Is The Credit Crunch An Opportunity For Independents?

Across retail as a whole, some 10.8m shoppers are disloyal to the stores they use; and, across every retail sector more consumers are saying they would prefer to use an alternative store to the one they currently use most.

The findings demonstrate the extent of the challenge retailers now face in holding on to shoppers, especially in the face of the credit crunch when every customer counts. In fact, this year loyalty has seen its toughest blow, declining at its sharpest rate for the past ten years. Over 22% of shoppers – some 10.8m people – now say they are dissatisfied with the store they do most of their shopping at and that they would prefer to shop somewhere else. Although not every customer will act on their disloyalty, such a high level of fickleness is extremely worrying for retailers who are already struggling with weak consumer sentiment and spending.

“In the current environment it’s critical for retailers to hang on to every customer they’ve got; no one can afford to lose business,” comments Neil Saunders, consulting director at Verdict. “Such a low rate of loyalty demonstrates the extent to which people are shopping around and are increasingly willing to punish retailers that don’t meet their expectations. It should act as a wake-up call that retailers need to become better at meeting the needs of their customers.”

While the research confirms that the credit crunch, which has made consumers more inclined to shop around for bargains, is partly to blame for the increase in disloyalty – it is not the whole story. An increase in the choice of where consumers can shop has also driven the long-term decline. The proliferation of new, often international, retailer entrants combined with an extensive selection of internet retailers has made it easier than ever before for shoppers to switch their custom.

“As competition has intensified it has become increasingly difficult to hold onto customers and retailers now need to work harder than ever before to retain shoppers,” comments Mr Saunders.

Over the next few years retailers will need to work much harder in terms of understanding what their customers want and delivering this through products, prices and the store environment. Some of this will not be easy and may involve additional expense in terms of investment in customer service initiatives. Nevertheless, those that do not invest risk conceding customers to those that do.

Jeremy Rance, national director of the Retail and Wholesale Sectors at Barclays Commercial Bank, added, “The research shows that the current climate is causing consumers to shop around not just for price and value but also for a distinctive quality of service and connectivity with the retailers. They are proving to be more discerning than ever, requiring phenomenal consistency of performance from the retailers in return for their loyalty. For those retailers that can uniquely combine range, convenience, layout, facilities, customer service and price into a compelling proposition, they will be rewarded
and rewarded well, striking a chord of intrinsic and intangible values in the heart of the consumer.”