In times of economic stress, particularly at the scale the world is experiencing, it would be easy to adopt a wait-and-see attitude before making big decisions on things such as new product lines, changes to in-store range, and pricing. It would also be easy to stay in lockstep with competitors on strategy and tactics, a sort of wisdom of crowds approach.
This kind of thinking would be a mistake.
This is not the time for big, macro decision-making…or waiting. It’s a time for micro-decisions; lots of them. And that’s not a cop-out, it’s a strategy in and of itself. Why? Because the end customers of brands and retailers — shoppers — are making untold numbers of micro-decisions about how to manage their money every day.
For them, life has become a constant re-calibration. Spending capacity is just that, a capacity. It’s a net-sum game that needs to be managed in the micro-decisions of risk management. Shoppers will be asking themselves what their new basket of essentials looks like every time they shop. They’ll negotiate within households on what constitutes a small treat. Every item in the basket is up for negotiation in some way. Will it be abandoned, substituted, or downsized? It’s all up for grabs and the micro-decisions of brands, retailers and advertisers will build credibility with shoppers. Those who get it right will find favour as a result.
The job of brands and retailers
Instincts and assumptions alone are dangerous things in the current fiscal climate. For example, it would be easy to assume only the less affluent will suffer. And while there is a clear correlation between household income and the extent to which a household considers itself to be “struggling”, it is not that simple. Even amongst those earning £40-49,000, 17% feel the strain financially, while only 45% of those earning £50-59,000 claim to be “comfortable.”[1]
As our data shows, they have been adjusting to this reality for many months. Kantar looks at grocery inflation through a lens of 75,000 identical products compared year-on-year in the proportions purchased by shoppers. It is clear shoppers are buying differently, and decisions on how to serve them need to be made.
But decisions, small and large, also need to be around the future. As prices stabilise, inflation settles, energy prices decline, and interest rates rebalance, spending power will continue to shift. The danger is that amidst the short-term headlines shouting of record inflation we find ourselves in a race to the bottom on price as brands hustle to compete with own label and discounters. It’s decision time.
[1] Kantar Worldpanel LinkQ Pressure Groups Survey, October 2022