No 1 New Year’s Resolution for retailers must be the alignment of business strategy with consumer demands, cautions RSM
A survey of 2,000 people across the Republic of Ireland, Northern Ireland and the UK has revealed interesting, different consumer patterns and intentions in the three jurisdictions, but also an underlying trend towards more considered purchasing.
Consumers are becoming increasingly discerning and retailers are being advised by accounting and advisory firm RSM to make business strategy their number one New Year’s Resolution.
HMV, Orla Kiely, House of Fraser and Coast are just some of the well-known retailers that have experienced difficulties in the last couple of months. Consumer behaviour is changing rapidly, and retailers must interrogate all aspects of their business and customer service offering to ensure that their business model is resilient enough to face the risks posed by the volatile economic outlook for the year ahead, according to RSM.
Áine Farrelly, Management Consulting Partner, RSM Ireland said; “As 2019 gets underway, many of us are considering our resolutions for the year ahead and our firm advice to retailers is that there is no room for complacency. Consumer behaviour is changing rapidly, and retailers need to ensure that their business model, and culture, is properly aligned with changing consumer preferences. We already know that online shopping has dramatically and forever altered how people make their purchases and this is borne out by the result of this survey, but we are also now seeing that people are increasingly choosing to make purchases that they consider to be in line with how they identify, for example from an ethical or sustainable perspective. While people in the Republic of Ireland are still intending to spend on things like gym memberships and Netflix, 80% of those surveyed said they intend to save either the same or more than they did last year – meaning that retailers are going to have to work harder to convince them to part with their hard-earned money.
“The combination of increased rental pressures, growing competition, and changing spending patterns is already hitting the high street hard, with many retailers reporting underperformances at Christmas, and others disappearing altogether. In retail, and in other sectors, we are advising companies to take a root and branch review of what their customers want, and to ensure that their business model is fully aligned with that,” she said.
Richard Gardiner, RSM’s Office Managing Partner in Belfast said; “This survey shows that, not only is the uncertainty amongst consumers due to the volatile economic environment causing them to be more conservative, they are also changing how and why they shop. The high street is increasingly being seen as a ‘showroom’ where people expect experience-driven shopping. We are living in extraordinary times, and companies cannot operate as though it will be ‘business as usual’. Resilience can only be ensured by taking regular and careful reviews of how business strategy is aligned with the needs and demands of your customers.”
Online shopping habits show no sign of abating, but fraud poses a risk
There is no denying that the digital disruption has well and truly taken effect, with 90% of those surveyed in this online survey saying they shop online, and more than half shopping at least monthly online (72% NI and 56% ROI). Respondents cited free delivery and returns, speed of delivery, and quality of images online, as being the biggest influencing factors in their online spending patterns. 81% of those surveyed in the Republic of Ireland and 75% of those surveyed in Northern Ireland also admitted to checking prices online and purchasing online where it presented better value.
While online shopping is undeniably increasing in popularity and posing a threat to traditional retailers, consumers are still concerned about the risk of fraud, with two thirds of respondents, of all ages, across ROI, NI and the UK saying they worry about fraud when purchasing online so retailers must ensure that their anti-fraud measures are as robust as they can be as any exposure in this area could lead to significant reputational damage which could hit their bottom line.
Factors influencing spending behaviours – ‘social influencers’ still performing well, and those in the Republic of Ireland most likely to be influenced by Word of Mouth
When asked about factors that influencing spending habits, price and quality were cited as key drivers by consumers across the Republic of Ireland, Northern Ireland and the UK, and consumers in the Republic of Ireland are most likely to factor ethics in their spending habits (88%), compared with 79% in Northern Ireland and 74% in the UK.
The WOM factor is highest in Ireland, with respondents in the Republic of Ireland most likely to be influenced by their family and friends in purchasing decisions (67%), compared with 45% in the UK and 58% in Northern Ireland. TV advertising comes next, with 46% in ROI, 42% in NI and 28% in the UK citing it as an influence. Online influencers continue to have a considerable impact with 44% of total consumers in ROI (25% NI and 21% UK) saying they have made purchases based on recommendations by bloggers, Instagram influencers and celebrities. In Generation Z these figures rise to a massive 80% (ROI), 67% (NI) and 55% (UK).
A company’s contribution to the community was cited as important by 40% of older consumers in the Republic of Ireland, and younger consumers said sustainability was an important factor for them (43%). 50% of consumers in the ROI said they would pay a premium for ethically produced goods and services, compared with 43% in Northern Ireland and 38% in the UK. In all three areas, those aged between 18 and 30 were most likely to be open to paying a premium.
Spending intentions – Fitness and entertainment continue to be prioritised
It’s in the Republic of Ireland that respondents were most likely to spend money on gym memberships (72%) compared with 52% in Northern Ireland and 48% in the UK, and also on subscription services such as Netflix (84%) compared with 75% in Northern Ireland, and 64% in the UK.
Respondents in the Republic of Ireland also were most likely to say they will buy a smart product in the next 12 months (53%), compared with 38% in Northern Ireland and 32% in the UK.
Disposable income – saving high on the agenda for those in the Republic of Ireland
Increasing living costs are cited by consumers across the Republic of Ireland, Northern Ireland and the UK as being the issue most likely to impact on disposable income.
The cost of mortgage / rent was the second most cited factor amongst consumers surveyed in the Republic of Ireland, with consumers in Northern and Ireland indicating Brexit as the second biggest factor.
In the Republic of Ireland 80% of those surveyed said they were most likely to either save more or the same as they have done in the last 12 months, while in Northern Ireland and the UK respondents did not indicate an intention to save more.
*The survey was conducted by 3GEM for RSM in the Republic of Ireland, Northern Ireland and the UK between October 15th – 22nd 2018.
The survey was conducted online, and the sample comprised:
- 500 adults age 18+, nat rep by age, gender and region in Northern Ireland.
- 500 adults age 18+, nat rep by age, gender and region in Republic of Ireland.
- 1,000 adults age 18+, nat rep by age, gender and region in the UK.
About RSM Ireland
RSM Ireland is the 8th largest accounting and advisory firm in Ireland. Established in 1987, it is the biggest first-generation accounting firm in Ireland, and is one of the fastest growing firms serving the midmarket. RSM Ireland employs 150 professionals across 3 locations – Ranelagh, Dublin (HQ); Birr Co Offaly, and Portlaoise in Co Laois. It was named ‘Practice of the Year’ and ‘Large practice of the Year’ in the 2018 Irish Accountancy Awards.
About RSM UK
RSM UK merged with the RSM practice in Northern Ireland in 2017, and at the same time acquired the Northern Ireland consulting business, PACEC Limited, enhancing its UK reach.
All 70 staff from RSM Northern Ireland and PACEC Limited will joined RSM UK - bringing the total headcount to almost 4,000. The Belfast office of RSM UK is a well-established firm with over 25 years’ experience in audit, tax, and consulting in Ireland and the UK.
About Áine Farrelly, Management Consulting Partner and Chief Operating Officer, RSM Ireland.
Áine Farrelly works as a consulting partner with RSM Ireland, within the management consulting team. She has extensive experience and specialises in providing general consulting and financial advice to clients across a wide range of industries.
She also acts as the firms COO with responsibility for the functional operations of the firm.
Áine has specific expertise in carrying out commercial evaluations and independent business reviews on behalf of banks, funding authorities and other key stakeholders as well as assisting organisations with organisational restructuring. She has also been involved in the completion of due diligence assignments for companies of various sizes and across a range of sectors including acquisition targets for plc’s.
About Richard Gardiner, RSM’s Managing Partner in Belfast
Richard is a chartered accountant specialising in audit, assurance and advisory services. He is also a highly experienced and well-regarded adviser in corporate and business planning and restructuring. Richard leads the business advisory team within the audit, accounting and advisory division and acts as money laundering registered officer for the office.
Richard’s audit and advisory clients range include SMEs, professional partnerships and charitable organisations.
Under his leadership, the business advisory team provides outsourced accounting support to a range of clients include businesses based throughout the UK and the Republic of Ireland.
Richard is a member of the boards of a number of charitable organisations and has advised a range of charitable organisations on issues including accounting and financial reporting standards, corporate governance and forensic accounting and fraud detection/prevention.
Richard has advised a wide range of clients on business strategy, corporate planning and financing and fund raising. He is retained by invest NI as an independent appraiser of financial plans and has advised on the funding and structuring of a wide range of local projects and FDI projects.
Richard is an accounting graduate of Queens’s university Belfast. He is a past chairman of chartered accountants Ireland – ulster society and sits on the boards of four local charities.
About the RSM network
RSM is the sixth largest network of independent audit, tax and consulting firms, encompassing over 120 countries, 760 offices and more than 38,300 people internationally. It has the fifth largest firm in the US as a member and the third largest in China. The network’s total fee income is US$4.6 billion.