Deloitte: A changing retail landscape puts the ‘smart shopper’ in focus
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Sharon Fraser
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It is no secret that 2009 has been an extremely challenging year for the retail industry in the North West and throughout the wider UK. The first nine months of the year, for example, saw an estimated 25,000 retail closures – equating to more than one shop in every ten in the UK – with book stores, fashion retailers and florists most severely affected by recessionary pressures. As ever, recent reports on the performance of the industry are mixed. The British Retail Consortium stated that UK retail sales for September were the strongest since January 2008, with like-for-like growth of almost three per cent, while the Office of National Statistics countered that September sales were flat for the second month in a row. The unpredictability of the environment is clear. Consumer confidence has certainly taken a battering, and the sense of austerity that has permeated the collective consciousness will take time to shift. More people than ever are opting to spend less, save or reduce debt and, with rising unemployment, impending tax rises and the impact of increased National Insurance payments, 2010 is set to be even tougher for retailers. Indeed, we are predicting a fall in retail sales of 1.5 per cent for the year. Of course, there are always winners in any challenging market, and 2009 highlighted a number of success stories in the North West. The Trafford Centre always acts as a barometer for retailers in the region, and this year reported an increase in footfall of more than five per cent. N Brown, the Co-operative Group, Matalan, Pets at Home and JD Sports are also among those that have outperformed their respective markets. And of those who took early action to reduce costs and drive efficiency, many have recently reported significant profit improvements. Now more than ever, it is crucial that retailers understand the changing priorities and demands of their customers. Of the people we surveyed for our report, The Retail Review: Changing Habits, Shifting Patterns, the majority have decreased the amount they spend on clothing, entertainment and leisure and daily indulgences. More than half of North West consumers (54 per cent) admit to buying more cheaper or non-branded products, and a massive 64 per cent say they are more aware of what they spend their money on. The economic backdrop has seen consumers gravitate in droves towards the supermarkets, where the growing focus on budget and own-label products has proved a significant draw. But the retailer that assumes these changes mark only a temporary response to the downturn does so at his or her own peril. While the recession may have accelerated the pace of change by forcing consumers to take daily decisions on their spending patterns, the ‘smart shopper’ has in fact been with us for some time and is undoubtedly here to stay. In the North West, 51 per cent of consumers state that their spending habits have changed for the long term. In fact, the history of retail in the UK shows the balance of power shifting over decades, from the Government to the manufacturers to the retailers. Now, it is very much with the smart shopper, and retailers must adjust the way they interact with and serve this market in order to survive and grow. For example, while value for money has proved itself to be a key driver of success over recent months, values are also growing in importance for the smart shopper, with many demanding good corporate citizenship, ethical supply chain policies and low carbon footprints. Technological advances have also pushed transparency to the fore by giving the smart shopper the ability to research retailers, products and prices and to trade opinions instantly with others. In response, retailers will need to focus on improving their selling and customer service skills. Other areas demanding attention include product and service relevance and range proliferation. Retailers must become more demand-driven and avoid wasting even one square foot of floor space, while exploiting their brand value in line with consumers’ changing priorities. The growth of emerging economies provides another compelling prospect for the ambitious retailer, with a saturated domestic retail market and the rising middle class in the BRIC countries combining to create a considerable opportunity. The retail business model itself is also crying out for re-evaluation following an extended period of increasing consumer demand. It is no longer enough for retailers to focus purely on retuning short-term forecasts. With a VAT change just around the corner, the pre-Christmas period could show a small increase in like-for-like retail sales as consumers look to purchase any necessary big ticket items at as reasonable a price point as possible. But any surge will be only short-term in nature and should not be seen as a lasting fillip. The retail industry has proved its flexibility in adapting to both the direct and indirect effects of the recession. Those that will succeed in 2010 and beyond will be those that continue to listen to the smart shopper and react quickly to meet the demands of a rapidly changing market. Sharon Fraser, Head of Audit, Regions.
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