Market intelligence firm IRI has outlined five trends it believes will influence the UK retail sector over the coming year, including topics as diverse as loyalty, packaging choices, geocentric purchasing and the proverbial elephant in the room, Brexit.
In keeping with the Christmas theme, you might call them the three, sorry, five wise men...
Retailers need to focus on impactful customer engagement
Paul Hinds, Senior Vice President of International Retail Solutions, IRI
Loyalty programmes remain an important component of the customer experience, but they are increasingly commoditised, with customer usage driven by habitual collection of points rather than meaningful engagement with the retailer and its brand.
This lack of purpose and differentiation is a challenge for retailers who need to derive value from their programmes to justify continued investment. Especially with disruptive online retailers and specialist ‘clubs’ able to develop one to one relationships with the customer without the need for a traditional points-based programme.
Retailers are striving to use their loyalty programmes to gain competitive advantage vs. those businesses that do not have the key by-product, the customer data asset. Using predictive analytics to create forward-looking and highly personalised programs based on individual customer preferences and behaviours is the long-standing goal, but doing this at speed and scale, is still a challenge.
Understanding the what, when, where and how customers buy and then making a quick, impactful decision to drive growth, that can also be accurately measured is still beyond the reach of many retailers. Those companies who get this right, embed a customer insight-driven approach across the entire business, will be the ones that lead the pack.
Plasticphobia on the rise
George Knowlson, Insight Analyst, IRI
Plastic has become one of the most discussed topics of this year. The final episodes of Blue Planet II made consumers more aware of the impact that their lives and choices are having on the environment and many are looking to make a change.
Plastic bottles became a target in the press and we’ve seen this have an impact on water sales; halting growth of a category that enjoyed strong growth for many years.
According to a recent IRI shopper survey, more than two-thirds of UK respondents said they prefer to buy products from companies that respect the environment and that use environmentally friendly packaging.
FMCG manufacturers will need to be seen to be taking action by a smartphone dependent generation – who are well connected and able to co-ordinate the masses – if they want their brands to remain top of mind. Choice of packaging will become a key attribute in consumer brand choice and being first with ethical options could pay big dividends.
The year 2019 is likely to expose new skeletons from cupboards that could be devastating for some and great opportunities for those with strong ethical options in their range.
A move to geocentric purchasing
Olly Abotorabi, Senior Regional Insights Manager, IRI
Local and national brands are increasingly winning consumers’ hearts and minds. IRI’s 2018 European Shopper survey showed that more than half of UK consumers prefer to buy local brands.
Support for UK producers, and better quality and taste were cited as the most influential factors. We have a strong innovative ‘local scene’ in the UK, driven by a desire for authenticity and provenance.
We’re also seeing increased uptake of free-from, vegetarian and vegan products, and movements like zero food miles gaining momentum and being promoted by smaller, challenger players.
Manufacturers and retailers increasingly accommodate them, by virtue of buying up fast emerging food and drink operators and finding space on the shelf for them respectively. Expect this dynamic to continue into 2019, as both parties continue to realise the equity of ‘local’, the opportunity to differentiate and also mitigate some of the proposed import risks associated with Brexit.
Retailers and manufacturers will need to work smarter to ensure they can convert those shoppers who are ‘interested’ but not yet ‘buying local’ by promoting authenticity, making sure the price is right and ensuring they can find the products on the shelves before they walk out of the store.
Promotions and range will stay in check
Stephen Jacobs, Insight Director, IRI
The year 2018 has seen a further de-escalation of promotions and range expansions have been kept in check. These new strategies are working for retailers, but are making the task for brands increasingly more challenging. For this reason, we can see the strategies continuing and possibly increasing slightly.
Over the year we have seen ranges cut by just -2%, but we are seeing the range expansion in the Christmas build-up being capped, pushing the year-on-year trend to -6%, as retailers are demanding that both promotions and new range must drive incremental growth, or they have no place in their stores.
As Brexit plays out, prices will be scrutinised
Stephen Jacobs, Insight Director, IRI
While the debate continues on the impact of Brexit, the big one to watch is the pound exchange rate, as this has a huge impact on the cost of goods from overseas.
If we see a dramatic change in currency rates it could be the mechanism that opens the pricing floodgates, with food and drink prices and long term inflation around 8% down on the wider market, will the market adjust prices around 10% to catch up on all that lost inflation or will we find ourselves fixed in an eternal price standoff? My guess is it will be somewhere between the two.
Be prepared for the worst and hope for the best, but having no plan could leave you very exposed and miss a big opportunity that is only going to happen once.
© 2018 European Supermarket Magazine – your source for the latest retail news. Article by IRI. Click subscribe to sign up to ESM: European Supermarket Magazine.
