Start planning now to remain relevant to your customer base as we move into 2019
Much as I might want to avoid the subject, it is impossible to look at retail predictions for 2019 without looking through the lens of Brexit. As the uncertainty continues over a possible deal, I want to try and think about the effect it will have on retailers in 2019, what is probably concerning them and what, if anything, we can do to brace ourselves.
I watched with interest the Channel 4 live debate show, Brexit: What the Nation Really Thinks, which aired in November. Survation interviewed 20,000 people online across the UK from 20 October to 2 November 2018 in the biggest ever independent Brexit opinion poll, to try to decipher how the country would vote now and why. The fascinating results were revealed live on air and I could clearly see a variety of statistics that retailers should take heed of when thinking about their 2019 retail strategy.
The headline was, if the referendum was re-run, there would be a swing toward remain at 53 per cent to 47 per cent. In terms of the economic outlook, overall 44 per cent think Brexit will be bad for the economy, versus 31 per cent thinking it will be good. This overall national mood of ‘regrexit’ seems borne out by the current economic data. The Gfk consumer confidence index in the UK dropped to -10 in October 2018, as the Brexit impasse affected how consumers felt about the economy despite easing inflationary pressures. This deteriorating consumer confidence is being played out on the high street where we are seeing a continuing stream of store closures – not just because of Brexit, but certainly not helped by it.
In fact, hedge funds have amassed a £1.4bn bet against high streets with economists warning a crucial Christmas period will hinge on a pre- Christmas Brexit deal. The latest footfall data from Springboard shows a two per cent decline in October 2018, a steeper decline than September 2018. So, a clear picture, right? Well, not entirely. The detail of the Channel 4 programme helped to expose the far from unified picture of consumer intention. There appears to be a trend in voting by age group, which is imperative for retailers to note when thinking about their 2019 retail strategy as it’s linked to their financial independence.
To start with, a clear majority of voters aged 54+ would vote to leave again, the percent in favour of leave versus remain is almost identical in every age group upward. Interestingly for pensioners 75+ views are even more hardened with more now in favour of leaving.
In terms of the views of the economic outlook post-Brexit while 45-year-olds and younger now overwhelmingly have a negative view, for 55-64-year-olds it is much tighter. Over a third (34 per cent) think it will be good, versus 40 per cent bad and for 65-74-year-olds a majority think it will be positive, 42 per cent think it will be good, versus 35 per cent bad.
With regard to personal finances, a clear majority of consumers aged 54+ think Brexit will either be good or make no impact to their personal finances. There are two factors behind this; firstly, they are after all ‘Generation Wealth’, with more assets so therefore less likely to be directly impacted by any adverse effects. Additionally, as a majority wanted to vote ‘leave’ anyway, they were clearly unimpressed by what they see as ‘project fear’ from the remain side about some of the reported negative financial impacts.
However, for worried millennials a far different picture emerges. They are more in favour of the EU than ever before. Sixty-seven per cent of 25-34-year-olds would now vote remain, against 56 per cent who voted remain in 2016. Among this age group just 24 per cent think Brexit will be good for the economy versus 50 per cent bad. In terms of their personal financial situation, again the reverse of the older age groups is true. Fourty four per cent of 25-34-year-olds think it will be bad, against 18 per cent good, with 22 per cent thinking it will make no difference. This is perhaps not surprising when you consider they were firmly against Brexit from the start, are less secure in their jobs and have a hampered opportunity of working in Europe.
So what does this mean for retailers? As older consumers are more confident in our ability to forge ahead without EU membership, if a deal is settled, could we see the baby boomers create a mini-boom on the high street? Insulated from any of the more negative personal financial impact of Brexit and with more confidence in the country’s future and their own economic situation, could this lead them to spend more? This demographic is also far more likely to visit bricks and mortar stores. And for millennials worried about their personal financial security as well as the economy, retailers need to entice them to shop. Millennials seek out experiences, which also applies to the way they shop. Retailers need to engage with this audience through the customer journey, making any purchase a positive experience.
An understanding of these varying motivations, and the different demographics, their mindsets and their spending power, can make a big difference to retail strategy. Also, being agile, flexible and able to react quickly to the buying signals, especially in relation to pricing and promotion strategies for millennial audiences to try to entice them to spend, let alone spend more. Just as the outcome of the negotiation won’t satisfy all political parties or a now fractured population, neither will a one-size-fits-all retail strategy. Start planning now to remain relevant to your customer base as we move into 2019.