Seeking opportunities amidst record-low consumer confidence

Consumer confidence in the UK is hovering at an all-time low following the global coronavirus pandemic – and it has, unsurprisingly, made consumers and business owners alike wary.

As lockdown lifts and certain businesses begin to reopen, UK consumer confidence has dropped to -36, three points shy of the record -39 witnessed during the 2008 financial crash. That’s according to research carried out for the Consumer Confidence Barometer from Growth from Knowledge (GfK) between May 20th-26th – and it’s not the only survey of its kind. The results are perhaps unsurprising given the uncertainty around the current and future economic climate, and it seems that people’s perceptions about their own financial situation have just as much influence as people’s optimism towards the economy’s recovery. Throughout lockdown and even moving into the new phase, the hospitality and food and beverage sectors have been particularly hard hit. But with consumer habits still shifting and people slowly adjusting to the new way of life, how can businesses find a balance, and what role could the sector play in improving consumer confidence?

A balancing act
“Throughout lockdown, it’s been clear that the hospitality sector has been amongst the hardest hit, particularly those who solely relied on the bricks and mortar retail channel which dropped to zero pretty much overnight,” JP Then, founder of Slerp and Crosstown Doughnuts, tells us.

“The sector is now having to finely balance two opposing elements. On the one hand, you have the pent up demand from people eager to visit their favourite restaurant or coffee shop after months of being restricted. While on-demand and delivery has gone a long way in connecting businesses with their audience digitally, there is still the natural human want to dine out and experience things.

“On the other hand, you have understandable nervousness from people as things begin to return to some semblance of the new normal.

“I truly believe the overwhelming sentiment is that the community wants to support the sector as we are inherently part of the fabric of the community. It’s up to us as operators to provide the space and functionality that gives people a sense of safety but also makes it enjoyable. This is harder to predict, as it depends on a lot of individual circumstances such as size of premises, retail layout and resources, but I do expect consumer confidence to build over time.”

  Future spending
Lockdown has certainly brought with it a seismic shift in consumer behaviour, from the type of items people purchase to the platforms through which they purchase them. Another shift we’ve seen is that of spending habits, with many customers spending solely on essentials, and others becoming increasingly concerned about value for money.

Whilst individuals’ own financial situations may become more stable, surveys have revealed that most people are less confident about the state of the economy as a whole. With many consumers believing that the coronavirus pandemic will have a long-lasting impact on the economy, we may still see spending stagnate as consumers becoming increasingly price sensitive, particularly as furlough is reduced.

According to a recent consumer survey by consulting firm McKinsey & Company, 38% of UK respondents strongly agreed that they would have to be very careful with how they spent their money following the pandemic, whilst 40% said they would be cutting back on their spending in the future.

It’s an interesting prospect for the food and drink industry. Where people may normally have spent disposable income on items billed as luxury goods, such as artisanal and fine food products, now people are focusing on essentials and perhaps the occasional treat.

With many Brits still working from home and restrictions still in place, the online retail sector and snack and drinks brands may find take-home sales increasing, and new opportunities arising.

So strategy could prove key here, as Theadora Alexander, co-founder of Young Foodies and of Mighty Small, a new online retailer dedicated to small independent brands, tells us: “The F&B sector will need to place great emphasis on value to rebuild consumer confidence in packaged foods. There’s no doubt that as we enter into recessionary times, there will be a renewed focus from the consumer on value for money rather than focusing on cost. There are examples from previous recessions where premium supermarket goods did well. But there’s a difference between premium with demonstrable value to the consumer vs premium for premium’s sake.

“Concerned companies should take this as an opportunity to strongly demonstrate their point of difference to consumers,” Theadora says. “It’s a poignant reminder for founders and business owners to self reflect. Use this time to explore, identify and strengthen your brand’s role in the market, showcasing your USP and distinctiveness.”

Have confidence in your brand
When it comes to consumer confidence, keep in mind that consumers aren’t only thinking about the economy in general: they also want to have confidence in the retailers, brands and producers that they spend with. That’s why JP stresses that it’s also about having confidence in yourself as a brand and embracing change: “I think there are two main pieces of advice I’d give to other companies worried about consumer confidence. The first is to maintain close communication with your staff and customers at all times. Be transparent about your thinking, and how this has translated into initiatives and policies that you’ve put in place. Customers respond well to honesty and transparency, and this again will go a long way in making their experience feel both safe and enjoyable.

“The second is that businesses really need to use this time to think outside the box, be nimble and try something new. It’s hard to fathom that doing nothing and waiting for things to get better can actually be more damaging than trying something completely new. In many ways, us operators have a completely free pass to break the norm for the new norm – when else do you have literally nothing to lose, because if you stand still, you lose anyway?

“The only certainty for people in the industry at the moment is that it is very uncertain – we need to adapt and be creative, not stay stagnant. New initiatives may not be part of the original plan, but most customers will be receptive to new things, even if it is a sense of ‘test and learn’ – and this opens up opportunities for businesses. This is also where the communication becomes so important again, as maintaining an understanding of why you are doing something builds trust.

“We’ve seen first-hand through Slerp, where we’ve been helping businesses of all sizes to pivot to on-demand and delivery, many for the first time, that consumers are open to change.”

Seeking out opportunities

It may feel like a challenging time, but to help your business grow, it’s important to consider what opportunities are open to you that could help you strengthen the brand and grow your market share.

“Retailers should continue to provide quality, value-for-money products,” Theadora says. “Working closely with smaller, more agile and innovative suppliers will help them build a more compelling product range that attracts footfall and drives conversion. Secondly, retailers should inspire and engage shoppers in order to enhance the in-store experience. Having spoken with the major supermarkets about this, I know they are fully invested in this approach and are looking at ways to make visits more interesting.

JP adds that now is also the perfect opportunity for businesses to adapt their strategy: “Accept that this is a ‘test and learn’ phase – use the opportunity to be bold.

“When helping businesses to pivot through Slerp and begin trading through an on-demand and delivery channel, there are a number of things we also work through with operators to ensure this is as efficient and effective as it can be.

“For example, businesses can offer a more refined menu, as particularly in the first weeks of re-opening, too much choice can be daunting for customers. In the same way, this allows businesses to change their menu more frequently, which will keep people coming back as this confidence starts to build.

“Pushing set menu bundles is also a great way for businesses to control operational efficiencies and drive better margins.

“Whilst businesses will rightly welcome the moves to begin to re-open, and many customers will be eager to get the dine-in experience, we firmly believe that the shift to online ordering is here to stay. We’ve seen first-hand with the operators we work with, that the success they’ve seen in this channel is something they will want to maintain, even when their doors are open again. For this reason, it is also a good idea for businesses to pick items that travel well and ensure you invest in packaging, to continue to support those who want delivery or takeaway.”

Future trends
As the lockdown eases, it will no doubt be interesting to observe how consumer appetite for spending returns, as shoppers adjust to a world of social distancing and the seismic shift to online shopping. For local retailers, small brands and British producers that put the right measures in place to secure consumer confidence, the future could be fruitful.

“British consumers are definitely favouring small and local retailers now more than ever before, which is really good news for independents, including farm shops, delis and convenience stores,” Theodora says. “We welcome this, celebrate it and hope it stays that way. It’s ironic that COVID-19, however hard on the economy, has actually thrust local shops five years forward in terms of customer affection. The channel is in massive growth and although some of this may be tailing off, they will be enjoying a much better position now than they have been in recent years.”

JP echoes that sentiment: “One positive that has become clear in all of this, is that consumers want to buy local and support independent businesses. There has been a real movement towards this, a sense of people rediscovering their local communities and helping them through this situation. People have perhaps not been aware in the past of the quality produce and offerings that their local operator has, but I think that understanding is there now. I really believe this movement is here to stay, which certainly puts independent retailers in good stead for the future.”