What it means: This year, value is the most important factor in consumers’ decision making at retail. Retailers are pivoting to more prominently message value to consumers in an effort to curb discretionary pullback.
Convenience and experience are often seen as the most important strategic objectives for retailers and brands to get right. Both of these concepts tend to focus on high-end retail, as convenience and experience at retail typically come at a premium cost. But, in the face of economic uncertainty and threats to consumers’ personal financial security, retailers are returning to “value” as a key strategy across the store. Value-based retail hasn’t necessarily gone away, but it will become more prominent throughout 2023.
Value has always been a staple across most retailers, but particularly those in dollar, mass and essential sectors of retail. Whether focused on “everyday low prices,” coupons or discounts, lower prices and higher perceived value are an important tactic to get customers in the door. But, during the past five or so years, even retailers in those markets shifted focus away from messaging value to elevating assortments, style and brands to woo new shoppers and provide more for existing customers. Now, the value renaissance comes at a time when consumers are hyper-aware of prices, wallet constraints and uncertainty in many areas of daily life.
During the past few weeks, retailers have announced new measures to make value more easily identifiable for consumers. Grocer Winn-Dixie plans to reduce the price on 150 products — from national and private label brands — through its Down Down program to ease pressures on supermarket shoppers. Programs that easily message cost savings for consumers are key, especially during times of economic uncertainty. As retailers advance these programs in the future, digital signage will also help in creating unique and easy value propositions. Target during its fourth quarter earnings call announced similar intentions to highlight lower price points and introduce additional private label brands. Both of these efforts aim to show value directly to customers without sacrificing quality or style, which has always been a key message for the brand.
Clear value messaging is the way forward for the retail industry in the short term as consumers continue to focus on making trade-offs and protecting their discretionary income. Even retailers that cater to higher-income consumers need to ensure that value for price is communicated to mitigate pullback. This year, value innovation will prove to be more important than investing in experiences or convenience for consumers, but that ultimately will keep customers engaged and loyal to brands as those other investments return.
What’s next: As value takes center stage for retailers and consumers, investments on convenience and experiences at retail may take a back seat until consumer sentiment rises.