Prior to the recession, consumers enjoyed almost 15 years of economic wellbeing. Disposable incomes were on the rise, the value of goods and number of assets increased, and consumers were able to spend confidently. But in December 2007, this all changed - and now, nearly nine years later, the mindset to spend less and spend more carefully is pervasive across British consumers.
Instead, this era of frugality has shoppers favouring brands that add value, help them save and offer an emotional connection that goes beyond a simple product.
But who are these modern deal seekers, and more importantly, what can they mean for your business?
1. Budget retail
Due to the economic circumstances of the late 2000s, Millennials are earning significantly less than their parents. In fact, those born between the early 1980s and early 2000s will earn 20% less than the previous generation at the same point in their lives. Pair this with 65.8 million Gen Xers whose life was in full swing when the bottom dropped out of the world economy, and you’ve got millions of consumers who are taking a new look at the way they spend.
The rise of single-price retail has been one of the greatest success stories post-recession. Granted, these types of retailers existed long before the recession hit, but they have continued to rise in the aftermath at an unprecedented rate. Single-price discount retailers all follow one simple rule: everything costs exactly the same (usually 99p or £1).
More shoppers are beginning to view the ‘pound shop’ as their local for bargain household goods – whether this is toilet paper, cleaning supplies, beer or wine.
So it’s not that they aren’t buying; they’re just buying smarter and are more carefully considering their purchases before opening their wallets. This growth trend among bargain shoppers is indicative of the consumer desire to save more on necessary purchases in order to have a larger nest egg to spend on areas that consumers deem more valuable, like travel, eating out, events, etc.
Retailers who fall outside of the single-price retail model and budget category shouldn’t worry just yet – quality of life is a huge factor for these consumers, which means it’s about more than just having the lowest price.2. Personalising with data
As consumers hold back on spending, and look for more deals to justify what they do buy, retailers often find themselves in the precarious position of deciding how much to discount their goods. Promotions are still alive and well, but there’s something else that contributes to the final sale: personalisation.
Targeting offers to reach the most engaged customers – who are most likely to spend with the brand and who have a high intent to buy – can allow retailers to minimise over-discounting to a broader group.
This is something that all retailers should take note of, and many have already begun to. The rise of mobile devices has triggered consumers to shop smarter, find deals and collect coupons. But consumers are no longer just seeking the quality goods they desire at the price they want; they’re looking for an experience to match. Beyond revamping technology and resources internally, third-party vendors specialise in serving up these kinds of opportunities by using strategic data and analytics.3. Experiences over things
Today’s consumers are interested in saving money on everyday essentials in exchange for having more to spend on things that help them define who they are. Millennials and Gen X shoppers perceive value differently following the recession and are often looking to spend more of their money and time on things that offer an emotional connection.
Think of it this way: experiences are the hot new item consumers are buying.
Add to this their comfort with technology and always-on social mentality and you’ve got an army of consumers who can boost your brand with a single post on social media.
Consumers may be budgeting better, but there’s no need for retailers to ring the recession bell just yet. Your shoppers are smarter and more mobile, but this also means you have an influx of data to help you learn more about them than ever before. Help them engage with you in meaningful ways.
Start by showing them who your brand is at its core, let your internal culture shine through to consumers, be open to partnering with outside companies in unexpected ways, open the door to more data resources and you might just find a way to break through the frugality and come out on top.
By Giulio Montemagno, senior vice president of RetailMeNot