Coping with changing behaviour

22 Mai 2009 Par Duncan Roberts
Corinne Cahen, UCVL (Photo: David Laurent)

Luxembourg’s retail associations say their members have so far escaped the worst of the crisis. But they recognise the need to adapt to changing consumer habits if they are to remain competitive.

“There is no doubt the crisis has arrived in Luxembourg, but I am not sure it has reached the retail sector in the city,” says Corinne Cahen, president of the UCVL Luxembourg city retailers’ association. She explains that the weather can play just as important a role as economic fortune in the success or failure of the sector, and so far since the crisis began the capital has been lucky. Thierry Nothum, president of the Confédération Luxembourgeoise du Commerce (clc) agrees that compared with other countries or regions, Luxembourg’s retail sector has probably suffered less. “Which doesn’t mean that we have not seen the emergence of new behaviour patterns in consumers – though whether they will become permanent or are a temporary suspension of a disposition to purchase is not yet clear.” He suggests that some regions in the Grand Duchy have suffered worse than others and cites the Ettelbrück-Diekirch conurbation, where many Goodyear employees live, as an example of an area where purchase power and confidence has fallen because 1,500 workers are on chômage partiel. “A phenomenon like that has a direct impact on local retailers,” he says.

However, Nothum also points out that with the crisis less than a year old, it is difficult to differentiate between structural problems in the retail trade and problems caused by the crisis. For instance bookshops or music and DVD retailers have been suffering for several years from the impact of cheaper e-commerce giants such as Amazon. Back in February, the clc and communications agency, IP, published a survey on the “new behaviour of consumers”. It indicated that consumers are thinking more and more about their options when deciding how to spend their disposable income. As well as finding that 20% of workers fear their disposable income will fall, the survey also revealed that 57% believe the economic crisis will last at least two years; that is until at least the second half of 2010.

Service quality

Changing consumer habits have manifested themselves in shoppers either seeking out cheaper goods, deciding to buy less of a certain type of product or, in a few cases, forgoing luxury items altogether. Price clearly plays an important role, whether it is seeking out temporary offers or making price comparisons – Nothum says that in France, where precise data is available, consumers are switching from brand name to supermarket generic products. “There may not be much difference in the quality, but there is in price. And I would be surprised if the figures for Luxembourg were much different.”

But other factors, notably choice, availability and quality of service, also play a role in changing habits. The clc is on the verge of launching a campaign titled La Vente – un métier passionnant to attract retail sector employees and managers to a series of courses on improving service.  “In a market that is restrained and much more critical, soft factors play an important role,” says Nothum. “And those who stand out from the crowd will do better than others”. Cahen says that personal service and trustworthy advice are key to retaining and winning new customers in the crisis, and she is forthright about those retailers who fail to meet expected standards. “This is just a hypothesis, but a crisis that lasts some time might well serve to get rid of the unserious people on the market,” she says. “Shop management or sales might not be seen as the most important or glamorous career in the world, but it is a noble profession – and one that requires discipline and responsibility.”

Nothum would also like to see politicians and the media play a more responsible role. He feels that many consumers who have no need to worry about losing their job or being on short-term work nevertheless allow themselves to be pressured, sometimes subconsciously, into being more cautious in their purchases. “The retail sector is extremely dependent on psychology and consumer confidence,” he says. “We would like politicians and the media to present both good and bad news more objectively, and provide explanations.”

Liquidity problems

Both Nothum and Cahen agree that politicians in Luxembourg have done their bit to indirectly assist the retail trade, and recognise that direct help of the kind given to the finance sector or manufacturing industry is difficult to provide. Tax breaks and tax credits and other measures introduced in the budget last autumn have helped improve purchasing power, but Nothum points out that they have also imposed costs on retailers. “Retaining the Index and increasing the minimum wage have, of course, helped purchase power, but they also penalise businesses who might then pass on their extra costs to the consumer by raising prices. Other costs have fallen, such as the price of petrol and other goods that have been linked to lower prices in raw materials such as cereal.”

Liquidity is another problem facing the sector. Many producers in Europe have changed their policy and are demanding payment much quicker, and some businesses are just not properly prepared to meet the new restrictions. Nothum would like to see the government offer some form of short-term credit system as well as net fiscal ratings to help the sector. “So that, for example, if a business has outstanding payments to make to one tax authority but is also owed a reimbursement from another tax authority it does not get into cash flow problems.” Cahen would like to see more publicity for those measures that were already in place to help retail businesses, such as an aide à l’investissement for making improvements to a shop or employment programmes for the over 45s and the young. “It is our role in the UCVL to guide retailers, because they know their job really well but they cannot be expected to know all the forms of aid and different subsidies available. But it is also the job of the ministry – they could really advertise them like they have campaigns for the subsidy for energy-efficient fridges – and the minister is non-existent!”

“The other problem is that we have to look quite far ahead,” Cahen explains. “I have already made my orders for next autumn and winter. So no matter what happens I have to buy that stock.” But she remains optimistic despite the unpredictability. “Customers go and new customers come – which is what is exciting, in both a good and bad way, about this job.” And, as Lou Scheider of IP has said, businesses must continue to employ targeted and efficient and creative communication to seize the opportunities available when the crisis ends – they must stay “top of mind”. The problem is that communication is the easiest way for a retail business to save money. “But, just as our government has said, anti-cyclical measures are what is needed – the time to invest and start projects is when the economy is at the bottom,” says Nothum. He believes the crisis may have inadvertently helped the image of the retail sector. “The crisis has shown how volatile certain sectors are. But the stability of the retail trade, which employs significant numbers and delivers good income for the state, has real value in economically bad times.”