What do politicians, retailers, the media and market researchers have in common?
They are all talking, and worrying, about ‘consumer confidence’.
Economy is the biggest issue
Over three quarters of the UK population think the economy is the most important issue facing the country, and the Bloomberg/YouGov Household Economic Activity Tracker (HEAT) shows 55% expect their household’s financial situation to worsen in the next year (only 19% expect improvement).
Shopping habits are changing
Anxiety about the economy is changing how people shop; a recent YouGov survey found 32% of the UK population has shopped in pound stores in the last three months. Despite this, ‘value retailers’ like Primark are not immune, having recently posted poor results.
Risk of consumers down trading
Retailers are in a race to understand how today’s fragile consumer confidence translates into tomorrow’s category behaviours so we’ve looked at results from YouGov’s ‘Category Predictor’, to identify which categories are ‘at risk’ of down trading in the next quarter. We can’t cover everything here, but some of the key points are:
- Consumer confidence affects sub-categories differently. Take consumer electronics as an example. Shoppers are much more likely to trade down on software and games (-48%) over the next three months than on computers e.g. laptops (-19%).
- There are strong regional variations. Around 72% of shoppers in the South West intend to trade down on software and games compared to only 42% in London. This suggests that retailers may need regional strategies to deal with varying levels of consumer confidence.
- There is compelling evidence that understanding customers and their category confidence levels is key to prospering in a downturn. For example, 40% of Argos customers say they are looking to save on computers. That compares to only 22% of John Lewis customers looking to make savings.
Consumer down trading
Consumer down trading on computers, by brand
Trends knowledge is vital
Together, our results show that retailers need to understand not only their brand, but also the trends within their sector and the wider economic environment in which they operate.
A version of this article also appears in City AM