Credit cruch causing rise in retail disloyalty on UK high street

by Jemima Bokaie, Marketing 15-Jul-08, 09:15

LONDON - Cost-conscious shoppers affected by the credit crunch are deserting their habitual stores in the hunt for bargains, according to research by retail specialist Verdict Consulting.

The report argues that British consumers are growing more fickle, with 22% of respondents saying that they were dissatisfied with their favourite store and would consider switching to another retailer.

Verdict claimed that with the equivalent of 10.8m shoppers expressing their dissatisfaction, customer loyalty on the UK high street is at its lowest rate in 10 years. In 1998, customer disloyalty was 20%.

The clothing sector has suffered the highest increase in disloyalty, up 3.1% to 25.2% since 1998. The DIY sector recorded the slowest growth up 0.6% to 21.4% over the same period.

The survey shows food to be a particularly competitive arena, with more than a third of shoppers saying they would switch to another supermarket, up 3% since 1998, despite the loyalty incentives offered through schemes such as Nectar and Tesco Clubcard.

The study claims that supermarkets have encouraged consumer disloyalty by cutting prices and run-ning price promotions. This has been to the benefit of discount grocers; in the three months to mid-June, Aldi and Lidl posted year-on-year sales growth of 21% and 13% respectively.

Tesco and Sainsbury's lagged behind the market average, posting declines in year-on-year sales growth of 5% and 4% respectively.

Meanwhile, there is evidence that despite their focus on value, consumers are also demanding quality service.

According to the study, department store John Lewis' electricals department has the highest loyalty rate of any UK retailer; almost 91% of its shoppers said they would not switch to another retailer (see data file). It was credited for its high level of cutomer service, wide product range and value for money.

Marks & Spencer, Amazon and Dunelm also have loyalty rates of more than 88% for their footwear, music and video and homewares departments respectively.

Verdict also attributed the rise in consumer disloyalty to the wider choice provided by the arrival in the UK of new, often international, retailers.

'[The findings] demonstrate the extent to which people are shopping around and are increasingly willing to punish retailers that don't meet their expectations,' said Neil Saunders, consulting director at Verdict. 'In the current environment, it's critical for retailers to hang on to every customer.'