The latest Westpac-Melbourne Institute Consumer Sentiment Index shows consumer sentiment dipped 0.4 per cent to 84.6 in September from 85 in August.
The cost-of-living crisis is indeed not showing any signs of easing as many Australians continue to struggle under the weight of high interest rates and persistent inflation.
“Under any top-line figure of consumer sentiment or spending there is always a broad mix of consumer behaviours,” explains founder and CEO of Fifth Dimension, Lyndal Spooner.
“Many consumers are doing it tough, but they have not stopped spending completely. Rather as budgets are squeezed, we see the savvy consumer emerge who chooses carefully when and where to spend.
“We have seen this trend of the emergence of the savvy consumer many times in the past and there are three golden rules retailers can follow to ensure they win a greater share of consumer spend in the lead up to Christmas and retain good will into the new year.”
1. Price vs value
Spooner emphasises that over the long-term value always beats price. Value strengthens brand loyalty and sentiment while price can undermine brand equity by increasing commoditisation and belief that the full ticket price is not worth it.
“It’s a no-brainer that consumers will be looking for bargains and the more sales there are the more they spend. In fact, many consumers hold off making their Christmas purchases until the last-minute waiting for sales to begin. There is no need for consumers to get their shopping done early and out of the way when online shopping offers optimal ease and convenience,” she adds.
“Before resorting to heavy discounting to move stock, brands need to be clever and not only fight on price but deliver a stronger overall value proposition that ensures consumers appreciate and connect with the brand and have a stronger preference for that brand over competitors over the longer term.”
• Have consumers considered what they need at Christmas? Help them understand and juggle all the things they need to do at this mentally challenging time or create wish lists with reminders of when items they want to purchase are low in stock.
• Beyond the ease and convenience of online shopping or extended shopping hours can you help them save time in other ways such as unique Christmas wrapping or personalised cards for direct delivery.
• Can you reduce the risk of making a poor choice by extending your returns policy to after Christmas so that they can make their purchases earlier and feel at ease.
2. Practical vs indulgent
Spooner explains that consumers have been prudent over the past couple of months, spending less on discretionary and big-ticket items. Christmas will be the key time when consumers will want to break out of this conservative spending and treat themselves and their loved ones.
“It doesn’t matter what the category is, consumers will be looking for opportunities to trade up to a higher quality item at this time of year, hence your promotions should focus on higher value and higher quality items that are more aspirational. Focus your marketing efforts on access to the mid and lower premium market, not necessarily your cheapest products. Cheap products even cheaper is not aspirational.
“While discounts will be part of the winning equation, you will need to re-enforce the overall improvement in quality, features and functionality. You want your customer to appreciate and value the higher quality item.
“Digital sales channels are less effective in explaining the quality of items compared to an in-store experience, so look to develop sales tools such as informational videos that can demonstrate the additional features to customers or explain the heritage of the product so that they are more knowledgeable of the benefits of trading up. These are critical activities if you want customers to value your brand and recommend you to others,” she says.
3. Convenience vs experience
Spooner highlights that ease and convenience is another no-brainer, but unfortunately many retailers have focussed on creating frictionless buying environments that do nothing to deliver a unique and memorable brand experience.
“While we want to make things easier for customers we also want to stand out. Consumers will interact with a large number of brands in a very small amount of time over the next couple of weeks and very few brands will be remembered for having a unique sales experience.”
She encourages brands to go bold, it’s Christmas. People want to feel good but are often exhausted at this time of year. Think through the experience of interacting with your brand at this time of year.
• Are customers likely to be stuck in longer queues to try on clothes, queue for a checkout? What are you going to do about that?
• Are you likely to run out of certain stock faster, have a clear best seller? How do you warn customers or allow them to pre-order?
• Are your customers likely to be shopping with kids and be distracted? Can you give them a break for five minutes?
• Did they forget wrapping, gift cards, sticky tape, Christmas pudding?
“Sometimes the little things you do to help and bring a bit of joy become stand out moments in a stressed person’s day,” Spooner says.
“Retail fundamentals are key in the current market; good old school concepts done well. There is no point trying to be too clever, savvy consumers don’t have the time or the will to deal with this type of complexity when choosing carefully ‘when and where’ to spend. Brands that recognise this and execute well will emerge victorious this Christmas.”
