Inflation remains a thorn in the side of retailers and consumers alike. Higher costs are expected to dampen holiday cheer this year. Here, Lindsey Mazza, global retail lead at Capgemini Invent, shares insights about the impact of inflation this holiday and beyond as well as what retailers can do about it.
WWD: How is inflation impacting consumer spending?
Lindsey Mazza: Consumers and retailers are feeling economic pressure. Consumers are deferring non-discretionary spending while also buying fewer household essentials. Industry analysts have shared more modest forecasts for holiday 2022. The National Retail Federation has predicted U.S. holiday sales growth of 6 to 8 percent this year, far lower than 2021’s 13.5 percent year-over-year growth, but positively, still above the 4.9 percent decade average.
WWD: How will this impact retailers this shopping season and beyond?
L.M.: While it’s encouraging to see that these numbers are still going up, the crucial thing to note is whether this growth is enough to keep businesses afloat, particularly when we anticipate huge energy cost rises across Europe impacting operations and supply chains.
This will predominantly impact smaller and medium-sized retailers which rely on global supply chains, but don’t have the economies of scale, unlike their larger counterparts, to act as a buffer. Most will be able to weather this period of lower spending, but if these challenges continue into the medium and long term, the outlook is not so positive.
With customer spending power reduced, retailers will need to reduce costs and increase revenue streams, both during the busy shopping season and beyond.
Smart use of data, personalized customer experience offerings, and an intelligent mix of technology investments can go a long way to stay ahead of the curve and maintain customer engagement.
WWD: What changes can retailers make to increase consumer spending?
L.M.: In the short term, bringing in greater levels of personalization can have immediate benefits. Features like “frequently bought together” recommendations are proven to bring increased revenues for retailers, along with tailored, connected products.
Personalization, of course, does more than just push additional sales. When handled sensitively and thoughtfully, it delivers an improved customer experience to build customer loyalty. This will be key for smaller retailers to ensure cash-strapped customers don’t jump ship to a larger rival for a cheaper deal.
Understanding your customer, their wants and needs, is more important now than ever, and retailers need to use data-driven insights to influence how they communicate their offers to customers.
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