Last month, consumer confidence in the UK dropped to -13, which is the lowest level since December 2013.
Consumers seem to be asking themselves if that Saturday shopping spree is really worth it. This is not music to retailers’ ears, and it’s entirely understandable that 2018 is off to a shaky start.
Times may be tough, with retailers like Toys R Us going under. But fear not.
Here are two ways retailers can thrive when consumer confidence is on the decline.
1. Re-evaluate and strengthen brand positioning.
Cautious shoppers will focus on buying essentials, meaning that specialised retailers may see a decline in sales. Shoppers will be more likely to put off purchasing what they perceive to be a luxury or non-essential item - the most important word here being perceive.
What shoppers need and want is highly subjective. When people buy something they didn’t plan on buying, they justify it to themselves by thinking about the quality of the item, the use they’ll get out of it, or how much money they’ll save in the long run.
Retailers who clearly articulate how their products do all of the above through online and in-store channels have successfully positioned themselves as essential.
For retailers who can’t pull this off, it will be all about the experience.
The unique experience your brand offers could be partnering with other brands for in-store pop-ups and shared spaces.
It could be that your sales associates are just as passionate and knowledgeable about the products as your customers are. Maybe their friendly service and helpful recommendations make shoppers genuinely enjoy being in-store and feel confident about purchasing.
A retailer’s unique brand experience could be over the top and completely ridiculous, like this $155 paperclip from Tiffany's. We don’t recommend you take the joining of luxury and essential items this far though.
Retailers can’t make consumers confident about their purchasing power. But they can make consumers confident about their brand.
2. Look at the bigger picture - consumer confidence is just one indicator.
Consumer confidence doesn’t measure disposable income, inflation or wage stagnation, and can’t give a complete picture of how shoppers will spend in a given month.
It’s also a reaction to what’s already happened, not what will happen.
Consumer confidence also plummeted immediately after the results of the Brexit referendum as a response to the upheaval and uncertainty but rose to previous levels shortly after.
Forecasters were predicting declining sales this Christmas, but it wasn’t all bad news. Debenhams reported a 1.3% decline in sales, but Next’s overall sales rose by 1.5%, thanks to the colder weather. Retail is still full of surprises.
How people feel about spending money is not the same thing as how they will spend their money. Anyone who’s checked out the post-Christmas sales recently knows that shoppers make lots of emotional purchasing decisions, but few rational ones.
Nothing drives emotional purchase decisions like visually appealing stores and a consistently engaging customer experience. Hint - Yoobic can help you make both of these easy. Find out more!
In 2018, retailers who want to adapt and thrive should view lower levels of consumer confidence as a symptom of change and opportunity, not imminent failure.