By Maximilian Clarke

Retailers are facing a tough New Year as consumers draw the purse strings tighter, according to research by the Institute of Customer Service (ICS).

As retailer report season gets under way, today’s research, which polled 1,000 consumers and senior decision-makers at 250 of the UK’s largest firms in retail and other consumer industries, suggests that consumer confidence is still falling.

All retailers are experiencing a growth in 'switch mentality', with more than half suggesting this has grown significantly among their customers in the last three years.

This is supported by consumers: more than a quarter suggest they have switched their usual supermarket in the last 6 months and a significant amount have switched food and household goods (41%) and clothing brands (27%).

This new breed of increasingly discerning consumer will present a challenge for firms to retain customers.

Two thirds of retailers fear a significant threat of revenue loss as a result of this increased customer churn while a third see customer churn as the greatest threat to their business.

In this context, three quarters of retailers claim that customer service will be a critical market differentiator in the current climate.

The research sounds a sobering warning for firms’ customer service operations.

Nearly all retailers admit to cutting customer service back to some degree, with 52% cutting back 'to a large extent'. Exactly half admit to having significantly damaged customer service.

Yet as the 'switching mentality' takes hold, customer service is becoming all the more important. The great majority of consumers suggest that the quality of service they receive is important to their loyalty as a customer.

“In a fiercely competitive high street, environment where all retailers are slashing prices, service will be the critical differentiator,” commented ICS Chief Executive Jo Causon.

“Yet, half of retailers have placed themselves at an immediate competitive disadvantage by not safeguarding their customer service operations.

“Service has always driven bottom line performance, and will be a key battleground in the war for customers this year.”

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