Understanding the Consumer Shift: Adapting to Economic Pressures

Written by Richard Wright, Managing Director, SEA, at Manhattan Associates

The retail landscape is undergoing a dramatic transformation, primarily driven by shifting consumer behaviours in response to the escalating cost-of-living challenges. Recent research from Manhattan Associates has revealed that 89% of consumers are modifying their spending habits to cope with these economic strains. This shift has a significant impact on retail dynamics, creating a divide between those who adapt and those who falter in meeting evolving consumer expectations.

Retailers' Response to Changing Demands

In an era where mediocre shopping experiences are increasingly unacceptable, retailers are under pressure to not just serve, but to impress. They are doubling down on digital transformation, recognising that digitalisation is not just a trend but a necessity. About 26% of retailers are now focusing on upgrading to modern, omnichannel-capable point of sale (POS) systems, viewing this as a top priority for the coming year. This shift signifies a broader trend of integrating digital technologies across both front and back-end processes.

The way that retailers connect and engage with shoppers is evolving. While email remains the dominant channel, younger consumers are showing a growing inclination towards engaging through social media. This trend is in line with the broader move towards starting the buying journey online, with 84% of consumers beginning their search digitally.

The New Role of Retail Associates

With the added financial burden on consumers, the expectation for a seamless, personalised shopping experience has intensified. Retail staff are increasingly required to provide an experience beyond what can be achieved through online shopping. This trend is particularly pronounced in non-food retail sectors, where staff must engage customers with unique and memorable experiences. To meet these expectations, store associates are being equipped with digital tools and skills, transforming their roles from traditional customer service to tech-enabled brand ambassadors.

However, digitalisation brings its own set of challenges. Retailers reported only having accurate inventory data 70% of the time, a decline from previous years. This lack of inventory accuracy hinders the ability to deliver seamless omnichannel activity, which can lead to negative shopper perceptions as customers expect consistent and reliable information across all retail touchpoints.

Customers are increasingly looking for frictionless, interconnected retail experiences. For instance, when faced with out-of-stock scenarios, they prefer store associates to provide immediate solutions, such as checking product availability in nearby stores or arranging for home delivery. This need has led to the adoption of mobile POS devices and other technologies that facilitate retail store associates to deliver on-the-spot customer service and sales.

The Sustainability Challenge

While there is growing industry focus on operating sustainably, research suggests that only 45% of consumers now consider sustainability a critical factor in their shopping decisions, a notable decrease from previous years most likely tied to economic pressures becoming more prominent.

Despite these findings, retailers need to find innovative ways to incorporate sustainable practices into their operations, recognising that this will be a critical factor in long-term customer loyalty, especially among younger generations of shoppers. 

Adapt and Succeed

The retail sector is at a crossroads, facing both economic and digital challenges. The most successful retailers will be those that can adapt swiftly, integrating digital capabilities with a deep understanding of customer needs. This approach will not only meet the immediate challenges of today’s economic climate but also set the foundation for future growth and success in an increasingly digital world.

For more information on how your business can evolve to meet changing consumer demand, please visit: https://www.manh.com/en-sg