Shoppers are cutting back on their spending.
There is no need to look far to find the biggest driver of change in the retail sector right now.
Soaring inflation and rocketing energy costs have delivered a knockout blow to consumer confidence. As a result, shoppers are cutting spending wherever they can and searching hard for value.
In the UK, consumer confidence is at rock bottom and shop price inflation is up; in the US, interest rates have been raised and are expected to rise further. Figures released recently showed a sharp drop in EU retail sales and a rise in factory gate prices. Retailers can be forgiven for fearing that a perfect storm is about to land.
It remains to be seen whether intervention by governments – or at, for example, EU level – will allay consumer fears over their winter heating bills. Even if some of the financial pressure is relieved, consumers look set to curb their spending and search for better value for the foreseeable future. For international retailers, the picture is complicated by different regions tackling inflation and energy costs in different ways.
Inflation is putting retail businesses under pressure
With retail supply chains disruptions, logistical challenges, and further complications by port delays following Brexit, consumers still fear that prices may rise further due to inflation. The war in Ukraine continues to hamper trade, with political unrest naturally felt in the world of business.
Shoppers can see with their own eyes that supermarkets have occasional empty shelves. Choice has been restricted in some categories in favor of lower prices through economies of scale.
These changes alone are unlikely to bring comfort to consumers who may be facing financial pressures they have never before seen in their own lifetimes. What shoppers want is for retailers and their staff to become superheroes who can rescue them from their predicament – a role that technology is now able to help retailers audition for.
How can retailers prepare to deal with inflation?
Retailers with strong databases and the ability to use them tactically have a clear advantage over rivals when the economy takes such a sharp turn. Market leaders are demonstrating why they are successful by using the leverage their data provides to good effect.
The number of customers embracing new exclusive, targeted discounts offered by retail loyalty schemes is such that retail media networks are becoming valued additional revenue streams. For example, UK supermarket Tesco and health retailer Boots have launched sophisticated new media offers that encourage brands to pay for well-aimed access to customers via their loyalty apps.
Boots now has 15 million members of its scheme, and is planning a new value-focused push to help shoppers face rising inflation and the cost of living crisis. It is expected to carefully focus discounts and offers to customers based on the data it holds on them.
However, the advantages don’t stop there. The increased use of apps to access loyalty schemes means they are more often accessed by consumers on a smart mobile device. That opens up a world of opportunity when it comes to providing customers with personalized, relevant promotions at exactly the moment they can act on them.
Most retailers, indeed most consumers, are not yet pushing the envelope of what can be achieved with the data and technology that is available for this purpose.
Mitigating the effects of inflation in retail
Convenience retailer Nisa has been among the first to start exploring the possibilities. Working with retail software Jisp, which used Scandit Smart Data Capture technology for the project, Nisa is testing new functions via its Scan & Save app.
With the objective of building instant digital relationships with customers, the revitalized app allows loyalty scheme members a glimpse of a brave new world of in-store transactions.
Shoppers are able to scan products on-shelf with their own smart devices to see instant augmented reality (AR) displays of personalized special offers – and also to access more detailed information such as allergen content or the levels of salt, fat and sugar in food products. They could then scan chosen products and pay for them within the app to avoid checkout queues.
Smart data capture on smart devices has the potential to provide a true win-win offer in stores of all sizes. For retailers, there is an increased level of customer data, which can be used to better target promotions and – increasingly – to sell their own media networks to product brands. These brands place a considerable value on an ability to reach consumers directly via a smart device.
Stores can also explore the potential of replacing expensive hardware with devices that customers bring in store themselves, to help alleviate cost pressures on retailers, and which customers can use to pay, as well as to scan.
Meanwhile, shoppers can benefit from improved service, faster shopping, better information, and – perhaps best of all – from targeted promotions that truly reflect their shopping needs, all driven by a device most of them carry 24 hours a day. Perhaps best of all, their confidence to spend can finally be bolstered by clear savings, personalized offers and a reason to exhibit brand loyalty because they are being treated well.
At a time when even middle income families are feeling the pinch from rising inflation and economic shockwaves beyond their control, that kind of help can make consumers feel that their local retailer is indeed something of a superhero, and one that – at a time when the world is beset by unrest – is on their side.
