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From Accountingnet.ie In Business
The recession has brought about a new way of shopping with many of these changes likely to be permanent. This will bring about a step change in the way consumers perceive 'value' and spend money, and in the way retailers are shaping their businesses, according to new PricewaterhouseCoopers (PwC) research launched at the 2010 Annual Checkout Conference taking place today, Monday 18 January 2010. Consumers hunting for value and buying less PwC's latest research amongst Ireland's leading retailers confirms that the majority of consumers have changed their buying patterns. According to the research, the majority (65%) of Ireland's consumers are now buying 'clever' and spending more time hunting for value, over half (55%) are buying less and over a third (35%) are trading down or buying cheaper products. 'Scrimping and splurging' will become even more pronounced. The same consumer, for example, is often willing to spend more on products and services that they perceive to have genuine value, while focusing ruthlessly on finding the lowest prices for more commoditised goods. Consumers are getting more individual and cannot be segmented as easily as they used to be. Changed consumer behaviour is here to stay According to Ireland's leading retailers, this changed consumer behaviour is here to stay. For example, over half (53%) believe that these changes are probably or definitely permanent. This is mainly due to the fact that when consumers experienced cheaper products, they felt the quality and value was the same. For example, the research shows that having bought cheaper products, 86% of consumers felt the quality was the same while 44% felt they got the same value. Speaking about the research findings, Jean Delaney, Partner, Retail and Consumer Practice, PwC, said: "The recession is fortifying the concept of value. Our survey supports the view that retailers have been aggressively responding to the consumer over the last 12-18 months – providing more deals, promotional activity and introducing lower priced ranges. The challenge now is to consider how to make the longer term structural changes required to appeal toa consumer who has been changed forever." Retailers making step changes to their business models The research further reveals that Irish retailers have also made step changes in their businesses in an effort to give the customers the value they are looking for, maintain margins and survive the recession. For example, according to the research, the majority (71%) of Irish retailers have initiated additional promotional activity; two-thirds (67%) have increased the level of discounting; 60% have adapted their product ranges and nearly half (47%) have changed the way in which they are sourcing products. This level of change is expected to continue. Outlook more positive, albeit challenges ahead Looking to the future, half (50%) of Irish retailers feel more positive about their business relative to 2009. This is reflected by the fact that nearly a third of research participants said that they are either planning to open new stores and / or seeking a merger, acquisition or joint venture opportunity over the next 12 months. Nearly half will look for opportunities through enhancing their information systems. Clearly, Irish retailers are looking for future opportunities to position themselves for growth. The research does suggest, however, that retailers expect 2010 to be another challenging year with many planning to continue to review their business models in an effort to be more cost effective. For example, nearly two-thirds (62%) will continue with cost realignment and margin enhancement initiatives while one in three will look to further restructure or refinance their businesses. Brian Bergin, Partner, Business Restructuring Services, PwC added “2010 will be a challenging year for companies across all sectors. There is a growing consensus that the economy will see a return to growth in the back half of the year and, as our survey reflects, now is the time to be ensuring that adequate financing is in place so support this recovery." David McGee, Director, Retail and Consumer Practice, PwC commented: "Our research indicates that most retailers are continuing to reduce overheads, maximise procurement savings and eliminate redundant product and service features. It is also clear that the consumer is increasingly ‘buying clever’ – researching purchases, shopping around and taking time to understand and compare features and benefits. Retailers need to re-examine their entire offer from supply chain to bundled services and ensure that they are aligned to the new consumer’s expectations. The challenge for all companies is to understand how this dynamic is working in their own sector, so that they can compete with the low cost operators on value, not on price." The research was carried out 12 to 14 January 2010 amongst Ireland's leading retailers. PwC sees 4 options on how to encourage customers to pay a premium over the lowest cost option:
Other research findings are: Changes in consumer behaviour by sector Switching, Trading down and 'buying clever' are prevalent for the grocery sector (35% of consumers) However, simply buying less is more prevalent for clothes (40%) and eating out (48%)
At a product behaviour level, it is more likely that the trend towards cheaper products for categories such as toothpaste, washing powder, soap and shampoo (ie branded commoditised products) will be permanent. However, consumers are likely to trade back up to higher-priced products in categories such as meat, fruit and vegetables. Interestingly, people are most likely to trade back up in chocolate - clearly indulgence comes at a premium!
For further details please contact David McGee © Copyright 2005 by Accountingnet.ie |
