If all dissatisfied customers within the retail industry decided to defect from their current retailer of choice, the total annual defection cost would be £147.2bn, new research from Webloyalty and GlobalData Retail has revealed. This rising disloyalty is up from £120.6bn two years ago.
This year’s Unfaithful Consumer State of the Nation report has revealed a significant proportion (19%) of consumers would defect if a retailer was deemed not to be a good corporate citizen, whether it be due to environmental issues, tax avoidance, staff welfare or other irresponsible practices.
Unsurprisingly, consumers are also influenced by money more than ever. Price moves from third place to first place as the number one driver of store choice, leapfrogging quality of products.
The increase in the price of disloyalty is underlined by data showing that consumers have become less tolerant. Compared with two years ago, more consumers are now willing to stop shopping at a retailer that gets things like customer service and price wrong. Staff rudeness (58.5%), significant price rises (50.6%) and poor-quality items (45.0%) are among the top reasons cited for defecting.
One noticeable trend is the increase in the number of stores or retailers that consumers use to do their shopping. This applies across all sectors but in some, like home furnishing and electricals, the rise has been particularly sharp (+15.3% since 2016). The trend is also high in clothing & footwear (60.1%) and food & grocery (55.3%). This increase has also correlated with a decrease in loyalty – most retail sectors now have loyalty rates of under 50% – further highlighting the consumer practice of ‘shopping around.’ The strongest loyalty is found with DIY stores (57% plan to continue using their main retailer) and the least is found in food and grocery (32.4%).
Ben Stirling, MD, Webloyalty Northern Europe, says, “Amidst the current challenging retail climate, retaining customer loyalty has never been more important. This research shows that shoppers have more choice and price transparency. As a result of this, they are increasingly fluid in their loyalty and they have little tolerance for poor service.
“It’s perhaps unsurprising that they’re motivated by price and quality but it’s interesting to see ethical considerations entering the fold too. Over the last year in particular, there’s been increased scrutiny on environmental issues, especially with the recent plastics debate, while issues with employee welfare and zero hours contracts have also been highly criticised. Consumers are becoming more conscious of fairness and sustainability, and retailers need to be aware of the real cost and impact of defections.
“What’s more, with price taking the top spot for store choice, margins and profits will come under even more pressure, encouraging a ‘race to the bottom.’ Retailers need to be personalising experiences and harnessing technology to create the best customer experience possible to give shoppers a reason to keep coming back.”
Neil Saunders, Managing Director of GlobalData Retail, added, “The rise of online shopping, along with Amazon’s online empire, has contributed to increasingly fragile customer loyalties. It’s interesting to see in this year’s report that the DIY sector boasts the strongest customer loyalty. This could be attributed to the fact that DIY retailers have yet to successfully transition to online sales as customers shopping for home improvement products value in-store consultancy – which they just can’t find online. While this might be good news for DIY, other industries are struggling and all retailers need to focus on ways to retain customer loyalties as a business imperative.”
The research was conducted on 2,000 UK consumers by GlobalData in September 2018.