Smart shopper plans for a frugal future

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• Retail spend resilient as Deloitte forecasts flat Christmas and 1.5% fall in retail sales in 2010
• 78% of people are spending the same or more on food and groceries; 45% spend less on clothing
• 52% of shoppers say their shopping habits have changed for the long-term

A new report from the business advisory firm Deloitte, shows that despite the background of the worst economic crisis in modern times, people are spending virtually the same in retail as they were last year. Deloitte forecasts that retail spend in December will be up by 0.5% compared with 2008, but will fall slightly for the whole of 2010.

Richard Hyman, Strategic Retail Adviser to Deloitte, said: “We believe total retail spend for the final quarter of 2009 will come in just below the same period last year, but the Christmas month will be slightly up. Next year, expected increases in unemployment, the impact of higher taxes and increased National Insurance payments will take their toll on retail sales and we forecast a slight fall of 1.5% in 2010.

“However, this is still an outstanding performance which reflects a bedrock of fundamental confidence that few might have expected.”

Consumer shift in values is permanent
The Retail Review: Changing Habits, Shifting Patterns argues that with roughly flat total retail sales over the next 15 months, there will be winners and losers. Our consumer research has revealed that 78% of people are spending the same or more on food and other groceries this year compared with 12 months ago. ‘Wants-driven’ spending has taken a bigger hit. 45% of people are spending less on clothing and footwear this year and 50% are spending less on entertainment and leisure.

Tarlok Teji, UK Head of Retail at Deloitte, said: “Consumers are gravitating to the grocers. The increasing number of budget or own-label products has been a winner for the supermarkets who have also taken over from traditional high-street chains as the country’s biggest clothing retailers. Now more than ever, non-food retailers need to focus on the relevance of their products and differentiation from their competitors.”

The report also reveals that the way in which consumers shop has changed for the long-term. The recession may have accelerated the pace of change by forcing consumers into taking daily decisions on their spending patterns, but the ‘smart shopper’ has been with us for a while and is here to stay.

59% of people have cut back on daily indulgences such as snacks or coffee, compared with last year. 60% have reduced the number of impulse purchases they make, whilst 45% say they more regularly seek out vouchers before shopping for food and other groceries. As further evidence of greater spending control, 65% of shoppers say they are more aware of what they spend their money on compared with 12 months ago and 51% buy cheaper or non-branded products.

It is a trend that hasn’t gone un-noticed by the industry with 88% of retailers acknowledging that people are shopping around more this year and becoming less brand loyal. However, whilst it may be assumed that these changes are a temporary response to the downturn, 52% of people say they have changed their shopping habits for the long-term.

Teji added: “In the immediate future people remain cautious about their spending power, but there is something more fundamental at play here too. These changes in behaviour have not happened suddenly, they have evolved over a period of time and mostly before the ‘credit crunch’. So talk of a ‘new consumer’ in our view is over done. The digital age has made information available 24/7 and now, anyone with the internet has the ability to research products, prices and opinions and with mobile technology this can be done on the go. This has created an unprecedented level of transparency.

“The history of retail in the UK shows the balance of power shifting over decades from the Government, to the manufacturers, to the retailers. And now, it is very much with the smart shopper. Retailers will need to adjust the way they interact with these smart shoppers and serve them.

Smart shopper forces retune of retail business model
Hyman added: “Retailers across the industry will need to focus on improving their selling and customer service skills. The past decade has not always required retailers to excel in this area, but that has changed. In some cases, retail portfolios need urgent attention following a period where the pursuit of floor space without rigorous customer insight has left many retailers with poor performing branches.

“There are opportunities too though. Cross-border retailing has always proved difficult but the saturated market at home means that the growth of emerging economies is a compelling prospect. Retailers are also well positioned to exploit their brand value by broadening their product and service offering with financial services one area of potential interest.

“However, most retailers’ business models were forged in the context of strong and growing demand and a consumer led boom. It is time not just to re-evaluate the business forecasts but to retune the business model. The retailers that are winning in these challenging times and show signs of breaking away are those that are meeting most of the trends we have identified. Those that are only doing one or two things are likely to be left behind.”

Ends

About Deloitte
In this press release references to Deloitte are references to Deloitte LLP, which is among the country's leading professional services firms. Deloitte LLP is the United Kingdom member firm of Deloitte Touche Tohmatsu (‘DTT’), a Swiss Verein, whose member firms are legally separate and independent entities. Please see www.deloitte.co.uk\about for a detailed description of the legal structure of DTT and its member firms. The information contained in this press release is correct at the time of going to press. 

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