British Consumer Index Retail Stock & Volume Planning

Anticipating demand plays an important part in any retail operation. Not just the overall demand for the product sector but also how that demand is likely to be made up. For the last three years the British Consumer Index has been monitoring which consumers are likely to buy from a range of 23 sectors in the next few months. This allows retailers to see the correlation between intention and their actual sales volumes. The forward looking ‘intention’ measure can then be used to plan the likely future demand. In addition data is also collected on consumers views on whether their own personal financial situation is going to get better or worse. When this forward and backward looking information is viewed in the context of the actual historic sales figures for those periods it provides a real indication of likely future sales. Overall demand is one thing but further analysis can determine the profile of the consumers currently likely to purchase compared to the profile in the same periods in past years and anticipate the type of products they will demand. By providing a forward looking measure of consumers purchase intentions The British Consumer Index (BCI) can help retailers plan stock and range levels.

How it can work; An Example

Level 1; Overall Volume

Q4 2012 Q4 2013

Likely to Purchase Volume

Actual Sales Volume

Likely to Purchase Volume

Actual Sales

Projected Sales

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Level 2; Ranging Volume projections, whilst valuable do not tell the whole story. Any shift in the profile of those likely to purchase from a sector will result in a change to the range of products those customers will buy. For example; if the profile is more geared towards younger, more design conscious individuals then the type of product on their shopping list will be different that if the profile was more conservative older people. Adding profile information to the overall volume data adds significantly to the impact the data can have on business decisions and thus the bottom line.

Change in Profile = Change in shopping basket

Level 3; Geography For retailers with a physical presence the difference between a profile in Richmond and one in Gateshead can be very different. Being able to add catchment area to the analysis can be vital.

Even at a Regional level there are significant differences in composition. In addition there are differences in the behavior between individuals in the same segments from place to place.

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An Example;

The period leading up to the increase in the VAT rate to 20% can clearly be seen in the chart (right). Not surprisingly likelihood to purchase from this sector fell away quite dramatically after January 2011. This was not just a short term blip but, as can be seen, a downward trend until mid 2012.

When looked at in the context of consumers overall confidence in their financial future more insight is available. Confidence had been falling all year in 2010 which correlates with purchase intention. The artificial nature of the Christmas boom generated by the VAT increase can clearly be seen. Not surprisingly sales fell away until Q2 2012 after financial confidence had improve to at least neutral.

The third element in the picture concerns the profile of the people likely to be buying. There is a distinct difference in the profile in 2010 to that in 2012. Most notably, Secure Families were replaced by Aspiring Singles as the dominant group. The impact of this fact alone on ranging decisions hardly needs explanation! In contrast Wealthy Achievers remained constant suggesting that they are least affected by external events.

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Summary The existence of forward looking data which also has a history provides a unique tool by which to plan for the future. Snapshot data is just that, a view at a moment in time. A snapshot of Consumer Electronics purchasers in December 2009 would have been extremely misleading!

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Taking as an example Consumer electronics and looking a the dominant UK retailer, Dixons Retail. They saw their sales fall in the key Christmas period from 2010 to 2011 and rise in 2012 compared to 2011 reflecting the forward looking BCI ‘Likely to Purchase’ figures illustrated in the chart.

For more details or to discuss how BCI retail planning can be applied to your business call Steve Abbott on 0203 286 1981 or email stevea@thebps.co.uk.

Retail Planning in the news: CACI use BCI data to understand more about who is likely to be shopping.

Wealthy keen to get shopping again By Andrea Felsted, Senior Retail Correspondent - Financial Times Middle-class shoppers have become more confident about their financial prospects over the past three months, but there remains a polarisation between the “haves and have nots” hitting the high street. Confidence among the most wealthy shoppers has rebounded since April, according to an analysis of British Population Survey data over the three months to the end of June by retail analyst CACI. Since the first quarter, the confidence of the most affluent group, which CACI classifies as “wealthy achievers”, who typically live in high status suburban areas, has stabilised after a slump at the start of the year driven by the crisis in the eurozone. There has also been a resurgence in confidence among so-called “urban prosperity shoppers”, those living in affluent areas of major cities, who have moved from having slight doubts about their financial prospects to steadily improving optimism. “There was widespread fear at the turn of the year, mainly because of Europe,” said Paul Langston, consulting partner for CACI. “The disaster we have feared, has not happened, and the tills are ticking along ok.” It is not just the very top end consumers who have gained in confidence, however. The so-called “comfortably off” have remained slightly concerned about their financial prospects. However, within this, “secure families” at the very middle of the demographic spectrum, which make up about 15 per cent of the UK population, have shown three months of positive sentiment. The increasing confidence of the middle market could be good news for many high street brands. Mr Langston said those in the “secure families” category should be “driving the core brands in the middle of the high street”. However, less wealthy shoppers remained concerned about their future. According to CACI the UK’s most hard pressed consumers have seen a marked decline in confidence since April. “The firming up of government policies on welfare reforms, concern over housing benefits and the negative press resulting from the announcement of the double dip recession have all eaten away at their confidence,” said Mr Langston. CACI’s analysis was for a period before GDP figures were announced last week and showed that Britain had sunk deeper into recession. Mr Langston said the impact of that would not be felt for another month or so. Consumer confidence could also be affected by the Olympics. “It is going to give a short-term feel good factor. I think the jury is out on how we all feel when we all come back. No-one’s sales figures are going to be normal for the next month,” he said. CACI’s demographic analysis puts the entire UK population into five categories, 17 groups, and 56 types. Copyright The Financial Times Limited 2013.

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