Retailer choices
Having seen signs of a tipping point in shoppers’ mindset, their shopping behavior, and their attitude towards brands, to what extent does this tipping point affect retailer choice and strategy?
After one-stop-shopping during the pandemic, there has been a huge uplift in shopping around: approximately 900 million extra trips in 2023, representing a three percent increase over 2022.
Not surprisingly, discount has been the winner in the cost-of-living crisis and this channel is still growing, mostly at the expense of specialist channels. Drugstores have also been able to expand slightly. We call this the lipstick effect: If one cannot afford a new coat, a new lipstick instead helps to feel good.
Many more shoppers entered different doorways. As we saw before, a shift in retailers and respective habits typically means that the opportunities of being bought the next time are cut in half. At the same time, the opportunities for in-store touch points accelerate. Interestingly, all channels saw increased traffic, only online had to face a decrease in trips and value. While discount sees the largest uplift in trips, it is not much higher than for drugstores, hyper- and supermarkets. These numbers unmask the disproportionate rise in prices by discounters.
As before, we are finding evidence for the tipping point: Early 2023, nearly one in five shoppers intended to reduce their shopping, whereas in fall, this percentage share dropped to 13%. As much as 87% of Europeans declared that they wanted to continue to shop at the same level or even more. The nationalities switching channels the most include France, Belgium, and Switzerland, while the most loyal retail shoppers can be found in the Ukraine, Hungary, and Great Britain.
Admittedly, prices continue to be an important aspect for shoppers, but we are seeing a unique momentum and “must-haves” to capitalize on, to reshape behaviors: It is time to change the narrative from price to appreciation.
To make sure that all those wandering shoppers will stick, aspects such as quality of assortment, convenience – easy access and navigation – and promotions, have gained in relevance and need to be amplified.
Most interesting: For those shoppers who want to stick, a good availability of brands is much more important than a good assortment of private labels, which again underlines the general trust in brands – and the respective opportunities.
While we do not want to over-emphasize the “old vs. young”-story, it is important to understand the preferences of the respective target audiences, as loyalty drivers differ by generation. Older generations such as the Boomers, are looking for a good in-store experience, service, and help, a good and big assortment, and convenient shopping, whereas for younger generations – Gen Z – detail makes the difference. Sure, the aspects above count, but they expect retailers to also address their lifestyle needs, supporting aspects such as sustainability and health. Younger people are furthermore interested in finding exclusive products, and with regards to shopping experience, are looking for inspiration and personalization.
Personalization is a strong argument, when shoppers look for smart ways to improve their shopping experience. Key aspects for highlighting the emotional advantage include superior performance, a larger assortment covering varying needs, and promotions. It’s about changing the narrative from money saved to money well spent.
Overall the definition of shopping experience is getting broader. As shoppers grow more digital, technology adds new opportunities to our way of shopping.
When asked about ways to improve shopping experience, technical advancements are certainly becoming a choice driver, but in-store automation and fast check-out counters are not the most relevant. As for artificial intelligence (AI), it holds the promise for more personalized pricing, recommendations and tailored promotions that deliver an extra edge in connecting with the shoppers’ particular needs for budget management, the right assortment, supporting convenience, and lifestyle.
Moving forward, shopper appreciation will be the name of the game. Just like in brand innovation, retailers have to put a stronger focus on shoppers’ needs and expectations.
It is important to change the narrative from the retailer perspective to the shopper perspective, from “we offer the best price, we are cheap” to “we pay attention to your requirements”, acknowledging that shoppers might have been looking for opportunities elsewhere, so “thank you for sticking with us”.
