COVID-19 has affected the world in countless ways over the course of this year, and the economy has of course been no exception, with the UK slumping into a steep recession. As retailers look towards an uncertain future, ensuring revenue has never been so important, yet actually knowing how best to do so can be a confusing ordeal. Slashing prices, whether looking to introduce everyday low pricing or time limited discounts, is a tried and tested strategy which can definitely be effective. It’s no secret that a bargain will entice shoppers, regardless of the industry, and with retailers having a surplus of stock post lockdown, many have implemented heavy discounting in order to clear some of the excess.
However, it is important for retailers not to act rashly and jump into using this strategy. When looking to win in a recession, a retailer’s customers need to be their main focus more than ever. Understanding who your customers are and why they interact with your brand is key to delivering what they want and ensuring repeat business. For example, the customer demographic of high end fashion retailers, and reasons why people shop there doesn’t match up with the strategy of cutting prices. These customers want a luxury experience and the status which comes with shopping at a high end designer.
Yet it is also important to note that customer demographics can change, and only by understanding current buyer behaviour and keeping up to date on their data, can retailers make informed, individually specific decisions. For example, it is vital that retailers avoid using old, static personas created pre-covid. Retailer’s understanding of their customers should be dynamic and an ongoing activity underpinned by data, thus enabling investment in the right areas to ensure they remain relevant to their customers and minimise risk moving forward. Here is where being customer focused and rethinking the value you deliver to your customers, especially in the context of a recession, becomes so important. Retailers need to understand what customers want and why it is important to them. Methods such as ethnographic research, in-depth interviews and quantitative surveys can help solidify this voice of the customer. It’s also vital to do this analysis holistically across the business, considering both the short and long term goals.
To ensure customers are at the heart of all business decisions, it’s vital that retailers are aware of how customer desires have been changing over the past few years. Increased awareness of world issues such as global warming and poor worker conditions has meant a noticeable shift in customer behaviour, whereby customers have become more socially and ethically conscious. When considering the environmental issue, it is one which has been at the forefront of media attention and protest groups in recent years, and has had an impact on shoppers. According to Walnut, 75% of the public are actually consciously modifying their behaviour when it comes to consumer items, with plastic being the most popular modification amongst UK consumers: 46% stating they actively reduce their plastic usage.
Customers, now more than ever, want to know that the brands they are shopping from are ethically sound and have a purpose running through the entire supply chain and all business operations. A 2018 survey from Euclid found that “52% of millennials and 48% of Gen Xers feel it’s important that their values align with the brands they like.” From sourcing materials to shipping to packaging, being ethically run is hugely attractive to customers but also morally responsible for retailers themselves. Indeed a number of retailers have already been moving towards a more ethical and transparent approach. Tesco for example have rolled out new E-200 electric units which reduce emissions, while IKEA have committed to using only renewable and recycled materials and to reduce the IKEA footprint by ~70% per product by 2030.
Warby Parker is just one example of how clear purpose and financial performance go hand in hand. Warby Parker is an online retailer of prescription glasses that, according to their mission statement, embodies ‘purposeful business’, with it’s core values consisting of “green is good, respect for all and customer-first.” The brand looks to give back to developing countries through their “buy a pair, give a pair” business model, whilst also being one of the only carbon-neutral eyewear brands in the world. The whole company from its owners to the employees, believe in the brand’s purpose on an emotional level, and this easily enables customers to align with the brand. Through this social purpose and customer-centric approach, the retailer has had major success since it’s 2010 inception, caused major disruption to the industry, and is now valued at $3 billion, according to TechCrunch.
When it boils down to surviving in a recession, price is most likely going to be a retailer’s saving grace, as discounting pricing strategies can guarantee the sales in the short term. However in 2020, it shouldn’t stop there. What the changing customer highlights is that there are more lenses than ever before to analyse customer wants, and consequently, more pathways to winning customer purchase and loyalty than just price.