Add CategoryIn a report provided to Inside Retail, market research agency Cognition Research has stressed the need for retailers to prioritise their understanding of consumer needs and behaviours, as a way of capturing customer loyalty and spend amid cost-of-living challenges According to its ‘Key thoughts and retail trends for 2023’ report, a two-speed economy appears to be evident, and the way that brands communicate value is likely to be particularly important in sectors such as food and beverage, as
as customers tighten their budgets and look for savings. Meanwhile, ‘revenge spending’ and ‘aspirational shopping’ are set to continue dominating areas such as boutique shopping, luxury items and premium delivery, as customers seek moments of joy. The report predicted that subscription models, and exclusive membership offers, will be an increasing trend in 2023. Meanwhile, an emphasis on sustainability and a circular economy is also set to continue, with research by Lightspeed showing that 77 per cent of shoppers are motivated to buy from businesses that are acting to make the world a better place. Cognition Research principal Bill Morgan told Inside Retail that the world of new retail is undergoing rapid change. Amid economic uncertainty, he said that many retailers were bracing for a significant fall in retail sales this year, and are subsequently cutting marketing and capital expenditure budgets. But, he believes there’s an opportunity for brands to gain competitive advantage, provided they have a strong understanding of how and why customers spend. “The need to understand shopper needs and behaviours, and where possible shape behaviours, has become more critical in 2023,” Morgan said. “There is a high opportunity [to create] differentiation due to fast-paced developments [in] the post-Covid era of ‘new retail’.” Invest wisely Morgan believes that the brands which invest in, rather than cut back on, omnichannel and experiential offerings are more likely to gain a competitive advantage in the current economic environment. But he stressed that it’s important that these brands spend wisely, and with a focus on customer needs and behaviours. When it comes to aspirational spending in discretionary retail categories, Morgan maintained that customers want to feel good, and have a positive, social experience. Referring to the concept of the ‘affect heuristic,’ he believes that customers make decisions based on positive associations. “At a time of difficulty, there’s a greater opportunity to create a positive message. In certain instances [it would be] beneficial to make people feel good, and have people enjoy the retail experience,” he said. “It is something that might sound banal, but is actually quite profound, as engineering moments of delight can have a terrific impact.” He noted that AI technology will increasingly be utilised by retailers throughout the year, as they continue to personalise communications and product strategy to the consumer. He added that there would be a further morphing of digital technology within bricks-and-mortar stores. Morgan cited the customer experience offering at Super Cheap Auto, where customers can scan a product via a QR code, put in their car registration, and see if it is an appropriate fit. “The delivery of digital technology into the retail environment are some of the areas where change is really taking place,” he said. He added that sustainability initiatives have become mainstream and would continue to be prioritised by customers in 2023. Morgan pointed to Selfridges repair concierge services as a positive example of a retailer tackling waste, addressing thrift and extending the product life cycle. “The smart retailer thinks of ways to [tie] all those threads with what they’re doing,” he said. Evolving, not static A key thing for retailers over the next 12 months, according to Morgan, is to understand key behavioural science and decision-making concepts, such as the affect heuristic, cognitive blur and choice paralysis, when making executive decisions. He added that shopping behaviours and needs aren’t static. Rather, they are evolving, and the decisions made by retailers can drive change in this area. “Retailers need to accept and embrace that the initiatives put in place in-store can augment and change behaviour,” he said. “This shopper understanding is especially crucial during a time when budgets are being [tightened] and retailers must compete fiercely for their portion of consumer spending.”