Taking stock: Are you in touch with the consumer?

What is the Kiwi consumer looking for this season? Another website? Lower prices? Human interaction? Read on… Steve Bohling reports.

To gauge the bigger economic picture , we talked with Cameron Bagrie, Chief Economist for the ANZ Bank, days before the Election. He believes that Kiwi consumers are going to be “pretty cautious” for two reasons: the situation in Europe; and that many Kiwis are still fixing their balance sheets and wouldn’t be spending up large until they had done so.

This aspect remains a work in progress. This time last year we talked about there being a 50:50 split between Kiwi consumers who had their incomings and outgoings balanced and those who had not. Says Bagrie: “We’re probably 60-65% through that journey, but it’s not yet complete. The household savings rate is getting better but it’s still negative so households are still living beyond their means.” 

Both individuals and the country at large are still adjusting, in other words… “It’s pretty grumpy but it’s orderly,” says Bagrie. His advice for retailers? “Focus on the basics. I think there’s a growing divide between the good and the not so good players. The smarter players are seeing growth – they just have to be smarter about growing their market share.”

Something that should benefit non-metro retailers is the rural sector: several pundits we talked to say that the regions may outperform the cities as higher farm income leads to a rise in spending ahead of the cities joining in.

This time last year, caution was definitely the order of the day, from the consumer’s and retailer’s perspective. We asked Tony Alexander, the BNZ’S Chief Economist, what his outlook would be if he were a retailer today. “I’d still be very cautious,” he responds. “I’d still be running low stocks quite frankly. 

“The risk is that the European situation gets a lot worse and leads to the confidence of Kiwis being affected and that would lead me to want to run low inventories and keep building up my strength in the balance sheet and where possible improving cash flows. My main message would be play it from the cautious side.”

Digital domain offers risk as well as reward!

Is online the way ahead, the means to attract the new consumer? Despite the hype, many New Zealand consumers are tentative about online shopping. Although the major retail players in our channel all now have transactional websites, for Kiwi retailers it’s not the Holy Grail or universal panacea that it is regarded as elsewhere in the world. 

But New Zealand isn’t the same market as the US, or even Australia, come to that, and this offers retailers both rewards and risks…

For example, TNS Global’s Digital Life survey recently polled 72,000 people in 60 countries, including 1,000 New Zealanders. TNS Global’s Auckland-based Jason Shoebridge says the differences between New Zealand and Australian attitudes to going online are striking, which is particularly relevant given how much marketing material is generated on the other side of the Tasman…

Something like twice the number of Australians is actively engaging online than New Zealanders, he says. In terms of accessing the internet from their mobile, only 26% of Kiwis have accessed the internet from their mobile in the last four weeks compared to 37% of Australians. 

Aussies are far more active in their use of the net on a mobile: 58% of Australians have used mobile internet to look for product information when they are actually in-store. Compare this to just 26% of New Zealanders who have done the same. 42% of Australians have used their mobiles to look for information about products they have seen advertised. Just 24% of New Zealanders have done the same.

“This is consistent with other findings we have seen about the level of engagement that New Zealanders have online, their attitudes and behaviours – there’s no doubt Australians are more engaged than New Zealanders,” says Shoebridge. All of which flies in the face of the typical Kiwi’s perception of themselves as early adopters and highly technologically enabled…

Why? “I think there are issues around data pricing here, issues around the lifestyles of Australians – it’s much more a commuting and a public transport culture than we have so there’s simply a lot more opportunity to use the internet on their mobiles. And Australians simply seem to be more comfortable in terms of engaging online.”

Get it right or face the consequences…

What does this mean if you’re seeking to “engage” Kiwis online? TNS Global’s Jason Shoebridge has some recommendations to retailers: chief among them are don’t imagine that one size fits all and online mistakes can be costly – and lasting.

“If you look at the attitudes and behaviours of consumers online,” he says, “there are quite clear segments in the marketplace. If you are a retailer trying to get out a message or sell online, you really need to understand those segments.”

This principle will be familiar to anyone experienced in offline media. The difference is that there is often a temptation in the online world – perhaps because it is relatively cheap to send out that message – to send the same offer out to everyone…

TNS Global has firm evidence that some brands are getting it wrong: “We found that 54% of New Zealanders said they didn’t wish to be bothered by brands online. Perhaps they had a bad experience, they found the material became too repetitive or boring or too frequent – it didn’t engage them.”

Bottom line advice? “Understand your customers and how they wish to engage online with you. In the same way that your customers will wish to engage with you in different ways in the offline world, exactly the same applies online.” 

However a major difference in the online world is that consumers can actively de-friend you: “They don’t just let it wash over them; they actively do something that severs the relationship, which is different from the offline environment,” says TNS Global’s Shoebridge.

And putting off one customer puts off others – virally. “Your current customers are highly influential in using social media to influence other potential customers. We found that something like 58% of New Zealanders agreed that the comments of others helped them make decisions about which brands they wished to use.”

The other way of looking at this is that “48% of consumers said that just one negative review could impact their feelings about a brand!” So this is a relatively high risk game…

Jason Shoebridge concludes: “Online is a fantastic channel but it’s one that you need to get right – you can use your current customers to get through to new customers but if you get it wrong it will have a big impact.” 

See also What’s really pushing the consumer’s buttons this year? and Blocking the Bargain bonanza – not this year? for more of the latest detail and opinion on what the consumer is thinking this year.