Consumer focus more important than ever as number of shopping locations visited increases

Further growth: Discounters are increasingly perceived as fully-fledged retailers (Photo: Lidl Switzerland).

Switzerland is experiencing an economic upswing, which means that the retail sector can also report overall growth of six percent for everyday goods in 2018. The driver behind this development is the increased price level, which is reflected in all areas - from fresh produce, food and beverages to near-food. However, the stabilization of the euro/franc exchange rate and shopping tourism, which led to high price markdowns in Switzerland in 2011 and 2015 in particular, also supported the positive development. Despite these positive conditions, competition in Switzerland continues to intensify.

Discounters have arrived in Switzerland

Discounters are well established in Switzerland and continue to record strong sales growth. In recent years, they have been able to improve their image and are no longer perceived as just cheap shopping options. The discounters' investments in quality, advertising, shopping atmosphere and freshness expertise are slowly paying off and are increasingly appreciated by consumers. The discounters have been able to position their image away from an exclusive focus on price and more towards being fully-fledged retailers. The planned expansion into highly frequented locations in city centers will further help discounters to gain reach and frequency.

Supermarkets: shopping experience instead of price wars

For traditional supermarkets (such as Migros, Coop, etc.), the past has shown that a price war is not necessarily the optimal response to the growth of discounters. Instead, the focus should continue to be placed on the most important shopping criteria for customers, such as freshness, shopping atmosphere, good value for money and bonus programs. You need to understand what consumers want and which offers bind customers to your store. Knowing the consumer and meeting their needs is the key to future success. 

Nielsen, together with Fuhrer & Hotz, explores this potential in the study "Switzerland. Retail Trade Monitor 2019". More than 200 representatives from the retail and consumer goods industry will follow the results on Tuesday at this year's Retail Trade Conference in Horgen. Under the headline "Consolidation - digitalization - fragmentation: what lies ahead and how can we remain/become consumer-focused?", industry representatives will share their views on this question. Consumer focus and personalization - not an easy but increasingly important topic.

Competition is becoming tougher due to declining customer loyalty

In recent years, every second Swiss household has added another/new retailer to its "relevant set", despite the ongoing consolidation in the Swiss retail sector. Last year, a Swiss household visited an average of six different retailers for the purchase of everyday goods. This is the logical consequence of the ever-increasing choice of shopping locations and shopping options. Today, Swiss households can shop where and when they want. On the one hand, in addition to traditional retailers, more and more convenience formats with an extended range of consumer goods are opening their doors. Opening hours are usually very customer-friendly and flexible. On the other hand, the network of sales outlets is becoming ever denser due to the strong expansion plans of discounters in recent years. And although online retailing of consumer goods is still struggling in Switzerland, the majority of consumers say they would like to try online ordering with home delivery. This increase in shopping options is spreading household spending across the various channels. As a result, the battle for the frequency and size of the shopping basket is becoming increasingly fierce as customer loyalty declines.

Consumer focus should set the direction

Not all purchases are the same. Nielsen came to this conclusion by analyzing almost half a million shopping acts over the course of a year. Instead, the shopping files can be divided into seven different "shopper missions". The shopper missions differ from one another in their shopping frequency, their purchase value and the composition of the shopping basket. In this respect too, fresh produce plays a decisive role in the shopping behavior of households. For Migros and Coop, large shopping baskets with a high proportion of fresh produce are still very important. For discounters, on the other hand, shopping baskets that can be defined as supplementary purchases are of central importance. Even though consumers in Switzerland state that their price sensitivity has increased in recent years and that they are looking for a good price/performance ratio, this study shows that there are other important needs that need to be addressed when making purchasing decisions. These factors must be known and pursued accordingly in order to increase customer loyalty and continue to positively influence value creation. Instead of being led in the wrong direction by the competitive environment, the consumer focus should lead the way. 

The majority of the 135 retail and industry experts surveyed share the view that the point of sale of tomorrow should develop in the direction of "smart shopping" and "omniexperience" in order to continue to meet (new) consumer needs. This means that the point of sale must enable a seamless shopping experience that focuses on simplicity, efficiency and individuality. In addition, the various shopping worlds (offline and online) should be linked together and offer consumers a holistic shopping experience. Retailers are already taking the first steps in this direction. Sales areas (e.g. shelves) are being reduced in favor of service and dwell areas, while at the same time increasing investment is being made in digital technologies and omnichannel concepts (linking offline and online).