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Shoppers shop around

Douglas Fraser | 11:58 UK time, Thursday, 28 May 2009

Trading down has been one feature of the recession so far, from restaurants to pre-cooked meals, and from pre-cooked meals to ingredients for cooking.

Egg sales have risen at a cracking pace since the start of the year, offering the best value source of protein.

And as people go less frequently to the hairdressers, sales of hair dye are up 47%.

It's not that people have stopped spending, particularly on food. But there are significant changes in consumer behaviour, which retailers reckon could come to mean a permanent shift on a scale we haven't seen for generations.

Experian, the retail consultants, today publish their latest analysis of consumer behaviour, looking to what will happen after recession.

It finds - and retailers agree - that there has been a sharp drop in consumer loyalty, or "brand monogamy". More than a quarter of shoppers say they have been more likely to look around for the best deal over the past six months, and 80% say they have become more aware of the price of goods and services.

The big supermarkets have been able to count on 80% of their consumers coming back week after week. But recently, they've found shoppers getting much smarter and sharper, searching out value.

Part of that breakdown of loyalty has been a reduction in the public's trust of big business.

Experian has never seen so much suspicion, with 40% saying companies are "not fair" to consumers.

That is surely affected by the banking crisis. Asda has researched trust issues, and found banks and the police fare badly, while supermarkets are in the top levels for public trust, alongside Google and the National Health Service. (Incidentally, if you look at political positioning on the NHS, you can see political focus groups have been coming up with the same finding).

That change is permanent, according to Experian's Joe Staton. In marketingspeak, he foresees "the promiscuous bounce-back consumer".

"The biggest casualty will be brand monogamy as consumers demand higher levels of service than ever before and drop those brands they do not believe fully appreciate, and indeed reward, their custom," he argues.

The consultancy is talking about loyalty being rewarded and re-won every day with reward points, personalised discounts and targeted one-to-one communications.

Personal recommendations will become more important to out-performing the competition.

And that chimes with developments from the major retailers in using social networking sites, with Waitrose launching a chat site, and Asda being astonished by the big response to an invitation on till receipts to share money-saving ideas.

That analysis also helps explain why Tesco is doubling its Club card reward points.

Another significant shift was being highlighted at the Scottish Parliament yesterday by Asda. It was trumpeting its increase in sourcing from Scottish producers, up from £16m last year towards a target £25m this year. Sales of "local food lines" are up 55% on last year, says the company.

This is, Asda reckons, driven by consumer preference, both to support local businesses and to cut back on carbon-emitting food miles. While the demand for organic produce and fair trade has sharply reduced, the awareness of green consumer responsibility remains high. According to Experian, 70% of shoppers are concerned about what they can do for the environment, compared with 40% a decade ago.

Asda managers say Scotland is ahead of the rest of Britain in supporting local producers in the in-store choices they make, while the most locally loyal parts of England are Norfolk, Lincolnshire and Cornwall.

The American-owned grocery giant commissions an independent tracker of spending power, and notes that reduced interest rates and inflation have been a key factor in pushing up Scottish spending power slightly faster than the British average.

Figures from the income tracker show the average Scottish family last month had £4 more in discretionary spend each week than it had last April, after taking into account the cost of essentials. A low point for the past year was September, before interest rates were cut and when fuel and food inflation had pushed that discretionary element down to £136 per week. Since then, it has risen £15.

The Asda response to recession is to do more of what it was already pushing, with relentless pressure and marketing on price, varying from its rivals by setting national prices across all its stores.

That price pressure is the reason it's not moving into high street convenience locations, as Tesco and Sainsbury's have been doing, even though Woolworths' demise has left lots of prime space vacant. Nor is Asda pushing, as Tesco and Sainsbury are doing, on further diversification into retail banking.

Its focus remains food and price, with a concern that the big retailers' hedging against currency fluctuations have protected British consumers fairly well so far, but that these arrangements will run out in the final quarter of this year, and we'll see upward cost pressure on produce priced in dollars.

The decline in the pound may have gone into reverse in recent weeks, but there's still plenty potential to import inflation to the check-out till.

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