A report published by accountants and business advisors BDO LLP unveils a new breed of consumer which is threatening the UK high street, rendering retailers vulnerable should they fail to evolve with the post-credit crunch consumer mindset.
As the UK emerges from the depths of the economic downturn, the report - Transitions to the New Consumer - comes amid predictions that more than 26,500 retailers will dissolve by 2015, which include around 6,300 bars and restaurants and 1,500 homeware retailers. It urges retailers not to join the future ranks of failed high street businesses, but to act now and adapt to the changing mindset of their customer base. This will mean taking new steps to build brand loyalty in the fight for survival on the UK high street.
Crucially, the study pinpoints the post-crunch consumer as having shifted to a more reasoned and thoughtful form of consumption. Demand for individualised service now dictates consumer spending, with shoppers less impressed by size, volume or even variety of product, and instead make their purchasing decisions based on individualised service and personal shopping experiences.
Overall, BDO forecasts that consumer spending is expected to recover and continue to grow, with growth in retail spend forecast to edge up from 2.6% to 2.8% next year. Yet only those businesses that heed the habits of the increasingly canny consumer will safeguard their success in the years ahead.
The report provides guidance to businesses on engaging with the new consumer mindset, examples include:
* Re-think who your customers are and who you want them to be
* Re-visit what great service looks, feels and sounds like
* Continuously review customer spending data and use it to provide a bespoke personal experience
* Consider the international dimension
* Develop and invest in multi-channel
* Focus on what customers want and need rather than product range variety
Mark Anslow, Lead Partner of BDO LLP in Birmingham, commented: “One size no longer fits all. Businesses will not survive and thrive if they do not take steps to understand the psychology of the new consumer. The recession has been a catalyst for change and people are becoming much more demanding – they want a personalised experience without paying a premium for it. That means consumers want to buy from retailers who target and treat them as individuals.
“The high street needs to redefine the concept of the personal shopper - only the personal touch will allow retailers to profit from this new breed of consumer. There are several ways to do this, but just through effective data capture businesses can start the journey to truly tailoring their approach to customers to activate purchasing.”
Future Transitions reports are to be released over the coming months and will cover:
* Transition to new forms of capitalism
* Transition to a new regulatory environment
* Transition to sustainable development
* Transition to a new corporate culture
The BDO LLP Transitions report reveals what the new consumer will look like and how it will affect retailers:
Trust and integrity
* New consumers will demand respect, trust and integrity from their product and service providers. Maintenance of brand image, corporate reputation and ‘on message’ marketing will be vital.
* Brand-linked promotional celebrities will need to be carefully chosen (and publicly ditched should they do a ‘Tiger Woods’) to protect a company’s good name.
* Marketing use of social media will need careful handling. Consumers will lose faith with purchasing comparison websites if big brands compromise impartiality or are seen to ‘place’ recommendations or reviews.
* Security of purchase, particularly online, could become a major consumer concern if identity theft, e-fraud and mistrust of the financial sector continue. Technological change may be rapid, but its acceptance relies on consumer confidence.
* The ethical and green agenda will resurface, but new consumers will now expect it of their retailers and be less willing to pay more for it. They will also expect the same integrity in the supply chain.
Train to gain
* Service with a smile is back. New consumers will want to be served well by alert, informed and respectful staff and will expect a service tailored to them as individuals. Even computerised online ‘service’ will need to smile.
* Above average training for staff could bring significant benefits. Better product knowledge will enable specialist advice to customers when requested. Greater corporate awareness enables staff to act as brand ambassadors. Improved skillsets provide greater operational flexibility.
The Flexibility Challenge
* Businesses will need to make fixed costs variable in order to respond quicker to rapid and sharp changes in new consumer demand. Supply chain efficiency, staff costs, premises, and importantly delivery options will all require fresh scrutiny.
* Retailers have spent the last decade looking far to the east and seeking lowest unit cost production to support volume sales strategies. As competition increases and stocks become increasingly ‘underbought’, discussions about quicker, more frequent, more flexible purchasing will emerge. Near east and eastern European production countries may benefit.
* Brand partnerships and collaborative selling may share the risk and reward in future competitive markets, while extending sales channels without the overhead investment. This could also be a strategic response to global village and local provenance trends.
The BDO Transitions website is at www.bdo.uk.com/services/transitions.