As the credit crunch sets in, people are changing the way they shop. But are retailers changing how they run stores to reflect this? Charlotte Hardie reports

One false move and you’ve blown it. Shoppers have become experts at talking themselves out of a purchase. Their jittery mindset in the current economic climate means that even the smallest of problems in-store can cause retailers to lose valuable sales.

While retailers are all too aware that their customers are spending less than they did a year or two ago, many may not realise that their behaviour in-store has changed dramatically, too. The good news is there is a lot retailers can do to maximise the expenditure of every single person who walks through their doors.

The grocers are notoriously adept at analysing customer behaviour in-store. Asda retail director Andy Clarke says the company has noticed a marked shift in shopping patterns. “They’re certainly looking for more value. We can see that over a four-week period, from payday to payday. At the beginning of the month it’s about stocking up and then they move towards value-orientated product the closer it gets to payday.” He adds that customers are proving to be “far more canny” with their buys in non-food, whether that’s apparel or electricals.

Two years ago, when banks were practically throwing credit at consumers – who had no qualms about spending money like it was water – Envision Retail studied the behaviour of 3,000 shoppers. This year it conducted another study with the same number of customers in the same stores. The differences are startling. It found the number of products that shoppers engaged with in-store had dropped by 67 per cent – from 18 in 2006 to six this year. “It demonstrates that people are being far more selective and controlled in their spending,” says Envision Retail managing director Jason Kemp.

The 2006 study defined five types of customers. One group, termed pleasure seekers, spends a long time in the store and is typically made up of those who shop after payday or with a gift voucher. In 2006 this group accounted for 62 per cent of all sales. That figure has now dropped to 46 per cent, while “product groupies” and “focused fulfillers” now account for 51 per cent of sales – an increase of 60 per cent. The groupies will know the exact area of the store they want to go to, while fulfillers will move quickly to a store until they get to a specific product they’re looking for.

Shoppers with objectives

Notably, conversion rates are up from 19 per cent in 2006 to 21 per cent this year. This may seem surprising but it cements the fact that people are now shopping with a specific goal in mind, rather than taking the time to browse and be inspired by the product on offer.

Shoppers are asking for staff assistance 60 per cent less frequently than they did two years ago – but when they do ask, they have far higher expectations. “Breaking the chain of engagement with shoppers is far easier in the current climate,” says Kemp. “There only has to be one thing wrong for them not to buy something.” And that could be anything from a long wait at a queue to unhelpful customer service.

Unsurprisingly, today’s shoppers have a keen eye on price. Clarke says this has had a significant impact on Asda’s store operations. Opening price points have greater prominence on the shelves, for instance. Asda has also increased shelf capacity for certain products that are selling well in the downturn, while raising the number of off-shelf displays it uses to promote value.

However, price promotions need to be thought through with care. Simon Puryer, store operations expert and partner at Itim Consulting, says: “It’s easy to forget that not everyone has the cash flow at the moment, so giving three-for-two offers on expensive items such as large boxes of washing powder doesn’t help everyone – it could well be an outlay that many people haven’t budgeted for.”

Kingfisher UK chief executive Euan Sutherland says that while the retailer has noticed customers are “shopping carefully” with a “keen eye for value”, it is also aware they are still keen to buy new, innovative products. Some retailers might be inclined to maintain the price points of such product, assuming that they will be consistently strong sellers. But B&Q has done the opposite with its Dulux Paint Pods, for instance.

“These had been priced at£69.98 but were recently cut to£49.98, making it easier for homeowners to afford the latest technologies in home improvement,” says Sutherland. “They’ve been going down a storm.”

The Continuity Company specialises in retail marketing programmes designed to change shopper behaviour. UK and Ireland general manager David Ringer believes that in today’s climate, it’s easy for retailers to become obsessed with price promotions and nothing else, in the false hope that shoppers will make a beeline for your store the minute they hear about such offers and continue to shop there. “Loyalty has reduced,” says Ringer. “Shoppers are being savvy and price offers don’t really lock them in. What’s key is to shop the whole store – and you do that through a mix of product pricing, value and promotional activity that ensures they keep coming back.”

One common – and easily rectifiable – problem identified by Envision Retail is availability. Just because the product isn’t on the shelf or rail, that doesn’t mean it’s not in-store. Money-conscious shoppers, however, are not inclined to pursue the matter. In fact, Envision’s findings suggest that the number of customers leaving a fashion outlet after not finding their size on the rail has doubled since 2006.

Kemp believes many shopfloor employees make the mistake of focusing on visual replenishment – if the rails look full, they’re happy. “There’s a cultural mindset that has to change. What’s the point of putting a load of money into your supply chain to ensure product gets to the store efficiently without a clear way of putting product on the shelves?” he asks.

Another issue for retailers is that store staff may well be less busy during this spending downturn. Puryer says their time must be put to optimum use. If customers enter a store only to see employees standing about talking or twiddling their thumbs, it doesn’t give the best impression of your brand. “If they aren’t serving customers, make sure they are engaged and active in the search to improve displays, link key promotions and improve customer service,” he says.

There is also scope to reduce employees’ hours – but this has to be done sensibly, warns Kemp. “Some retailers have a panic response to their ratio of customers. They have automatically dropped their staff accordingly without giving it much thought. When businesses simply wield the axe, you run the risk of hurting customer service at key times.”

Retailers need to create a staffing model that aligns hours closely with demand patterns, so retailers can both control costs and improve service at key trading hours. If you have insufficient staff to deal with customer queries quickly and efficiently at busy times, shoppers will only have more time to decide that they don’t want to buy something.

At the moment, it’s all too easy for retailers to become so sidetracked by driving footfall that they lose sight of the customer’s in-store experience. Stepping back and making practical adjustments to your store operations – that take into account a fragile consumer mindset – can make all the difference to a business’s balance sheets. A project by one fashion retailer on availability and improving customer service in fitting rooms led to increased sales per customer of 11.1 per cent. You do the maths…

How has customer behaviour changed in the downturn?

A recent study of 3,000 shoppers revealed that:

- The number of products that customers engage with during shopping trips has dropped by 67 per cent – from 18 in 2006 to six

- There has been a marked shift towards needs-based buying, rather than pleasure-driven browsing and purchasing

- Price is far more important in the hierarchy of evaluating product. Some 71 per cent of respondents checked prices, compared with 21 per cent two years ago

- Customers are far more careful about evaluating quality against price. Where these are not perceived to match, the customer will not proceed towards any other form of engagement with the product

- Shoppers are sending less time in fitting rooms and taking fewer items with them. In 2006 the average time spent was seven minutes; today the average is two minutes

- Customers court help from staff 60 per cent less often than they did in 2006

Source: Envision Retail

What can retailers do about it?

- Ensure everything possible is done to allow a smooth journey for customers

- Make a statement about your price points and make sure that any promotions are displayed prominently

- Stop basing replenishment decisions on the look of the store – 50 per cent of the time, when a product is not on display, it is somewhere else in-store

- Fashion retailers must put in place a process to identify which sizes are needed on the shopfloor and make it easy to locate them in the stock rooms

- If you need to cut staff hours, look at peak trading patterns and amend accordingly. That way you can ensure customer service levels are maintained. A 5 per cent reduction of staff costs for a retailer turning over£150 million would typically make a difference of£900,000 to the bottom line.


Source: Envision Retail