How Independent Retailers Are Surviving Changing Consumer Behaviour

March 23rd, 2021 | Retail News

During the COVID-19 pandemic, retailers experienced a significant shift in consumer habits. It was to be expected, given that most – if not all – of the Western world had ordered their shops, restaurants and pubs to close for a period of time.

The current crisis has another layer of complexity, however – not only has the pandemic impacted the financial situations of everybody around the world but consumers now also fear catching the virus from inside shops.

There is unlikely to be a one size fits all solution for retailers, due to the growing emergence of online shopping, but the retail community continues to adapt and revise its business models in creative ways to suit the current market conditions.

How Covid-19 is changing consumer behaviour

The Covid-19 crisis has posed financial problems to people across the globe. With long-term closures across many industries and intense company budget cuts becoming an unfortunate new normal, many jobs have been lost. Around 25% of families have had their finances negatively impacted by the Covid-19 pandemic.

People are losing the financial stability they previously relied on, and are struggling to find another job as easily as they would have pre-pandemic. One of the first things that many people look at is how to reduce their outgoings – shopping is often the first target. Spending on essentials rose by 65% while offline spending in other categories plunged.

Online shopping increased massively over the pandemic

On a related, yet opposite, note, we’re also spending more time at home than ever before. That means we’re constantly on our phones, laptops, and tablets, and watching television. These are all perfect platforms to be bombarded with advertisements, so the average consumer is more exposed to social media marketing than ever before.

Due to these factors, the buying behaviours and trends that were easily recognisable in 2019 will have, and continue to, rapidly change.

For example, McKinsey & Company conducted several consumer-sentiment surveys throughout the world from March 2020 to September 2020. One of the main themes the survey focused on was the shift amongst consumers to online shopping.

Around 15% of consumers have carried out their grocery shopping on a website that they’ve never used before, and a further 50% said they intend to carry on purchasing from their new shop for at least some of their groceries.

There are several factors that contribute to these changes. For some, it is the convenience and perceived safety of click-and-collect or home delivery services – many based their preferences on delivery slot availability. Others changed grocers based on price and/or quality.

Online click and collect services

This wasn’t just applicable to online grocery shopping. In June 2020, this consumer survey showed that 25% of those who continued shopping at bricks-and-mortar establishments but switched away from their regular stores were driven by lower pricing.

By September, the story was much the same: consumers were continuing to try out new food retailers, but for slightly different motivations. The biggest reasons this time were:

  • Better value (28% of consumers)
  • Better prices and promotions (27% of consumers)

Consumers are also changing how much they purchase: many people have taken to using a list to avoid the expense of purchasing on impulse. In April, 21% of consumers said they were grocery shopping in this way, but by June it had risen to 29%.

For retailers, the focus must be on being able to retain their new customers – and offering loyalty rewards is the perfect way to start.

Online shopping in a changing world

In 2020, online sales grew by 36% compared to 2019. This is the highest growth seen in 13 years. The reason isn’t just because we’re shopping more – retail sales, in general, dropped by 0.13% compared to 2019, which is the worst slump seen for 25 years.

And even in the summer of 2020, when lockdown restrictions eased for a while, e-commerce sales remained stable. People continued to shop online, even though bricks-and-mortar retailers had opened their doors again.

The growth of the online market still could have been much higher, as consumer demand has outweighed the product and service availability since the very start of the pandemic. Even now, retailers who have been allowed to reopen are struggling to meet customer demand.

Online grocery stores make up 6.9% of the UK grocery market in 2020, so they were already well equipped to deal with changes in consumer habits and fluctuations in demand. Market demand is forecast to grow again as UK consumers reportedly expect to increase their online grocery shopping by a further 5%.

Supermarket delivery van

According to research undertaken by Invesp, 65% of consumers prefer to buy online and pick up in-store rather than having their items delivered. That means it’s likely that the online market will continue to shift as consumers try to avoid paying delivery charges.

However, McKinsey’s research stated that even though customers have reported feeling very satisfied with their online shopping experiences, some consumers still see it as a temporary solution to their current restrictions.

The future of interactive customer experiences

Even in September, some six months after the pandemic hit the UK, an average of 73% of UK consumers surveyed by McKinsey & Company said they would not return to their normal/pre-pandemic routines until:

  • The government lifts restrictions
  • A vaccine becomes widely available
  • Medical authorities deem it safe

We have already seen that waves of infections will continue to rise and fall at exceptional rates, so it’s difficult to know when consumers will feel safe enough to return to their normal behaviours.

This begs the question: how will the future of consumer trends look in a post-Covid world?

The answer isn’t definitive, but it’s likely that retail customer experiences will be seen as an event or a destination experience, rather than a regular activity. Much like behaviour seen during the pandemic, it’s also predicted that consumers will continue to research the products they need online to minimise expenditure, and create shopping lists to avoid impulse purchases.

It’s likely that retail customer experiences will be seen as an event or a destination experience, rather than a regular activity.

So how do retailers boost physical footfall? During the pandemic, many businesses have been offering the chance for consumers to have video consultations with their sales experts. That way, the customer experience remains personal, and they feel safer when making purchases knowing that advice and recommendations came from a person they could see.

MAC Cosmetics adopted the interactive online shopping approach throughout the pandemic and considered it a success. 70% of all customers who received advice through a remote video consultation moved onto visiting a physical store.

This, of course, won’t apply to all businesses because of size and staff restrictions, but there is good news for small and medium-sized businesses.

The trajectory of small and medium-sized businesses

By the start of 2019, it was estimated that small and medium-sized businesses made up 99% of the UK’s total private businesses. The number of businesses in the UK has seen growth every year except between 2017 and 2018, with an average increase of 3%.

Retail sales values have been steadily growing for the last fifteen years. This growth has understandably slowed during the Covid-19 crisis. Some retailers have had to close the doors to their business for good, and it’s likely that we are yet to lose some more before we can put this period of economic unrest behind us.

However, the good news is that small businesses are likely to return to their previous level of growth. Authenticity and uniqueness are still increasingly important factors to consumers when it comes to making purchases both big and small, and that can only be a benefit to small businesses that make it through this crisis.

Retail marketing during the pandemic

Worrying about your business throughout the pandemic is only natural, but it’s important to maximise the opportunities that temporary closures bring. For example, you now have time to implement all the changes you’ve been putting off. Using your time productively is something that Christina Reavley, director of Village Green Interiors Ltd, recommends.

The agility of your business plan is crucial to survival. Circumstances have changed overnight during this crisis, so it’s important to be able to respond quickly. Whether it’s a transformation in consumer habits or something bigger like a period of closure for your shop, you must have the versatility to weather it.

If you didn’t have a crisis management plan in place before the pandemic, use your current experience to create one so your business becomes more robust. Develop a strategy to maximise the returns on any investment that Covid-19 has forced you to make.

One important aspect to consider is perceived value. At a time when retailers will be competing for custom, consumers must be able to make a rapid decision about where to shop. Having a customer loyalty system in place and clearly advertising it will influence consumer decisions.

Give your loyal customers bonus loyalty points

Adam Weeks, who owns The Horseshoe at Thurlby, recommends that retailers of all industries make sure that they’re maximising every sale. He suggests boosting spend per head by upselling at every opportunity, to offset the commercial impact of the pandemic.

Try and cut back on as many areas of your business as you can. Take note of what stock is selling well, and don’t take risks by ordering products that are slower going out of the door. Keeping your offer simple is important, according to Alice Edgecumbe-Rendle of Edgecumbe’s Coffee Roasters. They have reduced the menu for their takeaway service just coffee, cakes, and bacon rolls, which greatly reduced operational costs while the simplicity reassured and led their customers.

If you find that some of your products aren’t as useful in today’s climate as they were pre-pandemic, try to tweak your direction – it may just be a simple case of marketing.

And make sure that in all of this, you’re remembering your customers. Research by 4As has shown that 43% of consumers find it reassuring to hear from/about their favourite trusted brands during such a difficult time. Send out an email to your customers with news about product ranges and updates on any changes you’ve made. Optimise the benefit of your existing database and try to grow them with your marketing campaigns.

43% of consumers find it reassuring to hear from/about their favourite trusted brands during such a difficult time

You can also use your social media platforms to do this. Damon Buckingham of Buckinghams Artisan Butchery encourages all retailers to use social media to market any offers they have on their products, as consumers are spending more time than ever at home and on their phones or tablets.

Make sure you prioritise communication and transparency. Edgecumbe’s Coffee Roasters also say that being honest with your customers is crucial and that it’s okay if things aren’t perfect. Your customers will understand.

Talking to customers can also help you to understand any changes that your retail business needs to make, says Claire Waller of The Sitwell Arms. Streamlining your business in this way can help keep your outgoings down and boost profits without compromising on what your customers need and want.

Marketing health and safety guidance alongside your regular advertising can also help to reassure customers. These current times are already difficult for consumers ­– make them aware of the changes you’ve made to keep both customers and staff safe.

Ultimately, of course, you should just do what you do best – and stick with it, says Charles Clewlow of H Clewlows Butchers. Your customers are loyal to you for a reason, and that’s for your great products and excellent service. It can be easy to lose sight of that during such a difficult time.

Keep doing what you do best. Maintain your high level of customer service and high quality products or services.

This is something that Steve Betts of Steve Betts Butchers agrees with. His advice for all independent retailers is simply to make sure that you don’t let your standards slip.

The most important thing is having the ability to change with consumer buying habits. The trends we are currently seeing have never been witnessed before, so it’s difficult to predict what’s going to happen next. Make sure you’re ready for any surprises and remember to communicate with your customers. They’ll stay loyal to you if you continue to communicate with them in an open and honest manner.

 

If you’re thinking of adding a customer loyalty system to help you track changing consumer habits, please call us on 020 8266 1600 or get in touch via our Contact Us page.

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