We’re approaching the worst recession in decades. Following on from a pandemic (or potentially into the next stage of it), supply-chain crises, energy crises, climate change, labour shortages, war… people are uncertain, and uncertainty leads to concerns.

We wanted to add our point of view on this gloomy outlook and provide our thinking into these concerns. So we did what we do best and asked our respondents (real shoppers) what they were doing to provide some viewpoints on, well, all of this *gestures wildly*

Shoppers showed us what they were doing and what they were concerned about. The top concerns were cost of living and inflation. 52% of UK households are worried about the overall cost of living, 40% are especially concerned about the cost of food. That’s no surprise — the last 2 years have left their mark on the economy — and our wallets.

According to a recent article published in The Guardian, Tesco Chairman, John Allan said, “Overall inflation currently stands at 5.4%, a 30-year high, and is predicted to top 6% in the spring.” This is even after back in October 2021 when the Prime Minister, a haystack of dysfunction, claimed that inflation fears were unfounded.

No wonder shoppers are concerned. This groups of 52% of UK households are who we’ll be referring to as “Cost-Concerned Shoppers.”

In the rest of this article, we’ll explore the topic of how brands and retailers can win with these Cost-Concerned Shoppers.

What’s happening in a cost-of-living crisis?

Half of UK households are worried about the rising cost of living and this number is expected to rise. This has a big impact on retail across 5 key areas which we’ll tackle one by one.

1. Promiscuous shoppers
2. Migrate from online to in-store
3. Rise of Private Brands
4. Anchoring against the cheapest
5. Motivated by value, not price

Promiscuous Shoppers in More Stores

Cost-Concerned Shoppers shop in more stores than those who aren’t concerned. They are deal-seeking, and need to dedicate the time to buy what can fit in their budget. In fact, Cost-Concerned Shoppers visit 2.2 different retailers versus 1.67 retailers visited if not concerned.

In other words, if you’re concerned about the cost of living, you’ll visit 33% more stores to complete your grocery shopping.

And these aren’t just shoppers shopping around. The additional stores they go to are typically the discounters, Aldi and Lidl, but also we’re seeing the rapid rise of the bargain stores like B&M and Home Bargains. The “Aldi Price Match” therefore needs to be expanded to demonstrate price / value across an increased competitor set.

Migrate from Online to In-Store

Cost-Concerned Shoppers are 50% more likely to shop in large stores as their preferred way of conducting their grocery shopping, compared to online. As more people become concerned, more shoppers will migrate their shopping away from online, and back into stores.

The primary reason for this appears to be that these shoppers trust in tradition. They want to see the repertoire of products, prices and deals, and a feeling that online shopping has something (e.g. the best deal) being hidden from them. Sidenote: this isn’t just due to price / inflation of course — this is due to the online grocery shopping experience just being bad. We talk a lot more about that elsewhere and it’s not the subject of this article, but get in touch if you’d like to discuss this online grocery user experience area further.

Rise of Private Brands

Understandably, Cost-Concerned Shoppers don’t see the value in more expensive brands versus supermarket private brands / own label. But let’s put some numbers on that. 40% of shoppers think brands are higher quality than private brand, whilst that’s over 50% of shoppers who aren’t concerned.

So that means that if you’re a brand, you’re 30% less likely to be picked up by Cost-Concerned Shoppers (50% of shoppers). If that number continues to rise, that 30%-less-likely-to-buy figure is your risk.

Anchoring Against the Cheapest

Some more bad news for brands. Price is important for both concerned and unconcerned shoppers in equal measure. Half of all shoppers said they look for the cheapest product on the shelf.

This is how shoppers anchor their decision-making. Spot the cheapest product on the shelf, pick that or use that to compare everything else against it. If my branded product is 3X more expensive than the cheapest on-shelf, will shoppers trade up from the cheapest? What’s important and, quite frankly, scary about this approach is that your product is constantly being tested and assessed by shoppers in every store, thousands of times a day against the cheapest product on the shelf. Can your product justify the comparison currently? Can your product do a better job justifying why it’s better than the cheapest than it is currently doing today?

Motivated by Value, not Price

The most important reason that shoppers choose retailers is based on “good value for money”. Not surprising, when given the context above. But it is surprising that this is more important than just “low prices”. This difference is important. It shows the opportunity for retailers and brands to work together to offer shoppers that value and win together.

What can retailers do about it?

Cost-Concerned Shoppers go to more stores and will take spend away from you. You need to offer them the value of staying in your store. Bundle up those products, and make it easy to realise and calculate value. How?

• Draw forward spend on bundled-up staples. Make luxury / disposable income / “treats” the battleground with competitors.
• Make it an emotional mission — shoppers want things that mean something to them. “Big night in” was a roaring success 14 years ago — new ones like “family favourites”, or “party together at home” will likely be the successes this year.
• “Aldi Price Match” is no longer enough — shoppers want to see comparisons across more stores as they become more concerned and promiscuous
• Your in-store approach and online approach should be different. Online shoppers are less concerned about inflation. You don’t need to push price messaging here. You need to focus on experience, luxury, and trade-up. Your battleground here is Hello Fresh, not Home Bargains.
• Push private brand in-stores — Cost-Concerned Shoppers think this is good quality. This is where you can win against discounters.

What can brands do about it?

Brace yourself for an increase in importance and focus on Private Brands. As mentioned above, Cost-Concerned Shoppers are 30% less likely to buy your brand or think that it’s worth the higher price. If this number of Cost-Concerned Shoppers increases further, your leaky bucket of shoppers has sprouted a few more holes.

But it’s not all bad news (FINALLY). You’re not just competing with price, though you are being compared to the cheapest product on the shelf thousands of times a day.

So let’s get back to basics:

Why does a shopper pay more for your product?

• Do they know why?
• Can they articulate it?
• Is their articulation correct?
• Or is it based on unconscious, system 1 thinking?

Is your brand “better” than private brand? You’re going to need to prove it to retailers and shoppers. How?

• Do shoppers consider private brand first when they’re at the shelf?
• Do shoppers pick up your brand automatically / split-second? Or is it considered?
• Can shoppers explicitly tell you the reasons they buy your product over private brand or a competitor? Is it engrained, or is it unconscious?

The moment at-shelf, the last-metre decision-making at the point of purchase is changing, for all the reasons we’ve listed above.

Some brands claim they’re strong at-shelf with data from many years ago. This isn’t going to fly this year. For example, we’ve tested the old claim used by many a marketing business school that “cleaning products are purchased because their parents purchased them many years ago”. This, alongside so many old adages, is no longer true.

If you want to find out the risks that cost-of-living and inflation concerns have on your brands in-store don’t forget to contact VST or message me directly (nick@storetrials.com). We’ll identify your risks and opportunities and how to communicate the value of your brand to shoppers, consciously and unconsciously, and make sure you’re winning with shoppers in today’s volatile market and beyond.

‍