In the run-up to the future of retail and consumer conference R:evolution, business accelerator TrueStart explores hot topics retailers face.
The marketing goal of many retailers in the past 30 years has, in some cases, explicitly been to secure the ‘lifetime loyalty’ of customers.
The notion is self-evidently sound and, in sub-sectors characterised by consumer inertia such as retail banking and utilities, has been readily achievable.
Before the advent of the internet and, more specifically, the development of a demonstrable enthusiasm among UK consumers for online shopping, it has also been a realistic aim for companies engaged in the mainstream practice of selling physical goods to consumers.
Creating a national network of stores providing customers with easy access to the core retail proposition had been regarded as an essential step in securing a level of functional customer loyalty which, if augmented by a tight focus on the fundamental retail principles of competitive pricing, product innovation, high levels of availability and high store standards, could feasibly last for decades.
Two recent and unconnected developments have, however, fundamentally altered the retail landscape.
Firstly, the burgeoning willingness of consumers to engage in online shopping (eclipsing initial concerns about payment security and erstwhile misgivings about the lack of ‘retail theatre’ through a computer or mobile device screen) has drastically reduced the historical advantage conferred by a dense store network.
“The sheer depth of the financial crisis-induced recession in 2008/09 and anaemic recovery thereafter has changed consumer shopping patterns, potentially irreversibly”
Matt Truman, True Capital
In doing so, it has also reduced barriers to entry in the industry, heightening competitive pressures accordingly.
Secondly, the sheer depth of the financial crisis-induced recession in 2008/09 and anaemic recovery thereafter has changed consumer shopping patterns, potentially irreversibly.
Young consumers – the so-called millennials – are exhibiting some of the most profound changes in spending habits.
Despite Government-sponsored efforts to make the housing market more accessible, the reality of high property prices, as measured by a multiple of average earnings, and tighter mortgage lending conditions means that a far smaller proportion of young UK consumers are currently able to get onto the housing ladder than has historically been the case.
These factors have resulted in the emergence of ‘generation rent’, a group which does not benefit from the unusually low interest rates which have bolstered the household finances of those owning properties. In fact the number of households living in privately rented accommodation has more than doubled in the past 15 years.
“If you remember the 1960s, people say, ‘you weren’t really there’; if you don’t post, like or share it in the 2010s the same, it seems, is true”
Matt Truman, True Capital
Lifestyle and spending priorities are naturally shifting with an increasing emphasis placed on health and wellbeing (as evidenced by falling rates of alcohol and tobacco consumption by younger age groups) and, aided by the growing influence of social media, an enthusiasm for ‘experiences’ over ‘products’.
If you remember the 1960s, people say, ‘you weren’t really there’; if you don’t post, like or share it in the 2010s the same, it seems, is true.
At the other end of the age spectrum, there is and will continue to be an expansion of an increasingly digitally aware and financially secure (as a function of long-term participation in a rising housing market and, now, easier access to savings as a result of pensions reform) group of older consumers, sometimes referred to as the ‘silver surfers’.
It is worth noting that the over-50s are estimated to hold three-quarters of the UK’s financial wealth.
This offers myriad opportunities to retailers able to refine and target their offerings to a previously underserved segment of the population.
In the coming decade, it seems likely that retailers will be well advised to temper their laudable but increasingly outmoded ambitions to secure lifetime loyalty in favour of an approach more focused on the shifting spending patterns of individual age cohorts.
- On May 11, TrueStart hosts its annual future of retail and consumer conference R:evolution, where international influencers such as Mike Jones (initial backer of Dollar Shave Club) and Allison Johnson (responsible for the launch of the iPhone and iPad) will join industry masters such as Ben Lewis (chief executive of River Island), Marc Allera (chief executive, EE) and Kris Engskov (President, Starbucks EMEA). R:evolution is an invite-only event. To learn more please click here or contact firstname.lastname@example.org
- Matt Truman is chief executive and founding partner of True Capital Partners