Retailers are being warned by strategy consultant OC&C that consumers increasingly basing their purchase decisions on value for money above all other things.
In line with this week’s British Retail Consortium (BRC) Retail Sales Monitor figures, OC&C’s latest annual Retail and Proposition Index report reveals that with 43% of UK shoppers are planning to spend less in the next 12 months.
Retailers are being told to act urgently to set and communicate fair and consistent pricing, to protect trust at all costs while managing inflation as consumers reign back spend.
Despite typically being a busy time of year for the retail sector, the festive season is being earmarked as a period when retail businesses should brace for tough times.
The figures found that consumers are more likely to protect spending this year at value-led retailers: Of the ten retailers most resilient to a fall in disposable income, half are value-led.
The RPI also shows value players this year have been able to increase conversions more effectively than other retailers, with a conversion rate of 66%, compared to 47% for mass market retailers and 44% for premium players.
Previously, shoppers used to equate trust with the reliability and safety of products, now consumers are increasingly linking trust with value for money as they battle to keep the cost of their weekly shopping down.
OC&C’s latest report found that 80% of consumers are now prioritizing price as their key motivator when shopping – compared to just 65% in 2019.
According to OC&C, retail leaders must fundamentally change their business models in order to develop resilience and competitive advantage.
Since the cost-of-living crisis, both discount grocers Aldi and Lidl have made up a combined 2.4% market share leap.
“These are undoubtedly challenging times for retail businesses as consumers look to find bargains at the same time as input prices continue to rise,” OC&C partner Sohini Pramanick said.
“It will be the retailers who can maintain consumer trust, continue to provide their customers with strong value and avoid compromising on their sustainability goals, that will see their market share grow through these challenging times.”