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March online sales suggest customer behaviour becoming increasingly unpredictable, faltering confidence set to see spending plummet

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Online retail sales fell 25.5% Year-on-Year (YoY) last month, which is to be expected when compared to March 2021’s high growth of 57%. Falling confidence is also set to see spending plummet, however experts agree that predicting consumer behaviour is increasing difficult as their shopping habits fluctuate wildly.

According to the latest IMRG Capgemini Online Retail Index, which tracks the online sales performance of more than 200 retailers, Month-on-Month (MoM) spending patterns appear in line with expectations for this time of year, although this does belie a general sense amongst retailers that customer behaviour is becoming increasingly unpredictable – with some weeks weaker than expected and others stronger.

Without the anomalous pandemic growth for comparison next month’s data will reveal a clearer indication of what growth is really looking like.

Month-on-Month growth has crept back into the positive – coming in at +5% versus the previous month’s -7.7%. This is exactly where it was in 2019 before the pandemic disrupted the metric. Meanwhile the average basket volume (ABV) has once again climbed by £15, now standing at £136

At a category level, womenswear and menswear continue to exhibit positive growth (+20% and +14% respectively), whilst the rest of the categories show poor YoY changes – ranging from -2% in footwear to -44% in homeware and decorations.

Andy Mulcahy, strategy and insight director, IMRG, comments: “The Index shows that online retail maintained a big dip (-25.5%) during March, but that is against huge growth last year so is not necessarily indicative of poor performance. However, many retailers are reporting volatile traffic and sales spikes to us, with very little consistency in when one retailer does well and another badly. Retailers also report having to employ strategies such as discounts and offers to stop sales dropping, so while the index isn’t tracking major fluctuations, behind the scenes things are more frenetic than they seem; there is consistency in the inconsistency.

“On another note, Black Friday 2022 is on 25 November, which we recently found out is the same day that England play USA in the World Cup. Retail has never faced the distraction of the biggest global sports event before in the lead-up to Christmas, especially on the most significant ecommerce day of the year, but that could be a big factor disrupting it.”

Lucy Gibbs, senior manager, retail lead for analytics & AI, Capgemini, adds: “Despite the continued sales dip, online appears to be maintaining an increased share of the market two years since the pandemic began. However, there are strong headwinds facing the sector, with cost-of-living pressures and record high fuel prices affecting consumer confidence as well as increasing operational and supply costs for retailers. While retailers are doing what they can to mitigate against price increases, we have already started to see the impact on certain products, such as electricals and the overall average value of a basket continues to trend up, 12% vs February. Order volume has also dropped down to a new low of -42%, potentially indicating that purchases are already becoming more considered. Weathering this storm will require tuning in to consumer reactions, where value for money will be at the forefront of decision making.”

Faltering confidence leading to spending fall

A separate study by RAPP Group, however, reveals almost a quarter (24%) of consumers plan to spend less across six key sectors: travel, luxury, retail, automotive, technology and financial services. Two years of a global pandemic, economic uncertainty and now macro-level global events have unsurprisingly caused consumer behaviour to constantly shift, making it hard for brands to keep up. Now as confidence hits rock bottom, brands are dealt another blow.

Due in part to rising inflation levels and living costs, shoppers are spending less and saving more this year which poses a challenge for brands looking to thrive in already challenging circumstances. Travel (34%) and Luxury (35%) are still the hardest hit sectors which shows that though there might have been a positive shift in the last 12 months, this sentiment has dropped back to where we started.

What is clear is that brands should take time and invest in understanding the motivations and behaviour of individual customers as well as knowing them in the context of time. Perhaps crucially, brands need to understand and action the right communication in the right way – from social commerce, email bulletins, print advertising etc., find out where your audience is and meet them there.

The research, which was conducted as part of RAPP Group’s annual barometer of consumer attitudes, surveyed 1000 individuals to find that as household finances are hit hard, consumers are becoming more selective of where they spend their money. In fact, the survey found that more than three quarters of consumers (77%) say brand values are important when choosing a company or brand to shop with. This figure rises in the 16-34 age demographic to 83%.

Tackling climate change alongside stances on social and political issues are bound to have an impact on how consumers view brands. Interestingly, 45% of respondents cite ‘convenience and clarity’ as the number one brand value (up from 37% 12 months ago) adding credence to the notion that it should be what brands focus on in 2022 and beyond.

Getting personal

When it comes to individualisation, consumers noted that travel, retail and luxury sectors are not hitting the mark when it comes to delivering individualised marketing communications. In fact, these sectors have struggled to perform in comparison to the previous 12 months. When asked which sectors are delivering individualised communications, consumers perceptions of retail plummeted from 33% to 18%; luxury dropped from 10% to 6% and travel fell from 12% to 9%.

However, in spite of the ongoing sense of impending doom, 59% of consumers surveyed say they would spend more money with a brand that treats them as an individual – something which still rings true after 12 months, when the figure was 57%. And crucially, more than a third (34%) would spend 50% extra with a brand that treats them as an individual. Most notably, shoppers aged 16-34 are more than twice as likely to spend more money with a brand that offers experiences made for them individually than those aged 55+.

Jessica Evans, New Business Director at RAPP says: “Inflation skyrocketing and the war in Ukraine have taken their toll on consumer confidence. Our findings show that consumers want brands to go the extra mile to secure their loyalty and spend in these challenging times. In order to survive, brands must focus on what consumers are asking for; Convenience and clarity. Adapting your brand communications based on these wants and needs, is something marketers simply can’t afford to overlook.”

This is echoed in a third study by creative technology agency Rehab, which finds that brands are currently missing the mark on their relationships with their audience, which is expected to become exacerbated by the end of cookies for those without a new data strategy in place.

Fewer than a fifth (16%) thought that the companies they interacted with properly understand their needs as a person, whilst the majority of people (53%) claimed to buy products based on ads they’ve seen just once a year or less, despite an estimated global ad spend of over $700bn in 2021.

Rob Bennett, CEO of Rehab Agency, comments: “Our report highlights some staggering concerns from the general public around data collection – which will become a colossal issue for businesses once cookies are phased out. Brands everywhere will need to actually build a relationship with their customers, rather than relying on digital stealth. To do this, they will need to provide customers with more value and more reasons to trust in their relationship. Getting it right means pulling technology and marketing together to manage a strategic shift, with absolute transparency on why personal data is collected and how it’s protected.”

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