Time to pull out recessionary playbook?

There are many trends that may or may impact us in 2021 but COVID-19 hasn’t just been a health crisis- it’s delivered one of the most unique economic crises in UK and global history with consumer confidence levels dropping to a level similar to the economic crisis of 2008/9. Experience and a recessionary playbook be invaluable to guide through 2021

As UK comes out of the health crisis UK retailers are aware that customer confidence levels will take time to return to normal levels and reduced incomes, and fear of reduced incomes will drive changes in consumer behaviours. Recession or fear of recession will hit in the first few quarters of 2021 before any sustained economic recovery develops in 2022 or 2023.

Consumer confidence levels similar levels to 20008/9 Financial crisis

Measure +/- YOYJan 2021Dec 2020Nov 2020Jan 2020
Overall Consumer Confidence Index-19-28-26-33-9
Personal financial situation last 12m-7-8-9-161
Personal financial situation next 12m -423-56
General Economic Situation Last 12m-39-67-65-67-28
General Economic Situation next 12m-20-44-33-50-24
Major Purchase Index–25-24-22-28+1
Savings Index-218171120
Consumer confidence Levels GsK Consumer Confidence Barometer Jan 2021

Pull out Recessionary Playbook

Past experience of trading through recessions shows that customers will be looking to manage their budgets and spend with a heightened sense of value and will reset the quality/ price equation.

The Food Recessionary Playbook where there are frequent shopping trips in a year (250 trips p/a for food) is different to Non-Food clothing / non-food shopping (on average 50 trips per annum).

In Food retailing:  Consumers buy the same amount of food, just seek out ways that deliver value. Consumers tend to shop at the same stores; what varies is the frequency of shopping across the year / quarter/ month or week amongst their repertoire of shops.

Consumers will look for retailers they can trust to deliver value with a good value equation (quality/price) on categories and brands that are important.

The development of a good/ better/best own brand and branded tiering allows customers to trade down whilst shopping in one retailer.

Wasting less food is an important way to save money, either shopping more frequently or buying products with longer shelf life or simply just throwing less away (consumers freeze more leftovers).

Promotions on categories and lines that are important in store choice and ensuring availability of lines when customers shop will be critical (no one wants to make two trips).

Availability of things ‘I want to buy’, will always be important, but in a recession, ‘not running out of what I want and forcing me to make another trip’ will become more important.

Reset Value vs eating out / delivery – M&S dine in for £10 established value in their ready meals by benchmarking vs restaurants / takeaways.

Reset Value vs other services: hair dyes will increase as consumers DIY vs visiting the hairdresser as regularly.

In past recessions, in Non Food retailing, consumers buy fewer items, as well as shopping less frequently. Consumers have a repertoire of retailers they use and one retailer drops off the repertoire. In lower frequency categories it’s critical to keep your brand in consumers’ repertoire with relevant products.

Where do you place your bets to Survive Revive and Thrive?

Retail is a series of trade offs that you have to make. Where to place limited resource to drive customer visits? Invest in price or quality? Invest in service? Invest in colleagues? Which categories lead investment? Making a decision, when every stakeholder has an opinion, is difficult.  

Retailers, more than ever, need to really understand the relative importance of drivers of store choice and how they have changed in the last 10 months and how they may change in the future.  Consumers have been wrestling with uncertainty through COVID-19 but their expectations for their retail experience (both online and instore) continues to be high. Retailers have to adapt and be nimble – understanding where to place their bets – as always and those retailers that can adapt will be well positioned when the recovery comes.

At North Bailey we bring fresh perspective and critical thinking along with a wealth of knowledge to identify and solve your business problems.  We are provocative, challenge convention, ask the difficult questions and allow you to see your business from a different perspective.

To find out more how we can help you identify and prioritise your trade-offs

contact www.NorthBailey.com

Published by Andrew Mann

Managing Partner at NorthBailey. Having had senior marketing & insight roles at Tesco, Sainsbury's, Asda, Coop and M&S, I'm now using my experience & network to solve strategic marketing problems for NorthBailey clients

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