Consumers are becoming more price-aware in a recession economy, what are the costs and benefits to retailers? And more importantly, how can retailers beat the budget?

Biting the budget

Since the infamous Credit Crunch, the heady days of inconsequential boom-time spending have passed out of sight and mind and a double dip recession looms ominously over Britain. Grounded by a more realistic approach to finance, consumers are now developing new spending habits to facilitate the standard of living to which they became accustomed during economic growth. The rise of Lidl and Aldi amid a global recession is a telling sign of the adjustments being made by some consumers to cope with rising prices and stagnant wages.

But it isn't only low-income households that are changing the way they spend. The “squeezed middle” is making room for the finer things by scrutinising spending using technological budgeting solutions like Shop Savvy, a price checking smartphone app. They are also increasingly likely to consult web reviews for a better understanding of products.

What does it mean for retail?

The effect of price transparency is to create a fairer marketplace for consumers; they can discover the relative cost of an individual shop and compare it to web and physical retailers in seconds. This has effectively shrunk the retail environment, creating opportunities for consumers to find the best price whether online or in the high street.

Price transparency has pros and cons for retailers. The pros include the ability to entice consumers with low cost items and, if stores stay within touching distance of competitor pricing, retailers can make a trip to an out of town retail park seem like a false economy. But this is a double-edged sword, retailers with higher priced items may lose out on sales, and will need to offer something extra to encourage consumers to spend more.

So what have retailers been doing to stand out from the crowd in an increasingly competitive retail environment?

Communicate with consumers

Consumers are more price conscious than ever and becoming increasingly aware of how they can save. Make strides towards a more welcoming offering by communicating your best deals more clearly, whether that is in store or in advertising. Be conscious of local and national pricing trends and show consumers your commitment to offering real value.

Back up your offering with solid e-commerce to give consumers multiple purchasing channels and more opportunities to discover you. More importantly, make sure customers understand the added value they receive by buying from you. Consumers understand that there is more to a purchase than the product itself and that difference that may be the thing that makes them choose to purchase from your store.

Respond to prices

As well as a longer spell of Christmas sales and discounts, retailers tied together online and in-store offerings to boost footfall. Retailers like John Lewis offered in store deals in the weeks leading up to Christmas, with their web properties reflecting reduced pricing to web customers. They were smart not to ignore an online offering with a nationwide 16.5% rise in web spending in December.

John Lewis – whose familiar tagline, “Never knowingly undersold”, supports the point – are brilliantly capable of transparency in their pricing and this is appreciated by consumers. More impressive is their responsiveness to lower prices. John Lewis matches the pricing of all comparable retailers (those offering in-store and online retail) even during competitor sales periods, meaning consumers can be certain of value.

There's also a strong focus on expert, impartial and high quality customer service, high quality goods and responsible sourcing of own brand products. All of these come together to form a high value offering that customers trust. The result of their strategy was a 6.2% rise in like-for-like sales in the 5 weeks to December 31st.