Cost of living driving new consumer pricing and trust imperatives as 43% plan reduced spendingFriday 21 October 2022 | Press release
- All About Value: OC&C’s 12th Retail Proposition Index (RPI) reveals UK’s top-performing retailers.
- Retail leaders are structuring competitive business models around value.
- The #1 way for retailers to build trust is now through setting and communicating fair pricing and value.
- Report highlights how retailers must act now to reinforce four key value credentials to survive their most challenging period for 50 years.
LONDON – Friday 21st October 2022: With inflation and cost of living pressures driving consumer confidence to its lowest in 50 years*, the way retailers must build trust with consumers is changing. OC&C’s latest RPI reveals that, with 43 per cent of consumers planning to spend less in the next 12 months, retailers must act urgently to set and communicate fair and consistent pricing, to protect trust at all costs while managing inflation.
The analysis shows consumers are more likely to protect spend in 2022 at value-led retailers: Of the 10 retailers most resilient to a fall in disposable income, half are value-led. The RPI also shows value players in 2022 have been able to convert visitors to purchase much more effectively than other retailers, with a conversion rate of 66%, compared to 47% for mass market retailers, and 44% for premium players.
While trust was previously underpinned by associations of product safety and reliability, the report suggests the way retailers must build trust has changed dramatically. With 80% of consumers saying price influences most of their shopping behaviours, value is now a core consideration in the trust equation.
Value credentials have become much more important in which retailer consumers choose to shop with. Value for money and price competitiveness are intrinsically linked, and the top-rated players on these criteria (irrespective of sector) include many that have cost and value leadership engrained in their economic and operating models**.
The importance of value has grown most in specific product categories of essential (groceries) and everyday discretionary categories including clothing, while remaining static for big ticket purchases.**
The report also notes that other criteria have taken a back seat in the face of challenging conditions, with a dramatic change highlighted in previous top drivers from 2018 to 2022 – with, for example, ‘fair & consistent prices” being the 9th most important driver in 2018 – and the most important driver in 2022**.
Alongside trust, the report reveals three other trends playing through into the performance of value players. This creates a new set of imperatives for retailers to build resilience and position themselves for success:#
- Protect trust at all costs as they manage inflation
- Re-engineer their business model to deliver value
- Realise the value of their physical portfolio
- Don’t compromise on sustainability
Matt Wills, Associate Partner at OC&C Strategy Consultants, commented, “We see consumers intrinsically link trust with value for money. As retailers face a critical year ahead they need to assure consumers that they are being fair and consistent with their pricing, and that they’ve got their back.”
Tom Charlick, Partner at OC&C Strategy Consultants, added, “The most interesting thing about our findings this year is that the top-rated players on pricing and value money (irrespective of sector) are all those that have cost and value leadership engrained in their economic and operating models. Delivering a great value proposition cannot be achieved with a ‘sticking plaster’ - retail leaders need to fundamentally restructure operating models to develop resilience and competitive advantage around it.”