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GUEST COMMENT Feeling the squeeze: how brands can retain customer loyalty amid the cost-of-living crisis

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Jamie Saucedo, senior vice president, business operations at PFS

Prices have risen at their fastest rate for 40 years, with UK inflation hitting 9% in May up from 7% in March. As the cost of living continues to skyrocket, consumers are starting to cut back on their spending, and it is predicted that hospitality and retail will feel the brunt. According to recent reports, consumers are most likely to cut back on eating out and fashion as they adjust their spending to cope with rising costs. 

With price hikes showing no sign of slowing down, consumer confidence in the UK has fallen to its lowest level since 1974. Despite a slight rise in overall retail sales in April (1.4%), as the UK continues to bounce back from Covid, this could be short-lived amid further economic uncertainty.

The competition between brands is now tougher than ever before as consumers have less in the way of disposable income to spend on items deemed non-essential. Now, more than ever, brands and retailers must work hard to maintain customer loyalty in order to secure their hard-earned cash, whilst also being cost-conscious when it comes to their own operations in a turbulent economic landscape.

The other side of the coin

Consumers, however, are not the only ones feeling the squeeze right now. Retailers are also being faced with spiralling costs across the board including energy, transport, staff, and the cost of raw materials. According to a survey by Logistics UK, almost three-quarters (71%) of logistics firms are reporting an increase in shipping costs that “many businesses will not be able to absorb”.

With no option but to pass these costs on to consumers, retailers and brands are expected to enter a vicious cycle which could see sales and profits continue to drop for the foreseeable future. For many retailers, this comes at a time where finances are already strained as a result of the lingering impacts of post-pandemic recovery. In fact, earlier this year, whilst vowing to keep prices statics for at least a year on their own-brand essential items, health and beauty giant Superdrug admitted it was facing increased pressure to raise prices across branded products. However, with the cost of living crisis placing increasing pressure on consumer spending, raising prices comes with substantial risk.

Balancing cost pressures with customer satisfaction 

As online marketplaces become increasingly saturated, the face of brand loyalty has altered significantly, and consumers are considering cost as a key factor to the optimal shopping experience. In fact, our own research found that when asked about the most important factors influencing their decision to make multiple purchases from the same brand/retailer, consumers were mostly driven by free delivery (37%) and competitive/attractive prices (33%). In the UK especially, shoppers are more driven by cost than brand loyalty, with 31% of respondents agreeing to this statement.

Brands therefore must balance their own cost pressures with the satisfaction of their customers to retain their custom and avoid them turning elsewhere to find a better deal. That said, this doesn’t mean automatically cutting prices or devaluing products. Balance means finding ways to boost efficiency where possible – and in doing so – minimise the impact of inflation on customers. 

Optimising resources 

The first option, when faced with rising costs, is to look for alternative fulfilment solutions. Existing infrastructures that require significant investment, for example, can be repurposed, ensuring space is being fully maximised. Brands can look to a BPO to help offset inflation and could look beyond a centralised warehouse model and consider optimising existing physical store space to work harder and smarter. With the right order management system and picking technology, brands can transform their brick-and-mortar sites into multi-node distribution facilities – making the space work twice as hard by fulfilling the needs of both in-store shoppers, whilst also being able to support online demand. This can also be effective in reducing the distance between product and customer, therefore cutting back on the mileage and costs associated with delivery.

Cloud-based order fulfilment picking solutions will also prove valuable here. These flexible order picking solutions can be easily integrated within existing systems and can help increase distribution efficiency, by not only speeding up the picking process but increasing picking accuracy. Improved accuracy in these areas can ensure money isn’t wasted from returning incorrect products, whilst also ensuring greater productivity per man-hour. 

Renewing consumer confidence

Whilst there are steps brands can take to optimise resources, cost rises are inevitable, and retailers will need to consider other methods for retaining customer loyalty during this period of flux. To do so, brands must become more strategic, leveraging other elements high up on the priority list for consumers – including convenience and consciousness. According to our research, over half (54%) of consumers prefer to have the convenience of multiple return options to keep up with their busy lifestyles. Meanwhile, 35% of consumers named sustainable packaging, delivery and returns options at the checkout as key parts of the ideal shopping experience. Brands may not be able to gain complete control over costs in the current climate, but they can ensure they keep up with these other expectations to maintain loyalty and trust. 

Leveraging the start-up mentality around personalisation and value-added services can also be a great way of standing out from the crowd and remaining competitive during this time. From engraving to embroidery, even adding a personalised label to packaging, which doesn’t come at a huge expense for the business, can go a long way in providing value to the customer. 

Customer experience should also be a key consideration. When cost pressure rises and consumers are shopping with an every-penny-counts mentality, tolerance around the service they receive will be at an all-time low. Higher levels of frustration may be felt if an order is running late for example, or a mistake is made, and the wrong product arrives. Customer service teams must therefore be equipped to deal with enquiries quickly and seamlessly – and from a range of channels. Whilst there may not be internal resources available to do so, outsourcing customer care teams can be a cost-effective solution to this problem. 

Consumer confidence may be low currently, but this will not always be the case. Brands that can appeal to and retain loyalty whilst times are tough will continue to reap rewards in the future.


Jamie Saucedo, senior vice president, business operations at PFS

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