Consumer Spending – Where Is It Going?
6 September 2019
Author: Jasmine Waters
All too often, the world of e-commerce is seen to be getting a pretty hard time when it comes to the current state of the physical retail market. Digitally accessed stores shoulder the majority of the blame for why brick-and-mortar is suffering, with consumers more easily connected to the products they want and need, and their shopping habits adapting to this modern shopping experience. However a recent report by Kantar suggests that the spend lost from brick-and-mortar retailers has in fact left the market completely, rather than transferring to online as many of us might expect it to. So what can the physical stores do to claw their cash back, and what does this mean for the state of the online market?
Why has the spend disappeared?
According to Kantar’s findings, 62.2% of spending since mid 2016 has in fact left the market altogether, with only 35.1% of the total spend moving across to the online retailers. Although statistically this may come as a surprise, it is no secret that there has been struggle, along with possible dissatisfaction, within the physical retail market itself. Much of this must come from the consumer base, with one possible reason being cited as store’s use of discounted promotions. Gone are the days of the occasional bi-annual sales – chances are, if you were to walk into a shop on your local high street, they will have some kind of seasonal or themed promotion on offer for what feels like a continuous amount of time. With this now embedded in many retailer’s daily sales strategy, there is now a questionable level of trust between consumer and the RRP, often delaying any purchase in order to wait for an inevitable discount. Now more than ever, the industry itself needs to make a conscious effort to move away from adopting this as part of an arsenal of tactics, in an attempt to collectively reverse the lack of spend many are now seeing.
What else can be done to maintain it?
Alongside the problem of constant discounting, another potential reason for the disappearing spend in brick-and-mortar is stores marketing to consumers is segmented profiles. The consumer as we used to know them now no longer exists, and they do not fit into categories such as ‘value customer’ and ‘branded customer’ – everyone now shops everywhere, and customers remaining loyal to solely one brand is an unlikely occurrence. Whether the physical store can make their previous percentage of spend back remains to be seen, but it won’t happen if the stores themselves don’t learn how to differentiate. Innovating rather than replicating is much easier advised than done, but with constant change and nothing in the market or industry continuing to be certain, stores will have to experiment with how to win customers back with the old fashioned ‘trial and effort’ method. There is no question that online brands will continue to thrive and grow, as consumers have shorter attention spans and demanding habits. But across both, it is still most important to look at what the customers would like - not just what the competitors are doing – in order to hold onto available spend.
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