Effect Of Recession On Consumer Shopping: Implications For Retail Business Expansion
Overview of Secondary Data
This research is mainly aimed at assisting a local retailer (Streetwise) in making wise decisions dealing with the expansion of his/her business to the booming location based marketing/ location based services area.
Most of the people in the United Kingdom have suddenly changed on how they spend their monies. People no longer fancy the habit of walking into retail stores and spend big on goods. Currently people have shifted to the habit of spending their resources on travelling hence leaving nothing to spend in the retail shops (Mintel, 2004). People have also developed the culture of spending much on food leaving so little to be spent in the retail stores. Streetwise being a retail store is affected by this change.
Of late people have chosen to do all their shopping online and this has greatly affected the amount of sales being made by the retailers in the United Kingdom. To adapt to the new online shopping trend, some retailers have opted to venture in online advertising or opening up an online shop altogether.
Online shopping offers a wide variety of products to consumers. Most of these products are also cheap as compared to those being sold by the retailers at their stores and delivery is also made to the consumers’ doorstep making it more convenient. With online shopping, customers can get easily get updates of the current trends of fashion and the new products that get into the market making customers to frequently visit the shopping websites compared to visiting the retail stores due to their reliability and less effort spent in the process.
Online sales have been on the rise in the past one year. They have risen by 15%. 10yrs ago total online sales were almost 2.8% of all the sales made. But currently they stand at 18% of the total sales (Mintel, 2004).
Since Streetwise has never participated in location based services, it has suffered major losses due to the competition presented by other online companies selling same commodities that use LBS.
As it currently stands the retail sector is the one that pays the lion’s share of the total business rates in the United Kingdom. This is so since the owners of the premises where the retail shops are situated have increased the value of their properties hence making it expensive to operate in those spaces (Rossi & Krey, 2017). Owing to the fact that sales have greatly reduced due to other factors mentioned you find that it is so hard for retailers to make maximum profits under such conditions.
Shifts in Shopping Trends
Retail traders in the United Kingdom pay so much for the levies. With the current trends in a drop of preference of goods from the retail shops and the high bills expected to be paid by the trader means that the retailers find it so painful when paying them. This discourages retailers from employing apprentices and more staff and overall entry into the retail business.
Employees are entitled to increase of salary as a sign of motivation and appreciation for the work being done. But now there is the case of poor sales from the retail shops and so an increase in salaries for the employees will highly dent the operations of the store. This affect the retail business negatively as the staff are retrenched to keep the business going. In addition, the increases cost of living which will influence the retailers to increase wages of their staff.
Following the referendum for Britain to exit from the European Union, the pound has fallen in value as compared to the dollar and the euro. This has made the retailers to face a 15% jump in sourcing costs when importing goods from countries like those in the Middle East (Mintel, 1999). The jump in sourcing cost is transferred to the consumers hence making the commodities expensive which then lead to a drop in sales which affects the general operations of the retail store. In addition, the global geo-politics that has seen rapid growth of markets and producers in other states undermine the local currency (Kaiser & Bodendorf, 2012). Rapid and intense industrialisation of countries such as China and Japan has seen an influx of cheaper products in the country which offers stiff competition to the local retailers.
Following the above stated reasons, Streetwise needs to adopt an efficient marketing strategy such as location-based marketing (LBM) that will attract more customers into the store. Location based marketing will appeal to the ever-increasing online customer base thus bringing in more customers and increased profit margins that will be used to foot the various expenses incurred by the shop. In addition, further research and insight into upcoming technologies can be used to attract more customers to the store thus boosting sales.
According to an online survey carried out by Pew Research Centre, up to 74 per cent of smartphone users use their devices to find locations, and recommended facilities and places in that searched vicinity (Baines et al., 2011). In addition, unlike all other smartphone activities, location based services appeal to smartphone users of all ages. This data shows that the customer base accessible to LBS is huge and thus ripe for entry by retailers such as Streetwise.
Further development of LBS aims to combine it with augmented reality and AI so as to deliver a wide range of applications for the consumer. Recent studies have shown that up to 60 per cent of smartphone users feel comfortable sharing their location which is vital for LBS (Piercy et al., 2010). More companies are using location-based apps for targeted marketing which will in turn reach the consumers in real time.
Online shopping has been a growing trend in the recent years that has disrupted the retail industry all over the world. E-commerce 2017 statistics from www.bigcommerce.com indicate that at least 51 per cent of people in America prefer to shop online (Kaiser & Bodendorf, 2012). 96 per cent of the USA population with access to the internet have made an online purchase in their life, and of those 80 per cent shopped online in the past month (Kaiser & Bodendorf, 2012). Online shopping is very lucrative to many shoppers due to its convenience and less hassle experienced by the customer. Even so, statistics indicate although online orders have increased by 8.9 per cent in the last quarter of 2016, the average value of online orders has only increased by 0.2 per cent; illustrating that total revenue has outperformed transactional growth (Kaiser & Bodendorf, 2012). This may be caused by factors such as customers cancelling their carts due to late delivery of purchase or poor quality of the delivered product.
Statistics indicate that online shopping appeals to the younger generation, which consists of Gen Xers and millennials (Petermans & Kent, 2016). 56 percent of Gen Xers and 67 percent of millenials prefer online shopping than going to the physical retail stores. In addition, Gen Xers and millennials take 50 percent as much time in online shopping (six hours) as compared to the older generation (four hours) (Petermans & Kent, 2016).
Augmented reality (AR) is technology that brings digital information into a user’s field view and is overlaid into the real world, and the resulting image is usually viewed through a tablet or smartphone camera (Parasuraman & Grewal, 2012). AR allows customers to view digital pictures of their products of choice before they go ahead and can remove products from store-shelves, highlight a certain stock and deliver more information on it.
Development of glasses and other AR software is underway and will offer the customer more convenience in their shopping experience (Parasuraman & Grewal, 2012). These devices will allow the shopper to identify most objects and their details by sight for instance, a shopper that is only looking to purchase sugar-free products will see highlighted products that are sugar free through his glasses as he walks around the store. In addition, one can access reviews and particular information about a retail store across the street by just placing their phone camera over the physical place.
Various recent academic publications indicate that the future of marketing will be majorly location based. As indicated in the market analysis, most of the features in our smartphones and other smart devices have a location-based feature which can be utilised by companies to advertise their products and services to their target audience (Schiller & Voisard, 2004). With the ever expanding database in the cloud, development of augmented reality and artificial intelligence (AI), some entities have taken up the challenge and utilise LBM/LBS. It serves as a crucial part of real time communication with the consumer and also allows the company to reach a wider customer base (Schiller & Voisard, 2004).
However, the location based marketing has been gaining popularity, but there are presence of different and contradictory opinion regarding the same. Turhan, Akal?n and Zehir (2013) stated that the location based marketing or location based service is one of the effective and successful ways that is acquired by the retail business organizations. However, Ahmad Jaradat and Ahmad Asadullah (2015) contradict with this opinion and mentions that the LBS requires monetary capabilities of the company which consequently leads the same to faces issues in the economic factor. Along with this, the population as well as the economical stabilities of the company is another important factor the is capable of influencing the location based service.
Apart from the mobile industry, the whole digital industry is gradually depending on the LBM/LBS. The cab services companies are another most successful example that is acquiring the LBM/LBS in terms of the gaining competitive advantages in the respective industry. As opined by Muchkaev (2007) cab service companies like Uber has been adopted the LBS as one of the integrated part of its business. However, Turhan, Akal?n and Zehir (2013) argued that the LBS is the most influencing factors that is affecting the general and usual cab industry. The organizations which are not that advanced in the technologies in the taxi or cab industry, have become the victims of the LBS. Failing to establish a real time communication with the consumers, these few organizations have been victimized by the system of LBS (Balan, Nguyen and Jiang 2011).
Airlines industry is another important users of the LBM/LBS system in terms of straitening its image in the consumers. As mentioned by Mountain and Raper (2001) the airlines industry these days are using tracking app interims of helping the passengers to track their baggage. In regard to this, he also mentioned that the aviation industry requires advanced technologies for doing its daily activities and using LBS has not only helped the organizations in this industry to save time but also helped them to smoothen the activates. On the other hand, the shipping industry is also taking advantages of the LBM system in terms of tracking the goods. However, Paixão Casaca and Marlow (2005) observed some issues in the LBM/LBS which indicates its negativity. The business becomes customer-preference oriented which sometimes leads the company to lose the potential customers. In addition, Ahmad Jaradat and Ahmad Asadullah (2015) points out that user-interface of the LBS is also capable of affecting the business of certain organization as well as lose its popularity.
Living Wage Rises
A small scale non-participant online observation of a location based community was the method chosen to collect qualitative and quantitative data on consumer behaviour. An observation sheet (Appendix 1) was designed from the data obtained. Observation can be defined as the planned description, recording and interpretation of people’s behaviour to gain in-depth understanding and meaning to people’s behaviour (Saunders & Thornhill, 2012). As the leading researcher, this method of obtaining data is advantageous as it allows a large sample to be drawn, various diverse and unbiased opinions of the users of location based services can be followed and rationalised.
The main objectives for the online observation of a location based community were:
- To find out customer expectations and perceptions on location-based services (LBS) and location based marketing (LBM)
- To investigate buyer behaviour on location based services (LBS)
- To find out the customer choice criteria when location based marketing (LBM) is used.
Online observation has enabled the research team to evaluate consumer choice criteria for services and goods while on an online platform with a variety of choices. The research team monitored the feedback, comments and views of online shoppers through social media pages and sites, online forums and blogs. The reason of taking up this research method is because the research team wanted to reach a wider audience all over the world. The target audience will range from both the youth and the old who have access to internet due to the digitalization of the world we believe that even the old have access to internet and have gone online for purposes of purchasing goods and services.
Member comments on forums and blogs were analysed. The forums chosen were Technavio blog, Skyhook blog, Accenture Consulting and Forbes online magazine.
The chosen sites and forums were chosen since they had a lot of engagement, comments, debates and expansive information on the topic of research and thus aided in achieving the research objectives.
Appendices 4.2 to 4.5 contain the records of observations and various samples explored during the course of research. All samples were coded according to the diverse scopes of areas covered. (Appendix 4.4 Coding)
There has been an increasing awareness among consumers on LBS in retail. Previous studies have shown that about 57 per cent of consumers thought it was beneficial to receive recommendations, promotions and complimentary products while shopping for a particular product in a store (Piercy et al., 2010).
Observation has also noted that increased marketing campaigns by industry leading companies in manufacturing and social networking have increased positive consumer perceptions with more consumers registering more trust and readiness to engage with retailers centred on their location from LBM.
Efficient use of LBM has been shown to have massive benefits for the retailers including huge profit margins. In one of the sites (Jones, 2016), and example of a successful use of LBS has been listed. Starbuck’s mobile order and pay feature on the Starbucks app utilises a consumer’s proximity to a shop to allow the client to order before stepping into the shop. This enables Starbucks to save the customer’s time and offering them convenience thus more and more customers keep coming back.
During the first entry of LBM to the market, a small number of early adopters were registered taking up location based services. The first adopters experience real time interactions with the retailers, receiving notifications based on their location. Based on the advantages due to this experience, more consumers are encouraged to use location based services; which has resulted in some retailer brands experiencing a high number of interactions with their customers.
Many consumers that used location based services have shown more willingness to check out and eventually buy products recommended by LBM software. In addition, location based services enables more personalisation in their shopping experiences thus a positive customer experience.
LBM services that offered loyalty program to their frequent customers were shown to have more success in retaining customers. Incentives in the loyalty may include reduced prices on purchase of recommended products.
Observation has shown that customer would gauge their experience in online shopping based on the timing of delivery, shipping charges and quality of products on delivery. Up to 42 per cent of the shoppers were likely to abandon their shopping cart due to the time of delivery. This shows that customers are more likely to engage in online shopping and location based services due to the convenience they offer.
Inclusion of the quality photographs of the product being used, customer reviews, product information and ease of access to contact the retail company have also been proven to influence customer’s decision in online shopping. Customers are more inclined to buy products that have quality photographs of them being used in everyday situations and adequate product information about them. Customer reviews boost confidence in new consumers who may be having their first shopping experience in that site.
Other factors that affect use of location-based services in the retail include emerging infrastructure and privacy.
New infrastructure is emerging every day in the technology scene which boosts retailers and consumer confidence in LBM/LBS. The new infrastructure refines search for products most likely to be used by the consumer by monitoring the consumer’s history in shopping and behavioural patterns and will inform the retailers on the consumer feedback real-time. There is also development of apps that are more users friendly and that can accommodate any kind of smart device.
Use of Technology by Retailers
An emerging issue with the use of location based services is privacy of the consumer. Efforts have been made to make the consumer feel safe that their information will be confidential. Some of the measures put in place by LBS players are; offering the customer control over how much content is available to the retailer, options for push notifications, frequency of obtaining notifications and messages.
A questionnaire was designed to gather information on evident variables, respondent’s response to LBM and LBS and their perception towards location based services in addition to other parameters that could not be observed.
The objectives of developing a questionnaire include:
- To find out what is the respondent’s attitude and feelings towards location based services
- To find out how often the respondents use LBS and why they chose it over traditional shopping in retail shops
- To establish if the customer would have an intention to buy based on a LBM ad they view online.
The sample for the questionnaire will be drawn from the online community in London, made up of respondents of ages 17 years and above. A total number of five respondents will undertake the online questionnaire to examine its suitability and implement any amendments it may require.
A draft structured questionnaire was drafted (Appendix 4.3) was issued to the five respondents online. The major issues addressed by the questionnaire were the respondent’s perception and reaction of LBM ads and frequency of shopping via online LBS.
Qualitative methods will be used to understand the customer’s perception, beliefs and reaction towards LBM ads. Proposed methods of analysing the data obtained from the questionnaire include use of graphs and charts to determine the relationship between the various test hypothesis and test variables ( for example, consumers are more likely to buy products of location based marketing ads especially from retail shops close to their proximity). This analysis will help the research team to validate information from secondary data and the results from the observations.
Close relationships will be determined from the various variables by the researcher. This will be achieved by means of statistical analysis of mode and mean e.g., of sales influenced by LBM ads. Patterns will be drawn in cases of the frequency of shoppers to buy via LBM ads. Conclusions from this analysis will inform Streetwise on the best decision to make when expanding into the LBM/LBS scene.
Technology has no doubt disrupted all sectors including the retail sector where online sales are dominating the scene where retail shops once reigned supreme. With the advent of location based services and marketing, consumers now more than ever have information on how to access to products that are within their vicinity. Efficient use of LBM leads to a high customer retention, increased number of customers and eventually increased footfall to physical retail shops. It also offers Streetwise with important feedback and real-time interaction with the customer that would give insight into what the consumer wants and how to improve service delivery.
Location-Based Services and Marketing
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