Who we spoke to

Value – what you get as opposed to what you pay – is increasingly what matters to shoppers and is closely linked to loyalty.

In fact, the research from American Express shows 51% of shoppers today see value as being more important than customer service. If retailers get it right, there are rewards to be won with 21% of consumers asserting that they are more loyal to retailers than they were this time last year.

The Very Group chief marketing officer Jess Myers highlights that, while the cost of living has “of course increased customer demand for value, this doesn’t just mean price”.

For Myers inspiring loyalty beyond cost requires “structuring the shopping experience, diversifying products and ranges, and offering flexible ways to pay to add real value for customers”.

With £2.1bn revenue for the year to 2 July, 2022, and 4 million customers as of June 2023, The Very Group has evolved its offering to combine price with value. In February, it expanded its low-cost value range Everyday – with prices 20% less than standard – by 900 products following strong demand.

That same month it launched AI product discovery on its website and app to enhance the customer shopping experience. This followed the December 2022 launch of its virtual try-on AR cosmetics tool to provide a more immersive experience to customers shopping with makeup brands such as L’Oréal Paris, Maybelline and NYX – enabling them to make better purchasing decisions, and therefore derive greater value.

Fighting for discretionary spend

There is a marked difference between what value now means to customers in non-discretionary and discretionary retail.

FSB chair of retail Michael Weedon explains: “Looking at latest ONS revenue figures, for the first time we’re seeing mainly food stores overtake expenditure on the discretionary side and for years this hasn’t been the case. Most of our [160,000] members are trading in discretionary and they’re finding it hard.”

For BIRA chief executive Andrew Goodacre, representing the organisation’s 4,000 retail members, this is a “real problem” with customers focused on “essential spending, whether that’s food, energy and mortgages, and that not only stops people spending on discretionary items but is changing the volumes in which they’re purchasing”.

He says his retailers are seeing “fewer impulse purchases being made” and that “customers still want more value”. For his retailers, this is being achieved through offering “product bundles, greater convenience and increased levels of customer service”.

BRC director of insight Kris Hamer points to the positives with “the economy is more robust than anticipated, and sales values are ticking up”. However, he echoes Goodacre’s comment that “volumes are falling” and notes “this is even the case for food retailers that, on the surface appear to be doing really well, but are not seeing the same volumes they used to”.

Evolving loyalty schemes

Loyalty is being impacted by generational differences. Retail Week analyst Beth Bloomfield says Gen Z are more “protected” from the cost-of living crisis and therefore have been “lining the pockets of retailers such as JD Sports [which topped £1bn in sales in May]”, but she also says this group are falling more into a “want-it-now mentality”.

This is translating into evolving loyalty schemes, according to Bloomfield, with retailers such as Boots adapting its loyalty Advantage Card with new ‘Price Advantage Deals’ to cater for customers who “don’t want to save up their points, but would prefer to spend their money now”.

The research backs this up; 53% of shoppers said they now prefer instant savings over accumulated points. Boots’ approach is paying off – in July it reported customers with an Advantage Card had saved almost £50m through Price Advantage deals since January 2022.

UK consumers are embracing loyalty schemes, with 94% of the consumers surveyed signed up to at least one loyalty scheme and 59% saying they would now consider using a retailer’s loyalty scheme amid the cost-of-living crisis.

Retailers would be advised to invest in a scheme – indeed many already are. In July alone, the Co-op started offering rewards for members and their communities through its online grocery partnership with Uber Eats, OnBuy became the first marketplace to offer cashback loyalty rewards, and Selfridges launched its Selfridges Unlocked membership scheme to offer shoppers access to “the best product launches, events, news and free shipping”.

Retailers must invest in their stores as a tool for customer loyalty and merge this with online activity.

Consumers are looking for richer experiences in store with the American Express research indicating 37% are more likely to make a purchase if they are shopping at a store with special products or features, jumping to 62% among millennials (18- to 34-year-olds). Pop-up events, use of augmented reality (AR) technology, in-store hospitality services and entertainment are popular requests of what consumers want to see, according to the research.

Hackett UK retail director Ramon Zevallos has been with the luxury menswear retailer for four years. With Hackett reporting EBITDA of £4.06m in the year to March 2022, a swing from a loss of £8.55m in the previous period, Zevallos credits the growth – the best under his tenure – to “surprising and delighting customers”.

Customers want VIP treatment

“We offer customers experiences money can’t buy,” says Zevallos. “In store we do a lot of servicing, so if customers want to bring in their shoes for polishing or resoling, if they want in-house tailoring or if they want to have a gin and tonic while they shop, then we offer it.”

Of course, not all retailers can offer premium services as Hackett does, yet Zevallos says the emphasis should be on “making customers feel like VIPs”.

“I’ve taken some of our customers to the British Grand Prix through our collaboration with Aston Martin; we’ve taken couples to an exclusive vineyard trip with executive chefs; and we frequently hold business lunches for our corporate customers."

LK Bennett digital and marketing director Zoe Donovan agrees and says value is “not simply about price for us as our shoppers are happy to be rewarded in other ways”. This extends to inviting customers to experiences.

“We run lots of competitions where customers can engage with us, and they get excited. Having their photo taken at Royal Ascot and it then being shared on LK Bennett’s Instagram is something that they appreciate and enjoy. Top feedback we’ve received – and this is from women who are maybe in their 50s and not necessarily that active on social media – is about how special they felt.”

LK Bennett has seen sales soar with revenue in the year to 31 January up 30% on the previous year to £49m and EBITDA hitting £4m – three times that of last year. The fashion retailer’s strategy, according to Donovan, is centred around making the customer “feel really special”. She adds: “This is either in person or in digital communications through competitions, PR evenings that customers can attend, and co-creation such as creating shoes with bespoke dates on for your wedding or birthday.”

“It’s about the little bits of added value we can do as a brand to offer something different to customers and make it clear as to why that value is there.”

One of the biggest challenges for retailers is how to best use data to build loyalty. The American Express research revealed that the largest proportion of UK consumers surveyed (43%) say they expect to receive only personalised emails and adverts from retailers, not generic promotions, and 40% are open to sharing their personal data.

Yet there is a fine line with targeting. Some 58% of consumers say they get frustrated when brands contact them too frequently; the most, 27%, want only weekly communications with personalised messaging about the latest/offers and products; and 54% say they unsubscribe to emails if the content is too personalised as they feel their data is being exploited.

Finding the balance

The Very Group’s Myers says the balance is in being “convenient but not creepy”: “Brands have this duty of care and immense amount of data that they are sitting on so they must use that data for a seamless experience.

“There’s a value exchange in customers saying, ’I’m giving you my data, you’ve just made me tick and sign a disclaimer and you now have so much data on me, I’m expecting you to use it carefully and to see that in the quality of service provided.’ The retailers and brands that don’t use data in the right way are the ones that will get left behind.”

AI has a role to play in improving personalisation too, as Amex's Edelman notes in this example: “My Alexa alerted me the other day that a present on my daughter’s birthday Amazon wish list was 25% off. It saved me £35.

“It was great that Amazon knew it was my daughter’s birthday, knew it was on the list and the personalisation served me perfectly. AI is going to be very powerful with revolutionising personalisation.”

For personalisation to work, FSB’s Weedon says retailers must acknowledge customers but cannot go “over the creepy line”: “I think this is where AI can help because sometimes personalisation conducted by humans can be heavy handed.”

Customer loyalty now goes hand in hand with employee engagement. According to the research from American Express the majority (51%) of UK consumers surveyed say they have stopped shopping with a retailer recently due to unhelpful staff. Moreover, 27% of shoppers report that good in-store service has increased their loyalty to a retailer, shifting to a not insignificant 19% online.

Hackett has a “very high” staff retention rate and Zevallos says this is down to investing in pay, training, communication, transparency and, even, uniforms.

He says: “We have an ongoing project where we’re checking our salaries against other brands to make sure we’re paying appropriately. We offer suits to our male staff and we’re introducing female uniforms with tailoring as we know they value feeling good and being acknowledged.

“Conferences and training are vital too, especially for our store managers. We run seasonal training where we bring all store managers together for product updates. Our view is staff cannot sell [the product] unless they really know what factories, mills, quality and manufacturing has gone into it.”

Zevallos adds that Hackett “also recently launched a communication platform. Before it was very email-driven staff communication, and through this new platform our head office people are ensuring our store staff are up to date on what’s going on across the company and have access to opportunities for growth and career development.”

Marks & Spencer is another retailer investing in staff communication to enhance customer relationships. In July 2022, M&S launched its Straight to Stuart initiative; a platform for staff to share ideas, feedback and recommendations to drive change. As of 21 July, 2023 the retailer’s 65,000 colleagues had used the platform to make 10,000 recommendations with more than 600 implemented.

^{An update from M&S on its Straight from Stuart initiative five months ago, since this was posted it has reached 10,000 recommendations}