Table of Contents
Issues in the Market
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- Key themes
- Definitions
- Abbreviations
Future Opportunities
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- Something for nothing?
- Invasion of the data snatchers (from Mintel Inspire)
- Alternative data capture methods needed to avoid card fatigue
- Premium and cut-throat (from Mintel Inspire)
- Helping shoppers to be savvy
Market in Brief
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- Discounting
- Consumers saving money on food by trading down and cutting back
- Expansion by discounters to extend share gains
- Discount and value non-food retailers also benefiting
- Discounters set for major expansion post Woolworths collapse
- Loyalty
- Loyalty card participation at record levels
- Not all shoppers participate
- Loyalty schemes have little influence on where people shop
- Need to reappraise reward structure
- Loyalty schemes drive incremental sales but receptivity to offers waning
- Driving value from data generated
- Loyalty schemes have an important role in future
Internal Market Environment
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- Key points
- Food
- Food price inflation
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- Figure 1: Food price inflation, annual rate, 2004-09
- Price war: Real or imagined?
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- Figure 2: Leading grocers’ and discounters’ net operating margins, 2006/07 and 2007/08
- Tesco wants to be known as Britain’s biggest discounter
- Increased use of comparative pricing in advertising
- Changing promotional messages reflect the impact of the recession
- Money-off deals more attractive
- Emphasising value, not price
- Only discounters fully committed to EDLP
- Budget own-brands proving an attractive option
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- Figure 3: Budget own-label brands, 2009
- Co-operative Group retains Simply Value
- Premium retailers also adopting BOBs
- Tesco emulates discounters with “house brands”
- Discounters – share gains due to more than just expansion
- Aldi could overtake Lidl as the UK’s biggest discounter in 2009
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- Figure 4: Grocery discounters’ sales, 2003/04-2007/08
- Aldi and Lidl driving growth through new openings
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- Figure 5: Grocery discounters, store numbers, 2003/04-2008/09
- Kwik Save failings helped competitors
- Discounters – what’s on offer?
- Non-food
- Looming deflation making consumers ultra price sensitive
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- Figure 6: Non-food price inflation, annual rate, 2004-09
- Company failures leaves plenty of business up for grabs
- Departure of Woolworths changing the high street
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- Figure 7: Value of sales of major companies entering administration, 2008-09
- Value mixed goods retailers set for expansion
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- Figure 8: Value mixed goods retailers’ sales 2003/04-2007/08
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- Figure 9: Value mixed goods retailers, store numbers, 2003/04-2008/09
- Accelerated expansion plans under way among emerging multiples
- Grocers squeezing non-food specialists
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- Figure 10: Retail sales growth, by category, 2004-08
- Multi-format, multi-channel offer improving access
- Value clothing retailers continuing to prosper
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- Figure 11: Value clothing retailers’ sales, 2003/04-2007/08
- Outlet growth slowing
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- Figure 12: Value clothing retailers, store numbers, 2003/04-2008/09
- Growth in competition from online
- Dressing up discounting – it’s not all about price
- Recession-busting formats delivering new opportunities
- Pawnbrokers reinvented
- Rent to buy
- Proliferation of online deals and cashbacks
- Price comparison sites
- Online voucher code sites
- Online cashback schemes
Broader Market Environment
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- Key points
- Deep recession plunges consumer finances into chaos
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- Figure 13: Trends in GDP, PDI and consumer expenditure, 2004-14
- Rising unemployment undermining confidence and spending
- Retail sales growth slowing
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- Figure 14: Volume of retail sales (seasonally adjusted), January 2008-March 2009
- Credit drying up and limiting spending
- Income from savings drying up
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- Figure 15: Trends in savings ratio and interest rates, 2004-14
- Weakness of sterling makes imports dearer
- Population growth is positive and more poor pensioners driving value sector
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- Figure 16: UK population forecasts, by age group, 2004-14
Strengths and Weaknesses in the Market
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- Strengths
- Weaknesses
Who’s Innovating?
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- Key points
- Loyalty card schemes – new technology
- Contactless cards offer dual benefit
- Costa Coffee Club offers a digital rewards scheme
- Identifying consumers and capturing data without cards
- Real-time online gives added functionality
- Using communications devices and RFID to deliver personalised communications
- Greener thinking
- Loyalty card schemes – more benefits for high spenders
- Best Buy adds Premier Black top tier for high-spending customers
- US online clothing company gives Preferred Customer status
- Online retailers developing rewards programmes
- Loyalty cards in fashion online
- eBay Bucks
- Schemes trying to be different
- Offering a little TLC
- JoJo Maman Bébé gives generous discount
- Local flexibility for Costcutter store owners
- Promoting local loyalty
Loyalty Card Schemes
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- Key points
- Tesco Clubcard
- Nectar
- Boots Advantage Card
- Co-operative membership
- Other retailer standalone schemes
- New arrivals
- Recent departures
- Retailer payment card schemes issuing loyalty points
- Rewarding regular shoppers with points
- Other variations
- Customer or brand clubs and discount schemes
- Loyalty without the points
Consumers and the Recession
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- Key points
- Buying on promotion and down-trading in evidence
- Some switching away from c-stores but not between major grocers
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- Figure 17: What is being done to save money when shopping, April 2009
- High promotional awareness
- Strong evidence of trading down to BOBs
- Extensive cuts on treats and luxuries
- Significant switching to discounters
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- Figure 18: What is being done to save money when shopping, by main grocery store used, April 2009
- ABC1 families show strong down trading reaction
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- Figure 19: What is being done to save money when shopping, by ABC1 Special Groups, April 2009
- Price comparison activity muted
- Eating in is the new eating out
- Trading down on clothing evident among young affluents
- No compromise on quality or on immediacy
Customer Loyalty Scheme Participation
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- Key points
- Loyalty scheme participation reaches new peak
- Loyalty points help usage of store cards
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- Figure 20: Regular users of loyalty cards, by named schemes, 2002-09
- Tesco Clubcard attracting more participants and winning share from ABC1 shoppers
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- Figure 21: Regular users of loyalty cards, by named schemes, by lifestage and special groups, April 2009
- Tesco converts highest proportion of regular shoppers into scheme participants
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- Figure 22: Regular users of loyalty cards, by named schemes, by main store used for grocery shiopping, April 2009
- Gender divide needs to be bridged
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- Figure 23: Regular users of loyalty cards, by named schemes, by gender, April 2009
- Schemes failing to engage younger people
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- Figure 24: Regular users of loyalty cards, by named schemes, by 15-24-year-olds, April 2009
Consumer Attitudes and Typologies
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- Key points
- Principal interest is in discount
- Consumers split on lower prices versus points
- Effectiveness of schemes at creating loyalty called into question
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- Figure 25: Attitudes towards loyalty schemes, April 2009
- More people taking rewards as cash
- Fewer people taking an interest in coupons mailed to them
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- Figure 26: Trends in attitudes towards loyalty schemes, 2000-09
- Families under pressure take money-off option
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- Figure 27: Preference for discounts and redeeming points for money off, by lifestage and special groups, April 2009
- ABs lead as collectors
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- Figure 28: Those not influenced where to shop, by loyalty cards but who collect the points, April 2009
- Falling levels of engagement require retailers to rethink direct marketing
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- Figure 29: Use of coupons and interest in personalised coupons, April 2009
- Attitudes by participants in named schemes
- Co-op membership and M&S payment cards most effective at focusing spend
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- Figure 30: Participants maximisng spend, by loyalty card used, April 2009
- Major schemes’ brochures have low appeal
- Boots Advantage Card users value rewards most
- Smaller schemes need to do more with the data generated
- Consumer typologies and target groups
- Only a small minority are loyalty card enthusiasts
- Apathy rules
- Give me the points, give me the cash discount
- Keep it simple, I’m not prepared to wait
Appendix – Consumers and the Recession
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- Figure 31: What is being done to save money when shopping, by detailed demographics, April 2009
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- Figure 32: What is being done to save money when shopping, by detailed demographics, April 2009
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Appendix – Customer Loyalty Scheme Participation
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- Figure 33: Regular users of loyalty cards, by named schemes, by detailed demographics, April 2009
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Appendix – Consumer Attitudes and Typologies
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- Figure 34: Attitudes towards loyalty schemes, by detailed demographics, April 2009
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- Figure 35: Attitudes towards loyalty schemes, by detailed demographics, April 2009
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- Figure 36: Attitudes towards loyalty schemes, by loyalty schemes used regularly, April 2009
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- Figure 37: Attitudes towards loyalty schemes, by loyalty schemes used regularly, April 2009
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- Figure 38: Target groups, by detailed demographics, April 2009
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- Figure 39: Attitudes towards loyalty schemes, by target groups, April 2009
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- Figure 40: Loyalty schemes use regularly, by target groups, April 2009
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