What is the current state of the retail market?
Cost of living is a crucial factor that affects everyone’s daily life. Recent increases in transportation, energy prices and a 16.9% increase in food cost (year-on-year in December) are impacting people’s ability to make ends meet. As a result of this, the way people are purchasing and what people are spending their money on has changed. For example, there is a strong consumer sentiment around tightening the belt, hence, consumers are cutting back on discretionary spending like eating out at restaurants.
Additionally, there is a strong focus on buying essentials, in particular, essentials for others rather than ourselves, an example of this would be purchasing nappies for children. Looking at increasingly.com, a website selling product bundles to over 100 clients across a range of niches. They have seen increased revenue year-on-year for some of their clients in the pet industry, suggesting that pets are an essential household cost for most people rather than a discretionary expense. Following this pattern, there’s no surprise that their clients within retail and consumer electronics did not perform as well year-on-year.
In relation to e-commerce websites, there is a general increase in window shopping. People are landing on websites and looking around, but they are not buying anything and therefore not converting. People are spending more during sale periods, however, there is also an increased rate in returns too. There are cases where search volume around a particular keyword has gone down year on-year despite the client ranking for the same position. We’ve also seen decreases in branded search, which has a better conversion rate than non-branded searches. This reduction will consequently impact organic branded traffic and therefore revenue. Despite the current state of the market, we’ve seen some stability in the luxury market. Looking at reporting data and tools like Google trends, conversion rates of luxury goods have either stayed the same or increased in some cases.
While it is difficult to make precise predictions about the ever-changing market, there are several factors we can analyse to gain insight into potential trends and industry shifts. Energy prices are forecasted to go down, however, the energy price cap is going to be lifted in April, potentially squeezing people in the short term. Despite this, there are positive indicators, like inflation peaking in November and mortgage rates reducing, meaning people will have more disposable income. When looking at the retail space specifically, OECD reports show that customer confidence has started to lift in the last two months. The wider sentiment to this is that despite the market being quite tough at the moment, there are positive grass shots ahead.
How can advertisers adapt their marketing strategy for the current market in light of the state of it?
In today’s fast paced market, it is essential that retail companies are evaluating and adapting their marketing strategy. It is common for some people to reduce their marketing spend when approaching a recession, but this creates the risk of falling behind from your competitors. Adaptation is crucial in marketing especially in today’s rapidly changing environment. Below are 4 different ways to adapt your current marketing strategy:
Focus on repeat customers
There’s a saying that it is better to farm than to hunt, in relation to retail, it is essential to focus on repeat customers for long-term success and business growth. It costs six to seven times more on average to win customers you’ve not had versus to generate new sales from an existing customer who already has some level of loyalty to your brand. Repeat customers are more likely to spend more money and make more purchases overtime, so it is important to really invest in existing customers. A great tactic would be to hone in on the referral market, this is where word of mouth recommendations from existing customers help to grow a business’ customer base. You can use companies like Mention Me or Soreto to get your fans to market your brand.
Drive more revenue from each customer
Driving more revenue from customers is a smart strategy that allows you to increase revenue and profits without necessarily acquiring new customers or increasing your marketing expenses.There are different techniques and technology you can use to boost the average order value. A successful technique used by many brands like Amazon is product bundling, this generates them an extra 6% more revenue per customer. Understanding your customers’ needs and preferences is crucial so that you can only offer them products that will genuinely benefit them.
Optimise your website for SEO
The principles of good SEO stays the same despite the difficult economic conditions – it is imperative that your website is SEO optimised. SEO is generally seen as a medium to long-term game, though you can get quick wins within the short-term. For example, making on-page changes to an unoptimised website can often be picked up very quickly by Google. Bigger changes on your E-commerce website like fixing the internal architecture or opening up the fast navigation takes a longer time for Google to recall and index, particularly if you’re targeting keywords. Therefore when investing in SEO, have the strategic view to invest past the current cost of living crisis and look to where the website should be within the next year or two.
Review your pricing strategy
Another way to adapt your marketing strategy inline with the changing market is to look at your pricing strategy. The point is not to overly discount your products that you are wiping out any profit, but to get stock moving. A great way to review this is to look at how profitable you are and how competitively priced specific products are. If you have products that are more expensive but there’s high search volume out there, you can review your pricing strategy and look for areas where you can gain more traffic to it at a cheap cost. You can then convert that traffic into other areas of the website through bundling and cross-selling.
What practical tactics can retailers implement today to improve their performance?
Retailers should be implementing practical tactics to remain competitive, increase sales and enhance customer loyalty. A great tactic is to have a strong focus on product strategy by drawing your attention to products that give you more margin. In electronics, accessories generally sell better than the actual product. With this information, retailers can have a specific product strategy to focus on selling product accessories. Another tactic is to move towards subscription sales, it builds technical capacity for the future and also keeps your customers loyal, which is vital in this market climate.
When it comes to SEO, knowing the main pages and keywords that are driving the most traffic and conversions is imperative. This data allows you to focus on maintaining ranking position and organic traffic to those pages. According to the Pareto principle, 20% of pages drive 80% of traffic, so it’s wise to focus and double down on the 20% ensuring that there are not any fluctuations to those pages. Trying out new tactics in this time will help brands remain competitive but it’s also important to look into any outstanding SEO tickets that you have in the backlog, prioritising tickets that will maximise impact.
Retail brands that want to stay competitive in today’s market need to adapt to changing consumer behaviour and trends. By adapting their strategy to the changing market and putting customers at the centre of their strategy, retailers can thrive in an ever-evolving marketing landscape. Those who are slow to adapt to change risk falling behind and losing market share to competitors who are more agile and responsive to change. Therefore, it couldn’t be a better time to experiment, take risks and to invest for example in SEO services. In doing so, retail brands can position themselves for success in an increasingly competitive industry.