changes in Customer Behaviour
Customer behaviour has become the #1 source of strategic thinking for retailers, allowing retailers to focus on key areas, making a difference to their customers’ lives:
- Consumers are increasingly conscious of their budget and looking for deals.
- Consumers are now willing to travel further for the right shopping experience. With consumers returning to larger, experiential retail.
- Saving time continues to be of importance to consumers.
Next Steps for Retailers
The retail industry is increasingly more competitive than it’s ever been. By focusing on next steps for the future, retailers can identify new opportunities and trends, and develop strategies to stay ahead of the competition.
Australia vs Global Retail
There is an increased confidence amongst Australian retail, however there are learnings to be taken from across the globe around areas of focus and future challenges.
- Review trends and innovations from around the world to inspire future strategy and opportunities.
Whilst there is a tendency to focus on the immediate during times of uncertainty, retailers should look to longer term strategic planning:
- What does 2030 look like in your sector?
- What digitalisation and physical store network do you need to implement now to be successful in 2030?
- Review current market trends, global trends and predicted future trends that may have an impact on your category and create your roadmap to 2030,
- Split tasks into ‘Refinement’ (small changes to existing operations) and ‘Transformation (new ideas and discrete projects for change).
To download the RDG Retailer and Consumer Sentiment 2023 – Click here
Talk to our strategy division about our Industry 2030 program, e-mail us on email@example.com or call 02 9460 2882