The six consumer trends driving growth in retail
Anita Balchandani, Head of Retail and Partner at OC&C Strategy Consultants, discusses how the fastest growing retailers in the UK are thriving in a low-growth economy
Success in today’s retail sector has never been more elusive. Not only are today’s customers spending less on their shopping than they have done in the past, but they’re smarter, digitally savvy and hungry for the best deals they can find. Meanwhile, consumer dynamics are constantly shifting. Wealth is increasingly polarised, and customers are more diverse both in age and ethnicity than ever before.
The age-old rule of staying close to your customer still stands as the key to success in today’s market. But it’s no surprise that many retailers are struggling to keep pace, losing sight of a constantly shifting consumer in the midst of one of the most challenging macroeconomic environments we’ve seen in decades.
Some retailers, however, are thriving. OC&C recently published new research which ranks the fastest growing retailers in the biggest Western retail markets, revealing that value and premium brands are outgrowing their mid-market rivals by a considerable margin. With Aldi claiming first place as the fastest growing retailer in our UK rankings, closely followed by Waitrose, it’s clear that today’s retail environment is populated by extreme shoppers, with the majority of growth in the sector coming from polar extremes in terms of price position. This was reflected throughout our index, with the rest of the leaderboard dominated by the likes of Primark, B&M Bargains, Harrods and Burberry.
Although at first glance these retailers have little in common, there are several themes which recur in their pursuit of success. We’ve identified the six key trends currently providing growth in the retail sector:
Convenience: Shopping missions are evolving, with our research highlighting that 59 per cent of online purchases are now made outside of typical high street opening hours. Those retailers allowing customers to shop on their own terms are racing ahead, with brands like Amazon, Ocado and Net-A-Porter reducing points of friction in the shopping journey through optimised mobile access and speedy delivery options.
Specialism: Retailers such as Ulta Beauty and Williams-Sonoma have capitalised on opportunities to reinforce their sector credentials to great effect. In-store events, classes and webinars work well not only to augment the retail offer but also to deepen customer knowledge.
Simplicity: The success of the discounters is rooted in extreme simplicity and a ‘no frills’ approach. Our data shows that Aldi for instance, has enjoyed approximately 38 per cent year-on-year growth since 2011. They’ve achieved this by tightening up product ranges and ensuring their supply chain is as lean as possible to eliminate waste.
Aspiration: Growth leaders in the premium category on the other hand, are driving brand engagement by harnessing the aspirations of their consumers. Prada, Burberry and Harrods are all using digital channels such as Pinterest to forge stronger communities of “global affluents” to dominate the luxury market.
Wellbeing: The importance of healthy eating and an active lifestyle is front of mind for more consumers than ever before. Google search volumes for terms like ‘quinoa’ for instance, have increased by 51 per cent in the last five years. Retailers such as Wholefoods and Decathlon have moved quickly to position themselves as go-to destinations for those looking to live better, and they’re reaping the rewards as a result.
Adornment: The household goods and services industry has also grown exponentially in recent years. Retailers such as Dunelm, Maisons du Monde and Restoration Hardware are all capitalising on this by offering inspiring homeware solutions that don’t break the bank.
Capitalising on key customer needs is clearly the name of the game in today’s market. Those brands which we’ve observed growing the fastest are clear about which of the above tailwinds they’re exposing their businesses to and are adapting the quickest to create strong customer propositions that really shine.
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