OC&C’s customer research on a selection of retailers and their propositions will give the high street plenty to think about

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It was honoured by its peers with the online retailer gong at this year’s Oracle Retail Week Awards and now Amazon has shown that customers have similar faith in its abilities, topping the first annual index of customers’ perceptions of retailers, created by OC&C Strategy Consultants.

That an online-only retailer, which has only been trading through a dedicated UK site for 12 years, has been able to outmanoeuvre the competition so comprehensively should be a talking point for retailers of all kinds. Want to know why it scored so well? Well just look at the multitude of individual aspects of its proposition where the consumers surveyed scored it ahead of its bricks-and-mortar competition.

But some of the stalwarts of UK retail have also enjoyed a good showing. Despite the criticism and negativity it often faces from the City, Sir Stuart Rose will surely be pleased to see Marks & Spencer as the highest placed high street retailer.

And among the grocers, Asda was the victor. Tesco - which has traditionally done well in consumer research and has for several years topped a poll of the UK’s favourite retailer - was not so highly placed.

The rankings show that, even when just compared with its grocery competition, Tesco was pushed into second place by Asda on the choice of products and whether consumers felt its products were suited to them.

Asda was also rated more highly on being value for money and on having low prices, and significantly it did better than Tesco in terms of how much consumers trust the retailer. In fact, on this measure, Waitrose, Sainsbury’sMorrisons and Iceland can all claim to be beating Tesco.

With the full data available for retailers to download from OC&C’s website, the next few days will surely see some big names log on to analyse their scores compared with their competitors’ to work out where they are going right or wrong.

Amazon dominates

Not only was Amazon the overall winner, but it also triumphed in the majority of the different proposition elements each consumer was asked to think about. It came top for the quality of its products, the wide choice of products, products that are suited to me, service, value for money, website quality and trust.

In fact, the only area appropriate to its business model where it was not the champion was for low prices - where Primark, Aldi and Iceland made up the top three. In the other two proposition elements - store look and feel, and fashionability - John Lewis and Asos came out on top.

OC&C Strategy Consultants associate partner Tom Gladstone says: “In consumers’ minds, Amazon hits most of the key bases and has range authority crossing an increasingly large number of categories. It offers product at prices that are lower than the high street; though its positioning is comfortably mid-market, it equally appeals to a John Lewis-type and value customer.”

Gladstone continues: “The simplicity and ease of use of its site conveys value without necessarily conveying discount.” He says that this is something for other retailers to think about: “Not everyone can trade on low prices, but everyone can trade on value for money,” he says.

Trust is tops Gladstone highlights how closely correlated the overall scores are with the trust rating. Eight out of 10 of the top 10 ranked by trust are also in the overall top 10. M&S came second on trust and also second overall, and Boots came third for trust and also third in the overall measure.

Gladstone points out that one area where the online-only retailers have excelled is in building trust in a relatively short space of time. That Amazon was ranked ahead of a stalwart of the high street such as M&S speaks volumes about what the etailer has achieved since beginning trading though its UK site in 1998.

Online sets the benchmarks

Amazon was not the only etailer to do well in the index. Play.com was scored fourth in the overall measure, Ebuyer was scored 13th and Asos 22nd. But Asos came top for fashionability ahead of rivals New Look and Next. Ebuyer topped the electricals retailers and among its rivals was measured ahead of them on every individual aspect of the proposition, such as trust, value for money, choice of products and quality of products.

Gladstone says that online players are setting new benchmarks in consumer propositions - particularly in categories such as entertainment and electricals - with Amazon the lead example of this trend.

Sales performance

The index proved that financial performance and consumer perceptions are not perfectly aligned. Perhaps the best example of this is among the grocery players. Asda is doing the best job of all the grocers in the eyes of consumers, coming fifth in the overall index, and also being the category champion for aspects such as choice of products, value for money and products that are suited to me.

None of the other big four scored top marks in any of the proposition elements. Overall, Sainsbury’s came eighth, Tesco 15th and Morrisons did not feature in the top 30 at all.

Compare this with the latest market share data for the major grocers - which has seen Asda perform the weakest. Asda’s market share was down slightly in the 12 weeks to June 13, while Tesco held its share and that of Morrisons and Sainsbury’s grew.

Gladstone says that consumer perceptions may slightly lag financial performance, but the way you can correlate performance to consumer perception is to look at the change over time. Both measures should move in the same direction.

Low price proposition

Primark, Aldi and Iceland came first, second and third respectively when consumers were asked to rate retailers on low prices. Gladstone points out that for value retailers “price perception is key to their overall proposition rating. They have to deliver on price if they want people to rate them well”.

But this is not true for mid-market and premium retailers. “In consumers’ minds there is value other than price,” he says, explaining why retailers such as M&S, Waitrose, John Lewis all scored highly overall.

Hero sectors

In the UK, consumers perceive the entertainment, health and beauty, department stores and grocery retailers as having strong retail propositions overall. They were all rated more highly than the average for all UK retailers. Meanwhile, electricals, sporting, and outdoor and DIY retailers fared the worst on this measure.

Gladstone says of retailers in the electricals sector, the poorest performer: “Electricals as a category is not fundamentally living up to consumer expectations. When you look at what you can buy online compared with in-store, you can get a better range and price online. Best Buy in the US gets a much stronger rating in terms of store experience and customer service, and shows why it thinks there is an opportunity for it in the UK.”

WHSmith’s woes

WHSmith was recently heavily criticised after research from Which? was released showing that its stores were among the worst for store environment and customer service.

The retailer said that the report was unfair, as the sample size was small and it was rated within the entertainment category.

However, the results of the proposition index mirror the Which? findings. WHSmith did not make the top 30 on the ranking of its overall proposition. In fact, in elements such as low prices, product choice, service, store look and feel, and value for money it scored worse than 10% below the average score of its rivals.

The income effect

That high income households rated online grocer Ocado much more highly than low income households comes as little surprise. But there are some others that might raise eyebrows - TK Maxx and Peacocks were both substantially favoured by the relatively wealthy.

Meanwhile, three electricals retailers, EBuyer, Currys and Maplin, were among those rated significantly more highly by those in low income households, showing that retailers should not take demographic assumptions for granted.

Male versus female

Analysing the different retailers that men and women were likely to rank to more highly, Maplin came out as the blokes’ top choice.

Gladstone was not surprised by this: “Maplin has found quite a distinctive niche and has a clear view of what its customers want.”

However, some of the other retailers that men favoured over women were less obviously male-dominated shopping environments. Ocado, John Lewis, TK Maxx, Topshop and Primark all showed bias towards men. And Amazon, Ebuyer, Homebase and Argos were all rated significantly higher by women than men.

OC&C Retail proposition index

1Amazon88.7
2Marks & Spencer83.9
3Boots83.8
4Play.com83.7
5Asda81.5
6Waitrose81
7John Lewis79.7
8Sainsbury’s79
9HMV77.8
10Argos77.4
11Morrisons76.9
12Iceland76.9
13Ebuyer76.3
14Gamestation76
15Tesco75.9
16Game75.9
17B&Q75.7
18Next75.6
19Primark75.3
20Aldi75.2
21Debenhams75
22Asos74.5
23Pets at Home74.2
24Clarks74.1
25Maplin74
26Superdrug74
27House of Fraser73.9
28Lidl72.2
29Wickes72.2
30Gap72
Source: OC&C Proposition Index 2010 Survey

Methodology

2,500 UK consumers were questioned for the research, each being asked to rate 10 out of a total of 52 retailers.

The consumers had all visited or bought from the retailers they rated in the past three months. For each retailer they gave an overall rating from one to five stars, and then also gave star ratings for different core elements of the retailer’s proposition – such as low prices, product quality, service and the look and feel of stores. This five-star scoring method was then turned into an index of between 0-100 to give each retailer their combined scores.

The UK research was part of a wider study conducted by OC&C Strategy Consultants, looking at 289 retailers across six countries, and collecting the opinions of 22,000 consumers. For access to the full report please visit www.occstrategy.com/psi