Last month’s announcement that the UK had officially re-entered recession had a corrosive impact on consumer confidence. Our confidence tracker for April found the number of people saying they felt the economy would get worse increase by 8.9 percentage points, and the number of people saying their own personal financial situations would worsen jump by 6.1 percentage points.
While the announcement itself heralded no material change to the financial circumstances of the vast majority of consumers, it did have a significant psychological impact. When consumers lack confidence about the economy in general and lack certainty over their own personal circumstances, they are more reticent about spending – even if they have the money to do so. This pessimism is one of the retail sector’s greatest enemies.
As important as it is to be realistic that times are far from easy, we need to do a much better job of injecting some positivity into the consumer psyche. This isn’t something retailers can tackle alone, a great deal more needs to be done by government to show that there is a plan beyond the cuts, that there are reasons to be positive about the economic future. Admittedly, it is tough to do given present circumstances but there is a distinct lack of vibrancy, enterprise, dynamism and energy within the current administration.
Unless there is more of a concerted effort it is very likely that consumer confidence will continue to scrape along the bottom. Indeed, our latest numbers for May show that although things have improved slightly now people have had chance to absorb the news of a double dip, the outlook remains reasonably bleak:
- Well over half of the public (58%) believe that the UK economy will get worse over the next six months; less than 1 in 10 think things will improve. In April the figure thinking things would get worse was 59%.
- 39% of households believe that their own personal financial situation will deteriorate over the next six months, 51% think they will remain about the same while just 10% think things will improve.
- Some 64% of consumers say they are planning to cut back on retail spending over the next six months, with just 4% saying they plan to spend more. Of those cutting back, 17% say their cuts will be severe.
Such poor numbers underline the need to stimulate and encourage spending and for retailers to be sharp on all aspects of their propositions. A consumer whose tendency is to trim back needs to be persuaded to spend, and that means interesting products, engaging environments and plenty of added-value are all critical. Equally, poor service, products or availability can act as the perfect excuse for consumers to curtail spending.
In short, tough times call for more thinking and more effort and energy from retailers.