The YouGov Take: retail category management

Given the fragile state of our economic recovery I am pretty sure that consumer confidence will remain a hot topic for retailers and researchers alike throughout 2011.

An intriguing aspect of 2010 was that whilst consumer confidence fell, headline retail sales remained quite resilient. At YouGov we believe that this means traditional consumer confidence metrics are not enough for the retail sector and it is time to understand the more complicated picture of consumer category confidence.

By this we mean retailers need to predict how consumer confidence today will affect tomorrow’s category and sub-category spending. Specifically they need to predict which categories and subcategories are most at risk of down trading. And we have been conducting research to address this question: Category Predictor surveys 6,000 shoppers each quarter across a range of retail categories, drilling down to sub-category level behaviour and intentions.

It will be no surprise that many retail categories are expected to see down trading during the current quarter, but the story doesn’t end here, rather this is where it starts. I have picked out just three themes from the latest wave of our research:

• Some sub-categories are at greater risk of down trading than others in their category. Take women’s clothing as an example, shoppers are more likely to down trade on tops (47%) over the next 3 months than on jackets or underwear (37%). This is a pattern which we see across a number of categories and retailers can use this insight to target range, pricing and promotional activities at the sub-category level.
• There are striking regional variations. To continue with the example of women’s clothing and tops specifically, 54% of shoppers in the south west intend to down trade on tops, compared to 39% in London. This suggests that regional strategies are needed to deal with varying levels of consumer confidence.
• Understanding down trading and how it varies across (sub)category can provide retailers with competitive advantage. Through benchmarking likely down trading by category it becomes possible for an individual retailer to identify opportunities to attack competitors in specific categories where the pricing and promotional activity is not aligned to forecasted down trading levels.

Category confidence is without doubt a complex animal and retailers would be well advised to ask themselves if they understand how it is running in their particular categories. Indeed if it is true that confidence is the feeling you have before you truly understand the situation, there may be some who are in for quite a shock as the reality for their category dawns.