Insight

Retail revolutions - how different generations shop

Today's shoppers are a tough crowd, but once you've captured their loyalty they will fiercely stick by you through thick and thin. But how do you capture that loyalty in the first place? This report explores this question and more, exploring shopper behaviours and preferences and how these differ across geographies and age group.

Market drivers and the place of the shop

The store remains the focus of the retail experience

Download the full report

Retail Revolutions - How th... PDF 2.2MB

It has been a relatively good couple of years for fashion retailers given the tumultuous times experienced since the global financial crisis. Having said this, the sector has faced considerable headwinds over the course of 2016, amplified by the potential risks posed by the Brexit vote.

Despite these potential risks, over the longer term, further growth is anticipated as per-capita retail spend on clothing and footwear is yet to reach pre-recession levels. UK clothing expenditure in 2016 is estimated at £44bn, with growth of 26.5% anticipated by 2021; an increase of almost £12bn (although this is without factoring in possible disruption following the Brexit vote).

Online retailing does figure in this sales figure, however, it has been less of a threat than anticipated and instead provides a clear opportunity for retailers to extend their channels and showcase their offer. For example, 55% of consumers research online for purchases that are eventually made in store and 75% still prefer to try on clothes before they buy them.

The shop therefore remains as relevant as ever, with savvy retailers increasing revenues thanks to an online presence. According to a recent report by Verdict, a total of 89% of UK retail sales have ‘touched’ a store, from a combination of store sales, click and collect, or in-store browsing/research. The uplift equates to 9% of all retail sales; almost as much as that accounted for by online sales alone.

This boost varies across sectors, but is +10% in the clothing and footwear sector and +16% in the department store sector (see Figure 2). Furthermore, there is an anticipated halo effect where online sales are increased due to the brand awareness gained from having a physical presence. This is something that has not gone unnoticed by several pure play retailers who are now developing a physical presence.

Verdict anticipate that physical store sales will increase by 11% over the next five years to £151bn, during which time click and collect sales are expected to more than double and the browsing/inspiration element is forecast to grow by 37%. This would leave the ‘True Value of Stores’ at £171bn by 2021. So, while online is anticipated to account for a larger proportion of consumer spend over the next few years, the reality is that the two elements of in-store and online have become blurred, with both being increasingly reliant on one another for achieving optimum performance.

55%

of shoppers research online before purchasing in store

11%

increase in physical store sales over the next five years

£44bn

estimated UK clothing expenditure in 2016

The consumer relationship between retail and etail

Is choice and convenience driving the move online?

While most people still prefer to shop in-store for fashion, the move online may reflect instances where the retail offer in the locale fails to meet their needs and the physical alternatives are not convenient. For example, 48% of survey respondents stated that they would go online for their fashion purchases if their local offer did not satisfy their needs, compared to the 38% who would visit a larger town or shopping centre.

Access to retail is also key. For example, rural shoppers generally use the internet for the highest proportion of their shopping, giving them access to brands only available in large shopping destinations further afield. This has implications with regards to home delivery and internet connectivity. The ‘physical’ store still holds the aces when it comes to customer experience and engagement. There remains an overwhelming preference for trying on clothes before buying across all demographic groups, with around 75% of consumers stating this as a preference. For Generation Z (aged 16-24 years) and Millennials (Gen Y aged 25-34 years) 79.9% and 76.1% of respondents respectively state this as important, dropping slightly for the 45-64 age group, who are likely to have embraced the internet and are comfortable making repeat purchases.

Trying on clothes, however, becomes less of a key concern for consumers the further they are required to travel to a shop.

The ‘physical’ store still holds the aces when it comes to customer experience and engagement.

75%

Of shoppers prefer to try on clothes before they buy them

For the consumer, it is not about either shopping on the internet or shopping in-store. It is about switching seamlessly between the channels depending on their specific demands and needs at that point in time. The most frequent proponents of shopping online think that the internet offers a better solution with regards to browsing, price, comparison, convenience, speed and range, with over indexing on these issues for all consumer groups regardless of age, demography or location. Yet, when it comes to enjoyment, trust and returns, the physical store wins out.

Brand perceptions

Generational differences in brand preferences

Challenging non-food sales over the last few years has done nothing to thwart the importance of M&S as a leading high street brand. Its market share for fashion goods is the largest in the country (8.4%) and 7% of shoppers use M&S frequently for fashion purchases.

In fact, M&S is the most popular retailer for all age groups above 45 years, with Debenhams and Matalan being the 2nd and 3rd ranking for this age group. The popularity of M&S is even more pronounced for the Baby Boomer generation, with Debenhams and Asda’s George brand ranking 2nd and 3rd (Figure 5).

For the Millennials and Generation Z (under 35s) M&S only features in the top 5 retailers for those in London and the south east. For these age groups Primark is overwhelmingly the most popular retailer, ranking 1st in 70% of UK regions and 2nd in the remaining 30% (Figure 4). Primark has a market share of 6.3% of the UK fashion market. The top spot is closely followed by New Look and H&M.

With 7.5% of the clothing market, Next are the most popular retailer for shoppers aged 35-45, followed by Primark and M&S. The brands for this age group clearly bridging the divide between younger and older fashion choices. Retailers ASOS, Boohoo and ebay are the most cited pure play retailers.

There is a significant variation in top retail brand across the country at county level, with Debenhams, Asda and Tesco making the top spot in several areas. Value brands have been the real stalwart in recent times and have changed the face of the high street. One of the defining features of this analysis is the importance of these brands in meeting shopper’s most frequent needs and value retailers are the most popular offer in 40% of Shopper Towns across the country.

This popularity is apparent in the fact it has been these brands that have tended to be the most expansive over recent years. However, there are a number of Shopper Towns where the preferred price point is skewed towards mass and aspirational fashion brands. The question is then, does the offer in those towns meet these preferences?

Satisfaction & outlook for fashion spend

Which consumers are the most ‘satisfied’ with their local fashion offer?

78%

of Manchester millennials are satisfied with their local fashion offer

Sentiment is a well-established barometer for how retail is expected to fare and is typically influenced by wider economic stability or uncertainty.  But beyond market forces, what issues influence how consumers shop? Sentiment and fulfilment are inextricably linked. When a centre fails to provide in terms of its fashion offer, it can have an adverse impact on sentiment, or how a consumer chooses to make a purchase.

The consequence of low fulfilment is clear, if there is no obvious alternative within a reasonable distance, consumers will opt to buy on the internet. Where there is a good alternative, people are generally voting with their feet rather than their fingers.

Spotlight on shopping centres

Getting the balance right between ‘convenience’ and ‘destination’

Much of what has been examined in terms of consumer shopping habits and preferences in relation to fashion is universal across the retail property spectrum. However, shopping centres play a vital role in this experience and in some cases may be better placed to maximise the experience and spend of shoppers.

Shopping centres topped the ranking in terms of preferred location type when shopping for clothing and footwear with 43.4% of respondents placing it in their top three preferred locations. This was on a par with those who placed shopping online as one of their top three retail locations. This preference for shopping centres was even more pronounced for Generation Z and  millennial respondents, with 62.9% and 53.4% respectively placing it in their top three.

Respondents preference for shopping centres, particularly amongst the younger demographic groups, highlights the role the wider shopping environment can play in attracting consumers and in turn maximising the performance of individual retailers. The fact that centres are typically under single ownership means that they are usually the best placed to deliver an ‘attractive’ shopping environment as management can deliver a cohesive experience with the additional facilities shoppers often demand.

 

Shopping centres topped the ranking in terms of referred location type when shopping for clothing and footwear

While the survey found that over a third (38%) of respondents would visit a larger town and/or shopping centre if their local offer did not meet their fashion needs, 48% under the same circumstances would simply move their purchase online. For some of these respondents the option of visiting a larger town and/or shopping centre is simply not feasible due to the nature of their specific needs and/or distance from a larger ‘centre’. However, there may be a significant proportion that could be enticed to visit that larger ‘centre’.

To achieve this shopping centres would need to become ‘destinations’ in their own right, widening their shopper catchment. A number of shopping centres already achieve this due to their sheer size and location. But, this draw does not exclusively need to be determined by centre size. Variety of retail offer, introduction of ‘new’ brands, curating the offer to meet demand, shopper events and the food offer can all come together to enhance the ‘destination’ appeal of a shopping centre. This in turn can widen its catchment to the benefit of its retailer occupiers.

Having said this, there is also a ‘convenience’ need a shopping centre can also potentially fulfil. Baby Boomer survey respondents, a group considered to have the greatest potential spending power, appear to value convenience over destination shopping. This goes some way to explain why small local high streets and online shopping were rated more highly as preferred shopping locations by this group (46.1% and 40.1% respectively of 55-64 year olds placing in their top three).

The challenge to centre owners is then how to improve the ‘convenience’ appeal of their centres, not just in terms of retail offer but also in terms of accessibility and ease of navigation, to attract these consumers.

For shopping centres therefore, it is about delivering an overall offer and experience that meets the ‘everyday’ needs of its local catchment as well as the ‘aspirational’ wants associated with being a ‘destination’ centre.

Retail revolutions - how different generations shop

Download the full report here