STORY INLINE POST
This year, the retail industry is undergoing unprecedented changes as pre-pandemic behavior is no longer aligned to the new reality and the emerging trends being pushed by consumers.
In Mexico, as we reach the halfway point of 2022, retailers are making short-term decisions in the face of a new and unknown sales scenario. Commercial spaces are proposed as locations for entertainment and recreation. As a consequence, the influx in malls is growing.
According to a Getin analysis, during the first four months of this year, there were meaningful increases in visits to malls. Some retailers believed this phenomenon would help them to boost traffic to their brick-and-mortar stores, so they projected an increase in sales and the achievement of their 2022 sales forecast, but this is not entirely true.
Based on our analysis of customers and retail behavior since last year, we have deduced the new rules that will concern every retailer this year.
The New Rules of Retail 2022
The first rule: Despite the fact that there is a remarkable recovery in the number of people visiting shopping centers, the truth is that this fact does not imply an increase in sales.
In terms of people entering stores, so far this year, we have seen fewer consumers entering than in 2019 (the pre-pandemic year). Although it cannot be generalized to each retail sector, this behavior has been predominant throughout 2022.
We observe that while more people are visiting malls, this is not necessarily an advantage for brick-and-mortar stores.
Retail brands must invest in a strategy to lure in those people who are walking in the mall. In this case, the storefront of every store will be a key component to a successful strategy this year. Retailers must pay attention to increasing their attraction rate, which will keep them ahead of their competitors.
The second rule is to engage your customers and let them know about your most innovative product, new features, or those products in your mix that are the most instagrammable. To do that, your storefront and displays must have a special place in your marketing strategy.
What does this mean for sales growth?
In the first months of 2022, the average ticket and the number of products sold per ticket increased, since the purchase intention in 2022 is higher than in 2019.
So, the third rule is that although fewer people are getting into stores, those who enter are willing to increase their number of purchases and buy more expensive items.
This has meant that stores so far this year have had almost the same amount of sales revenue as in 2019 but with fewer people to sell to. This formula seems to be more profitable than in the past.
The next rule is born from this behavior, since by having people who are willing to spend, the brands no longer need to sacrifice their margin with excessive discount strategies.
Just answer this: why should I implement a discount strategy for my store if my customer is willing to pay the whole price? As long as this behavior continues, retailers must take advantage of it.
The last rule is that the stores that are achieving the biggest increases in visits and sales above the average are those that are adapting faster to this new model of buying.
Also, these brands are offering new and innovative products and they are the same brands that are connecting with their customers and giving them what they need. That is why they are gaining market share.
With these new rules, 2022 is becoming the first year in retail history to break with traditional schemes.
What is next?
In the first 15 days of May, the indicators are changing again. Although the income per ticket and the number of products continue to show an upward trend, we are seeing the opposite effect to that of previous months.
Visits inside stores are rising but purchase intention is lower than in the previous months, leading to more people getting into stores with the main purpose of comparing prices or items rather than buying (this action was common in the pre-pandemic behavior).
To keep these customers hooked, retailers must improve the customer experience inside the store, know their customer's journey to detect their opportunity areas and invest in the capacity of their staff to guide the purchase process to a successful close.
It is still too early to say if this behavior will remain relevant in the following months. Still, it would not be surprising if it does, since the summer vacation period and the new school year will begin, meaning people will tend to spend less as they save for this period.