New report predicts end to seasonal sale

The adage that ‘customer is king’ is truer than ever according to a new report by Visa Europe. With consumers across Europe seeking discounts before purchasing goods, we are likely to see an end to seasonal sales, as retailers adopt year-long discounting strategies.

The report, ‘Coping with Adversity: European Retailers and the Credit Crunch’, was commissioned by Visa Europe from the Centre for Retail Research. It confirms that consumer shopping habits have changed massively: retailers across Europe are seeing their customers reduce spend, use more money-off vouchers, trade down and visit different stores.

Download the report:

Coping with adversity: European retailers and the credit crunch (PDF 0.1MB)

A third of retailers in UK, France, Germany and Italy reported that shoppers were only buying discounted goods with Germany coming out top with 42%. And more than half of retailers (51.4%) felt that customer expectations had changed so much that they were forced to implement larger price cuts, rising to nearly two thirds of retailers in Britain (65.7%).  

With 58% of retailers across Europe reporting a drop in footfall numbers, many have responded with aggressive price cutting and promotional strategies in order to maintain sales.

This is most prevalent in the UK, with over one in five retailers (23%) reducing all prices, over a third (39%) implementing heavy targeted price cuts, nearly one quarter (24%) introducing new lower-priced ranges, and 18% of retailers expecting to run more special discount or sales days. However, the UK is the least likely (9%) to introduce differential pricing by region with Italy the most likely to do this (23%).

Visa Europe’s spending data reflects this trend. The value of all Visa Europe transactions in the first quarter of 2009 grew by 2% compared to the same period the previous year. However there was a 9% increase in the number of transactions on Visa debit and credit cards for the same time period.

David Goodridge, Head of Acquiring and Acceptance at Visa Europe says: “This report confirms that there has been a significant change in consumer behaviour. Shoppers are much more price conscious and more likely to demand discounted goods from retailers."

Goodridge continues: "This is a trend we have seen reflected in our own data - growth in the value of transactions has slowed as a result of discounting and consumers reducing their spending, although the number of transactions has actually increased. What is significant is that retailers are not only discounting but adapting their business strategy which will stand them in good stead beyond the recession.”

Other key findings from the report include:

• Retailers see online growth opportunities: 61% of all retailers believe that customer spending on the internet would increase with Germany and the UK top (73.3% and 71.5% respectively). 10% of retailers are planning to begin selling online in the next 12 months
  
• An increase in window shopping and returns:  more than 40% of retailers noticed more customers ‘window shopping’ (looking with no intention of buying) – this number rose to 65% of UK retailers. More than a quarter (26%) of retailers have experienced an increase in the rate of refunds with the UK noticing the biggest increase with 37.6%
  
• Retailers cutting costs: including 36% reducing inventory, 20.3% cutting employee numbers and 27.8% cutting planned store development
  
• Retailers responding with new strategies and positioning: fewer than 28% of retailers were planning no significant changes to their business 
  
• A greater focus on local merchandise: 13% of retailers are expecting to put a greater emphasis on ‘local’, rising to 19% in the UK and 17% in France 

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About the “Coping with Adversity: European Retailers and the Credit Crunch” Report

This report - the first to cover the impact in detail of the credit crunch upon the retail sector at a European level - is based on research carried out in late February-March 2009 by the Centre for Retail Research, Nottingham, UK on behalf of Visa Europe. A stratified sample of 350 large and medium sized retailers, from four representative European countries (France, Germany, Italy and the UK), were interviewed by telephone. Collectively they were responsible for 13.4% of retail sales. Large retailers are defined as having 150 or more stores or sales greater than £200 million.
 

About the Centre for Retail Research, Nottingham

Established in 1997, The Centre for Retail Research, Nottingham was set up to conduct authoritative and independent research for the retail sector in the UK and across Europe.

About Visa Europe

In Europe, there are over 360 million Visa debit, credit and commercial cards. In the 12 months ending June 2008 those cards were used to make purchases and cash withdrawals to the value of over €1.3 trillion. 11.4% of consumer spending at point of sale in Europe is with a Visa card.

Visa Europe is owned and operated by its 4,600 European member banks and was incorporated in July 2004. In October 2007, Visa Europe became independent of the new global Visa Inc., with an exclusive, irrevocable and perpetual licence in Europe.

As a dedicated European payment system it is able to respond quickly to the specific market needs of European banks and their customers - cardholders and retailers - and to meet the European Commission’s objective to create a true internal market for payments.

Visa enjoys unsurpassed acceptance around the world. In addition, Visa/PLUS is one of the world’s largest global ATM networks, offering cash access in local currency in over 170 countries.