Stressed economy means high price sensitivity among UK shoppers, increasing pressure on retailers
A massive schism is forming in the current UK retail landscape. Discounters are posing an ever-increasing threat: the latest grocery market share figures show that while the Big 4 (Tesco, Sainsbury, Asda, Morrisons) collectively grew by 1.6 percent, Aldi and Lidl together grew at their fastest rate since January 2015. The two German discount grocery chains experienced a combined sales increase of 19.2 percent year-on-year (Kantar Worldpanel, May 2017 monthly report).
In this challenging environment with pressure on both costs and prices, retailers need to aggressively leverage every available tool to ensure that they price strategically to earn their right to stay in the game.
This is the first in a blog series to share our insights and expertise on the topic, proposing some scenarios and solutions which can alleviate the pressures and challenges of today’s double-disrupted UK retail reality.
Understanding Price Sensitivity
Driven by the desire to understand the true roots of key trends in order to better interpret and predict them, and in our constant search to create value to our customers and partners, we recently commissioned Forrester Consulting to run a global consumer survey[i] to find out how shoppers around the world, including UK shoppers, respond to retailers’ pricing and promotion decisions.
Amidst many valuable and often surprising insights, there were a few particularly relevant to the UK retail market, revealing shopper behavior trends which are critical for a retailer to know and take into account:
- 85% of UK respondents confirmed that they would “shop around for the best deal on a product I wish to purchase,” which was the highest score among the five geographies surveyed (U.S., UK, Germany, France and Brazil), and confirms our observation about the growing price sensitivity of UK consumers, driven by decreasing disposable income, growing cost of living and increasing uncertainty about the future
- 34% of shoppers in the UK “will walk out of the store if the product is less expensive somewhere else” – a staggering realization that a retailer runs the risk of losing every third shopper if he/she remembers or believes that a particular product is cheaper from another online or in-store competitor
These are just a few of the many findings which can be turned into very actionable insights if a retailer is equipped with the right technology to do that. As said above, with the shopper journey becoming more and more convoluted, signals about behavioral change should be received and analyzed in (near) real time; this is the cost of staying in the game nowadays.
We invite retailers to reach out to us: we are here, open for dialogue and equipped to create an individual set of recommendations for each retailer – whether you are grocery, fashion, DIY, home improvement or another retail sector. There is no time to lose!
[i] Understanding Retail Customers’ Pricing Expectations and Tolerances, a May 2017 commissioned study conducted by Forrester Consulting on behalf of Revionics.