Retailers need to convince consumers to spend

Consumers have lost confidence in the financial system and retailers should visit product lines and look at new ways to package goods to convince shoppers to spend money.

Speaking at the International Egg Commission Conference, Richard Lewis (pictured) of the CEIS International Food Business Forum said the recession had caused consumers to panic.

He said recent figures from the Institute of Grocery Distribution showed that in the UK, 33% of consumers were going to spend more on budget brands, 21% were expected to switch from national brands to retailers private labels and 13% were likely to switch to discount retailers.

Mr Lewis divided consumers into three main groups: Group A with a loss of disposable income; Group B, the financially anxious; and Group C, those immune to the crisis.

“Group A are the consumers who have either lost their jobs, their savings, pensions or their homes. Either way this group needs to spend less,” he said.

“Retailers are serving these consumers by adding new label discount lines or running deep-discount price promotions on selected lines.”

“Group B, have so far suffered no material loss, but are not sure where they will be in a year’s time. They might lose their jobs or they could be slightly better off, if interest rates have come down, but confidence is shattered.”

Mr Lewis said this group would try to hold on to their money and spend less. But there was still an opportunity for them to spend more. “They will try to maintain a certain level of consumption, that helps reinforce their lifestyle and identity,” he added.

Retailers and suppliers should look at the way products are packaged to convince this consumer group that they made the right decision by staying in their price range.

“Think about reducing pack size and charging less. You currently have to buy six or 12 eggs, why not three eggs,” he said. “If retailers don’t offer a trade-down version in the range, the customer is going to look for a cheaper rival.

“Group C has got money and, having suffered no losses, they are effectively immune to the financial recession. They have disposable income and can be encouraged to spend it, if they are served correctly.

“It is time for retailers and suppliers to recognise that many shoppers do have money to spend. But to win in the downturn, you have to serve all three consumer groups,” said Mr Lewis.