Earnings reports and retail sales figures from this year indicate that consumers continue to be cautious about spending, a trend that has persisted for the past two years. This caution has benefitted companies like dollar stores and off-price retailers, while department stores and others trying to sell full-price discretionary items have faced difficulties.
In response, many retailers have turned to strategies such as markdowns, sales events, and the development of private labels. However, research suggests that during these inflationary times, shoppers aren’t solely focused on price. According to Matt Pavich, Senior Director of Strategy & Innovation at Revionics, while a significant portion of consumers may be downgrading, a considerable number are prioritising value in their purchases.
Consumers are particularly concerned with the quality of the products they buy. Deidre Popovich, a marketing and supply chain management professor at Texas Tech University, points out that while inflation affects retailers, lowering product quality to maintain prices can be a mistake. Research shows that as prices increase, many shoppers actually expect better quality. If the quality of a favoured brand diminishes, even loyal customers may consider switching. Popovich notes that consumers are aware that product packages are shrinking, offering less for the same price, and while some companies may cut quality to save costs, others recognise that consumers expect higher quality when they spend more. This price-quality heuristic leads shoppers to anticipate better quality as prices rise, and they make informed choices, not always opting for the cheapest option.
Younger consumers, particularly Gen Z and millennials, are especially attentive to the quality of goods and services. Popovich highlights that this demographic is heavily influenced by product reviews, influencers, and social media when making purchasing decisions. They are keen to know if others found the product worth the money, which drives their purchasing decisions more than older generations. Retailers like Abercrombie & Fitch, with strong merchandising, are likely to attract these quality-conscious customers, according to GlobalData Managing Director Neil Saunders.
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