The document discusses the challenges retailers face in the current economic climate of high inflation and cost of living crisis. It summarizes that consumers, especially those from non-affluent backgrounds, have less disposable income and will cut spending this holiday season. Retailers need to focus on value, loyal customers, genuine deals, and the right messaging to drive sales during this difficult time. Data shows apparel, electronics, toys, and home goods categories will be most affected by spending cuts. Strategies like targeting best customers, building trust, and using insights to optimize communications and offers are recommended for retailers to succeed in the fourth quarter.

1. HELPING RETAILERS UNDERSTAND
THE CURRENT CLIMATE
Weathering the storm

2. For many retailers, 2022 has been an uncomfortable
transition from the growth seen during the pandemic.
Supply chain was adjusted, more capacity in the
warehouse, aggressive delivery options and increase in
the staff to deal with the increase in online shopping.
An ideal post-covid scenario would be for the market
to return back to normal however, rise in inflation,
increased interest rates, cost of living crises have all
forced the consumer to think about spending
behaviours.
Retailers with customers from non-affluent backgrounds
will really have to think about how to get through this
period in a way they can survive and maintain what are
already thin margins.
With £4.4 billion expected to be wiped off this quarter,
the retailers are in for a difficult ride. The season comes
with consumers expecting better pricing however, can
retailers afford to meet that expectation any more?
Reconnecting with younger audiences and getting sales
will be a challenge as they are less loyal to the brands.
Brands that are able to find a balance between pricing
strategies and the value proposition will be the ones
most successful in this quarter.
INTRODUCTION

3. Source: Retail Economics
50%
of retailers
expect sales
to increase this
peak season
58%
of consumers
plan to cut back,
showing some
expectations are
out of sync with
reality.

4. INFLATION
RATE
EARNINGS
GROWTH
EXPENDABLE
INCOME
+13.2%
+11.0%
+10.8%
+5.2%
+5.9%
+5.5%
-16.5%
-10.0%
-2.5%
LOW-INCOME HOUSEHOLDS ARE EXPERIENCING
HIGHER INFLATION
Source: Retail Economics Cost of Living Tracker, HyperJar - August
The least affluent families have
been hit hard by the current
climate with a decrease of 16.5%
in discretionary income in August
compared to last year.
People are setting aside £1.5bn to
cope with the rising energy bills
which is ultimately going to
impact on the sales in this peak
period.
LEAST AFFLUENT
MIDDLE INCOME
MOST AFFLUENT

5. SEARCHES FOR SAVE MONEY
HAS HIT A 5-YEAR HIGH
Source: Google trends

6. £4.4
BN
Of non-food spending is
expected to be cut this festive
season compared to last year
in the UK market.
-22.0%
Expected spend cut by country (Billion)
-14.0%
-12.3%
-11.9%
-9.4%
£4.4B £0.9B £1.6B £2.1B £1.9B
Source: Retail Economics Cost of Living Tracker, HyperJar - August

7. EXPECTED AREAS OF RETAIL MOST AFFECTED
BY CUT BACK OF CONSUMER SPEND
Apparel
Electronics
Toys
Home
Health & Beauty
DIY & Gardening
3.25 6.5 9.75 13 16.25 19.5 22.75 26
26.0%
22.3%
20.9%
19.8%
17.4%
16.7%
Source: Retail Economics

8. FOUR AREAS TO WIN IN Q4 AND BEYOND
Communication
Knowing your most
profitable segments and
approaching them with
relevant offers will help
boost your sales.
Focus on loyal
customers
Understanding new and
existing customer needs
and communicating at the
right level is extremely
important.
Building Trust
Genuine deals are hard to
find and consumers won’t
blindly trust the deals
offered during the peak
period.
Insight driven
decisions
Benchmarks from previous
years, testing small changes
to your landing pages can
make a huge difference to
the conversion rates.

9. Often the communication takes place in silos driven by channel objectives instead of business objectives.
Whether its email, social or Search, how brands communicate needs to be centrally managed for a consistent
message.
Sales message should not be the
only message you send your
customers this peak season.
Less affluent consumer has been hit
hard and if nothing else, showing an
understanding of their situation can
win the hearts and minds of your
customers.
While it’s useful to be part of
emerging conversations or a new
trend, it’s important to know what
not to say.
Even if there is no negative
outcome, the value of the brand can
be diluted unless the execution is
better than others.
When selling products its important to
make the proposition relevant to the
customer.
The message shouldn’t just be about
price but how useful it is for the
customer. A message of durability and
longevity could work well especially in
the current climate.
Be empathetic Value for money
or longevity
Not all trends
are relevant
COMMUNICATION

10. LEAN ON YOUR MOST VALUABLE CUSTOMERS
Frequent, Active Single Buyers
People who are buying a single
product or low value products
Infrequent Buyers - People who
are buying products between
certain intervals
Plans to engage existing customers don’t always get the same attention as they should compared
to the new customer acquisition strategies. Knowing your most pro
fi
table segments and
approaching them with relevant offers will help boost your sales.
Dormant - People who haven’t
bought in the last few months
Elite - People who buy a few
times in the last 12 months with a
value beyond certain threshold
Email subscribers - people who
are interested in any new
products or range

11. LEAN ON YOUR MOST VALUABLE CUSTOMERS
Messaging at the right time to
the right customer with the
right offer will land you a sale.
Retailers must look at retention
and loyalty as core part of the
growth strategy.
Exclusive deals for your most
valuable customers is a nice
way to recognise the
importance of their relationship
with the brand.

12. BUILD TRUST TO STAND OUT
According to Which, 98% of the discounts advertised on Black Friday in 2020, including promotions on popular tech, home
and personal care products - were available for the same price or cheaper in the six months after the sales.
Offer genuine Black Friday deals and
if the offers will be available at a later
date, being open and transparent will
help you stand out from the crowd.
The expectations from retailers to
make the same margin is unrealistic
and could be raising the barrier to
entry. Offer some products at a
nominal margin as a value add.
This will make the transaction much
more exciting for the customer and it
will also increase their chances of
becoming a repeat customer.
Both delivery and returns are
influential factors as far as online
shopping is concerned. Make sure its
clear and communicated well before
a transaction is made.
This has become even more
important given some retailers are
thinking about increasing the delivery
cost and removing the free return
policy.
Genuine Offers
Not every product will bring
you the same margin Delivery and returns policy

13. 0
18
35
53
70
Place order Pay now Buy now Pay now Complete order Make payment
%
Retailers
Testing what messaging works better
for your customers is going to help
boost your conversion rates this
peak season and beyond.
‘Place order’ as a CTA has delivered
the most revenue across the 241
retailers benchmarked by IMRG.
Most popular Buy button text according to a research done by IMRG
Source: IMRG
INSIGHTS DRIVEN DECISION MAKING
Most popular ‘buy now’ button

14. For more insights and winning strategies for
this quarter and beyond, contact the team at
Honcho.
www.honchosearch.com