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Retailers face New Year war for customers as consumer confidence plummets

Consumers are shopping around and switching in tough climate but half of retailers have placed themselves at a competitive disadvantage.


Retailers face New Year war for customers as consumer confidence plummets

Retailers are facing a tough New Year as consumers draw the purse strings tighter, according to research by the Institute of Customer Service (ICS).

As retailer report season gets under way, amid warnings of a second recession, today’s research reveals consumer confidence still falling, another year on from 2008’s credit crisis.

The study is based on research among 1,000 consumers and senior decision-makers at 250 of the UK’s largest firms in retail and other consumer industries. 

All retailers are experiencing a growth in switch mentality, with more than half (52%) suggesting this has grown significantly among their customers in the last three years.

This is supported by consumers: more than a quarter (27%) suggest they have switched their usual supermarket in the last 6 months and a significant amount have switched food and household goods (41%) and clothing brands (27%).

This new breed of increasingly discerning consumer will present a challenge for firms to retain customers.
Two thirds of retailers (66%) fear a significant threat of revenue loss as a result of  this increased customer churn while a third (32%) see customer churn as the greatest threat to their business.

In this context, three quarters (75%) of retailers claim that customer service will be a critical market differentiator in the current climate.

Damaged Service
The research sounds a sobering warning for firms’ customer service operations.

Nearly all retailers (94%) admit to cutting customer service back to some degree – 52% to a large extent.
Exactly half admit to having significantly damaged customer service.

Yet as a switching mentality takes hold, customer service is becoming all the more important. The great majority (83%) of consumers suggest that the quality of service they receive is important to their loyalty as a customer.

ICS Chief Executive Jo Causon comments: “In a fiercely competitive high street, environment where all retailers are slashing prices, service will be the critical differentiator. Yet half of retailers have placed themselves at an immediate competitive disadvantage by not safeguarding their customer service operations.

“Service has always driven bottom line performance, and will be a key battleground in the war for customers this year.”

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