Charteris

Probably the most critical issue/trend facing Retailers right now is the Credit Crunch.

As you must know, the subprime mortgage crisis in 2007 has had a massive global financial impact. From a retail consumer perspective it seems however, that the recession effect still has some way to go. ONS figures for last month showed a rise of 1.2% in sales, although retailers are not convinced and the rise is being attributed to a number of reasons from massive price reductions to the high street being a “lagging indicator” to general volatility shown by the May surge and July drop.

Either way, the immediate impact is uncertainty. Lenders are uncertain about future sources and costs of funding, while consumers are unsure about how much further house prices will continue to decline, and whether or not widespread job losses and mortgage rate rises are really going to happen.

All expectation is that this is a recession that will deepen and the trend towards careful spending is going to put increasing pressure on retail margins. As it stands, the policy of reductions that retailers have employed to boost sales is seriously hitting profits. The John Lewis Partnership recently underlined this by announcing a 27% fall in first-half profits attributed mostly to price cuts and increased marketing spend.

Finally apart from the direct impact to profits discussed, the credit crunch is also severely impacting investors and share prices, and nervousness in the financial markets is making it harder to raise investment capital for new initiatives.

The effect of the global credit crunch on business and consumer spending thus means that retailers must look to innovate and create competitive advantage without the luxury of profit growth and flexible budgets. In short it means they need low cost / high benefit customer propositions that involve linking up existing assets to improve customer propositions rather than involving large spend on new systems, staff or channels.

Let’s start with a quick look at some of the key trends in consumer behaviour and the retail industry. I’ll pick out 3 each.

3 Deepening Trends in Consumer Behaviour:

1. Customers are becoming more demanding – the Web 2.0 revolution has provided a forum for sharing opinions to the point where consumers really do call the shots. They expect choice and convenience or will go elsewhere.
2. Social Media online is exploding – and is becoming a key vehicle for both strategic marketing and customer engagement.
3. Premium products and services still sell well and Green is becoming iconic – many of the less price sensitive consumers are still highly style and status conscious, and consumers are going to increasingly great lengths to boycott brands that have poor eco-credentials

Ok, so that’s 3 consumer trends. How about the Retail Industry in general?

3 Deepening Trends in the Retail Industry:

1. The credit crunch is getting worse – and negatively impacting retailer profits
2. The e-channel is still growing fast – online spending in July for example reached £4.8 billion, up 80% on last year to a new all-time high. Retailers are expecting a major shift to online this Christmas.
3. The leaders are merging channels – and providing seamless brand and customer experiences across them all. Consumers in return are becoming rapidly less tolerant of pricing, availability or service differentials online and offline.