Christmas is coming. How retailers can be merry this season.
Discover how retailers can deliver a memorable yet affordable shopping experience during the holiday season in a climate where inflation is soaring and consumer confidence is at its lowest.
Last updated November 10, 2022
Christmas is the season to be jolly, with ringing cash registers for retailers as consumers generally shop till they drop. Each year the retail industry gears up for the golden quarter: the lucrative period between October and December, for big holiday sales. This year, there is a shift in mood as we face the greatest cost of living crisis we have experienced in decades.
Countries around the world are experiencing soaring energy bills, supply chain disruptions, and the aftershocks of the pandemic, but the situation in Europe is especially precarious. According to the latest Reuters report, Germany, Europe’s largest economy, is on the brink of a recession. Ifo’s business sentiment survey spanning 9,000 firms indicated that the expectations for business will significantly worsen in the coming months.
Across the pond, in the UK in May this year, consumer confidence was the lowest ever recorded by data and research company GfK’s Consumer Confidence Barometer. A shortage of talent versus vacancies, and skyrocketing food and fuel prices having a knock on impact on inflation, were identified as key factors impacting the trend. “Consumer confidence is now weaker than in the darkest days of the global banking crisis, the impact of Brexit on the economy, or the Covid shutdown,” said Joe Staton, client service director at Gfk. Compared to other countries in the region, price pressures are “expected to be worse and longer lasting” in the UK, warned The Telegraph.
Given the stark economic climate, consumers are understandably tightening their purse strings. The challenge for brands is figuring out how to drive sales and encourage the price sensitive consumer to part with their cash, and stay top of mind and first in their shopping baskets and wishlists this season. It can be a Herculean task.
In our latest joint report, Christmas in July, with partner Retail Week, we share the strategies that brands should embrace this summer to give themselves the best odds at success this golden quarter. Here are some of the key insights from the report.
Value vs profit: 5 steps to mastering a delicate balance
In 2021, retailers had a strong Christmas period, with heavyweights like Tesco, Marks & Spencer, JD Sports, Dunelm all reporting positive sales figures in the festive season.
Retail Economics chief executive Richard Lim believes that a polarised Christmas is around the bent this year. “We tend to head into Christmas thinking it’s going to be tough, but come out the other end and it wasn’t too bad–this year, the pockets of consumers are actually more impacted than previous years…the country is experiencing an enormous income shock, with the least affluent families at the epicentre,” said Lim.
“We were expecting another roaring twenties, but it’s more like crawling twenties–people are nervous of spending.”
Will Higham, CEO, Next Big Thing
Will Higham, consumer futurist and chief executive of trends analysis business Next Big Thing, agreed that this year, consumers will be more cautious of spending and there will be more demand for community, experience, and spending time together. Thus, food and entertainment will rank higher on the priority list versus buying gifts. “We were expecting another roaring twenties, but it’s more like crawling twenties–people are nervous of spending,” he said.
The pressure is mounting on retailers, and to deliver a memorable yet affordable shopping experience this season brands must adopt a consumer mindset. The Christmas in July report advises retailers to follow the 5 steps below to be merry this Christmas:
1. Value for money is the name of the game. If you are a mainstream retailer, make sure your product range has something for everyone and tailor your prices accordingly.
2. Show empathy with your consumer and understand the current economic situation.
3. Start your strategy campaign early: this means the sourcing of goods to build up inventory, through to resourcing and the all-important Christmas campaign.
4. Food, toys and health and beauty are the Christmas winners in good times, but they also hold up in more challenging times, so hone these categories and do all you can to optimise sales in these areas.
5. Capitalise on events. Maximise the World Cup Season and key shopping dates such as Black Friday and other mega sales key dates.
In the report, Retail Week and Retail Economics provide a forecast of Christmas sales performance by category, and food and grocery product areas top the list as a safe bet this year versus other areas such as homeware. However, consumers are predicted to adopt recessionary shopping behaviours and are likely to switch to cheaper brands or discounters. Sustainable fashion, rental, and resale will be big trends that brands would be wise to tap into.
Forward-thinking retailers like Co-op are heavily investing in their product innovation strategy to deliver “right on taste and price”, drive interest in its own brand range, and to stand out from the crowd. “It’s a combination of ongoing investment in price, product, store layout and, more and more, our digital offer, which added together we are delivering a compelling and convenience-led offer for millions of people in the UK,” shared Michelle Rowley, head of product development and investment at Co-op.
Besides innovation and investment, brand relevance and evolution, agility and partnerships, culture and purpose, and last but not the least, customer experience will be the other 5 winning strategies for retailers to adopt in 2022 and beyond.
Customer experience and great service holds the key
Zendesk recently conducted a mini ‘Christmas in July’ survey of 350 consumers in the UK, France, Germany and Netherlands each, and the findings confirm that consumer’s number one priority while shopping this year is finding the cheapest price, followed by the fastest delivery times. Across these markets, consumers echoed the sentiment that although their pockets are not deep this year, a personalised shopping experience is still top of mind for them, and user reviews is the number one determining factor influencing them to click the ‘Buy now’ button.
“Your service teams hold the key to build stronger customer relationships that lead to long-term loyalty – and a difficult holiday season is an opportunity to show customers how you deliver on your values”
Andrew Lawson, SVP Sales, Zendesk EMEA
Our CX Trends Report earlier this year indicated half of consumers in Europe said they would switch retailers after a single bad experience. Thus, the criticality of getting the customer experience factor right cannot be overstated. Andrew Lawson, SVP EMEA at Zendesk, stressed the importance of investing in a seamless and personalised customer experience for brands to foster long-term customer loyalty that can withstand economic knocks, shocks and slowdown.
“Your service teams hold the key to build stronger customer relationships that lead to long-term loyalty – and a difficult holiday season is an opportunity to show customers how you deliver on your values…Retailers need to start early to collect their customer insights and invest in the right tools to be agile and flexible to their customer needs,” Andrew Lawson, SVP EMEA, Zendesk.
Some of the ways retailers can deliver a memorable and personalised customer experience is by embracing technology that provides a truly holistic view of the customer and their data. This will allow brands to interact seamlessly with customers whether it is in-store, online or everywhere in between across platforms such as live chat or asynchronous messaging so every interaction feels like one conversation. Leveraging AI is another strategic move that can put shoppers in control, enabling them to find resolutions and answers independently, and faster.
Retailers today must work harder, and smarter, to pull it off this holiday season. And like the early bird that catches the worm, the ones who get their act together early, find their authentic voice and deliver the most unique customer experience will stay way ahead of the pack before the Christmas countdown begins.