Customer centricity is key to surviving and succeeding in the retail landscape, which is more turbulent than ever.This report uses EDITED's Enterprise Intelligence data to navigate how consumer behavior is evolving and help retailers adjust their strategies accordingly.
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Brand loyalty remains at a two-year high, with VIPs increasing from 4.53% to 5% YoY of total customers. New customers appear to be less confident shopping outside their favorite retailers as the cost of living crisis accelerates, dropping 3pp YoY from the whole group.
The average consumer profitability for VIPs dipped over the past three months, a pattern in line with 2021. Meanwhile, profit per order for new customers rose by $6 YoY, highlighting the potential of diversifying audience reach.
The rising cost of living has led to consumers being more conservative with purchases, slightly pulling back on units per order from 2.91 in 2021 to 2.88 per. Inflation also led to average order values increasing by $11 (6%) YoY, adding to cautious spending.
Retailers are still facing challenges across the value chain, with unsold inventory levels over the past three months having risen from 15% in 2021 to 18%, while year to date, return rates are 3pp higher than in 2020.
Are Customers Becoming Less Loyal?
Retailers’ supply chains are still under pressure, leading to delays in dispatching goods to customers. While stabilizing since a backlog in January, which saw average shipping times almost climb to four days, deliveries are still slower than last year, averaging at 2.7 days YTD vs. 2.4 in 2021.
Despite this, VIP customers have remained more loyal than ever to their favorite brands throughout the year. This cohort accounts for shoppers who have purchased from a retailer 11 times or more and equals 5% of the total customer portfolio, up from 4.53% in 2021, and is a two-year high.
Meanwhile, retailers are struggling to entice new customers, who may be less confident shopping outside their tried-and-tested brands if they are undergoing financial stress due to the cost of living crisis. First-time buyers have seen a downward trajectory since the outbreak of COVID in 2020, and this consumer group dropped 3pp from 31% to 28% of online shoppers YoY.
Are Customers Buying More?
Since the start of the year, inflation across shipping and raw materials has seen average order values increase $11 (6%) YoY. These prices climbing alongside living costs have led to consumers pulling back slightly on order quantities, with units per purchase averaging 2.88 per order vs. 2.91 in 2021.
Year to date, there has been a pattern of both new and repeat customers spending more YoY. VIPS have been the most profitable cohort, paying $12.26 (16%) more, while new customers are spending $10.70 (13%) more YoY.
However, we’re starting to see a shift – over the past three months, the average profit per order for new customers YoY has increased by $6 on 2021, while remaining relatively flat for VIPs, underscoring the importance of engaging fresh audiences which, while are declining YoY, have the potential to be spending more.
Are Customers Returning More Items?
Return rates saw their usual spike at the start of the year and then outpaced 2021 and 2022 in April and June. High returns have eased as the cost of living crisis, coupled with retailers charging for returns, have led to customers making more conscious purchasing decisions. However, they are still at a two-year record of 18.96% YTD.
Retailers are still plagued by supply chain issues, evident by the glut of unsold merchandise. Over the past three months, deadstock reached an average of 18% vs. 15% in 2021, which could be due to a combination of deliveries not arriving on time and misjudged consumer demand.
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