Verdict Comment

LONDON – Thursday January 1, 2012 – In a traditionally strong period for the upmarket grocer, Waitrose has delivered a solid performance for Christmas 2011. New stores and an improved website provided strong total growth at 9.5%. L-f-l sales grew by 3.8% buoyed by strong marketing messages and an innovative festive product offer.

Online was crucial for Christmas 2011. Last year’s snow prevented some orders from being delivered, but in 2011 customers returned to a revamped and expanded online offer from Waitrose. This led to sales growth of 49% through this channel in the seven days before 25 December 2011. Sales of WaitroseEntertaining, the party food catering service, also grew by 29%. Many of these orders also relied on delivery services which were hampered last year.

However, according to Cliona Lynch, senior retail analyst at Verdict, the driving force behind Waitrose’ increased sales for Christmas 2011 was the continuing consumer desire to trade up. “This is particularly evident at Christmas where entertaining friends and family with indulgent foods is a priority. Consumers increased spend on entertaining at home to compensate for less disposable income in dining out over the festive season. The quality and added value associated with Waitrose’ Christmas offer negated some of the shopper price sensitivity which has risen with inflation throughout 2011.”

According to Lynch, the strength of Waitrose’ quality food message, backed by a strong Christmas marketing campaign, innovative festive product range and brand ambassadors Heston Blumenthal and Delia Smith ensured that sales growth in Christmas 2011 has set the grocer up for a strong start to 2012.

For further information and/or an interview with one of the Verdict analyst team, please contact:  Kirstin Stocker on kirstin.stocker@informa.com or 01483 825664 or 07716 756453

However, the major element behind the survival of the high street is how the consumer behaves and what consumers want. With retail growth halving every decade since the 1970s there was bound to be a fallout as the sector reached maturity.  This, combined with the impact of online shopping has led to an oversupply of space. Though these factors are behind high street decline, the main reason is consumers shop differently now to the way we shopped even 10 years ago.

We want the convenience of large out-of-town supermarkets with plentiful, free parking and a full range of products. We also want premium shopping centres with a complete range of stores and leisure activities. These locations would not survive if we did not shop at them and taxing them more heavily will be a further tax on shoppers rather than retailers and landlords.

To produce a relevant and vibrant town centre, a planner needs to assess the wants and needs of the local community, their shopping habits now and what impact demographic and economic factors will have on their future attitudes. As the report suggests, the future town centre will not have to be just about retail but the needs of the local community.

Already we are witnessing a return to local shopping. The expansion of click & collect, (in particular Collect + whereby we can collect parcels from local stores rather than wait in for a delivery or go to the Post Office), plus the high costs of driving, are encouraging shoppers to stay local. Furthermore the ageing population, with falling pensions and less mobility, will want local services and stores.

Just as a retailer looks for demand opportunities from consumers, so should local high streets.

 Shoppers will pay more but buy less this Christmas, says new report by Verdict and SAS.  But, do retailers know WHO is doing the Christmas shopping?

London, UK – 11th November 2011 – Men will buy more than half of the nation’s Christmas turkeys this year says a new report from Verdict Research and business analytics company SAS.  According to the report – How Britain will Shop for Christmas 2011 – retailers who want to make the most of the coming season’s opportunities are advised to look carefully at who is doing the shopping.

More than 10.5 million turkeys will be bought by UK consumers this Christmas. Turkey purchases start in earnest from mid-November while more than 5 million will be bought in the last week with 56.5 per cent purchased by men. The research suggests that women send their partners out with lists to save time as they ready the home, wrap presents, prepare party food and organise decorations, leaving men responsible for the tree, drink, Christmas food and present shopping.

“One of the most interesting things to come out of this report is who is doing the Christmas shopping,” said Maureen Hinton of Verdict.  “The data clearly shows that retailers ought to be actively targeting men, for whom Christmas is one of the big shopping windows. After a tough 2011 many retailers will be relying on Christmas to make a profit before being hit hard by a tough Q1 in 2012. Consumers will cut back as they recover from Christmas spending and face increased utility bills and high unemployment. Therefore retailers must build up enough cash and margin to support them through difficult trading until the next likely boost in spending, Easter.”

The report shows that UK households will spend £86.5bn in the run up to Christmas, £1.2bn more than in Q4 last year, but the volume of purchases will be down by 0.7 per cent.  Although shoppers will be counting their pennies, spend on food, clothing, footwear, health and beauty will all increase as consumers purchase their Christmas gifts.

Spend on food will increase by almost four per cent (3.8 per cent) in 2011 to £33.4bn, outperforming overall retail growth but only because of inflation rather than sales. Clothing, footwear, health and beauty will also outperform as they are major gift categories due to their relationship to personal well-being. However, non-food sales will be hit the hardest, shrinking by 0.1 per cent as consumers avoid big ticket items with home related categories expected to shrink by £490 million. (See appendix for a detailed sector-by-sector breakdown.)

Online sales will fare particularly well this year due to the convenience, ease of access and ability to compare prices across different websites. Spending online will grow to £9bn which represents nearly 10 per cent of total spend over the holiday period and this increase can, in part, be attributed to the increase in mobile commerce for price comparisons, ordering and checking stock availability. However, this does not account for the influence online has on overall spending with 63 per cent of online shoppers researching online and then buying instore. The increase in online purchases this year is up against a weaker comparative due to the bad weather of 2010 halting the delivery of online purchases.

“UK retailers face one of the most challenging Christmases ever as a combination of low consumer confidence and inflation is making shoppers question every purchase they make, even at a time when they want to celebrate.

All the growth in the market is inflation led and a repeat of last year’s bad weather would be disastrous for retailers who are already on very tight margins.” continued Hinton.

Cindy Etsell, retail specialist at SAS UK said, “The pressure on retailers this Christmas is unlike anything they will have experienced before. The key for maximising sales is about understanding when consumers are looking to purchase items and ensuring that sales prices are optimised accordingly. Monitoring customer behaviour is critical for this and the information that retailers have about their customers from till receipts, credit and loyalty cards, and even wider unstructured data from sources like social networks can steer their understanding of purchasing patterns and ability to mark down prices at the optimum time to shift stock without losing significant margins.”

-ENDS-

Notes to editors

For a PDF of the full report and/or interviews with Cindy Etsell of SAS or Maureen Hinton of Verdict, please contact:  Kirstin Stocker at Verdict: kirstin.stocker@informa.com OR Pippa Melamet at Hotwire: sas@hotwirepr.com.

ABOUT SAS

SAS is the leader in business analytics software and services, and the largest independent vendor in the business intelligence market. Through innovative solutions delivered within an integrated framework, SAS helps customers at more than 50,000 sites improve performance and deliver value by making better decisions faster. Since 1976 SAS has been giving customers around the world THE POWER TO KNOW.

ABOUT VERDICT:

Verdict Research is the leading authority on retailing. The firm has privileged access, at the highest level, to key executives working within the top 200 retailers. Its research and publications provide executives working in a wide range of business sectors – retailing, manufacturing, advertising, marketing, professional services, property, finance and the media – with unrivalled independent analysis of the retail sectors, key trends driving each, insight into the major players and forecasts. Verdict Research (www.verdict.co.uk) is a wholly owned subsidiary of Datamonitor.

Appendix

Christmas 2011 UK retail trends by sector

Food & grocery

• Online sales will be a key channel for seasonal sales growth and innovation will be crucial in gaining market share (20.9% total sales). However, UK shoppers are wary of another year of heavy snowfall, with many consumers going online to browse before heading to stores to purchase items.
• Grocers are embroiled in heavily publicised price-focused marketing campaigns and private label ranges have gained greater credibility with shoppers wanting to trade down.

Health & beauty

• This will be one of the more robust sectors in 2011 due to relatively low selling prices and a strong focus on offering a wide range of products for gifting. In particular, perfumes are always a strong festive gift with late November/early December being the peak purchasing period.

Clothing & footwear

• Clothing & footwear is expected to fare slightly better than other sectors this Christmas as they make affordable gifts compared to other larger big ticket items. Lifestyle and premium brands are expected to perform well with the in-store experience, brand perception and quality credentials helping customers to justify higher spend.

Electricals

• Small consumer electronics will give the sector a welcome boost but an increase of 3.5% in volume will not be enough to drive positive growth in 2011 because this is one sector that is still deflationary. Online specialists should perform well with their competitive prices and varied delivery options providing shoppers with a far more convenient mode of shopping.
• Post Christmas, market volumes will rise as consumers take advantage of sales but like-for-like comparisons are likely to be poor as many consumers bought big ticket items last year in anticipation of the VAT increase in January this year.

Books, music & video

• These products will struggle this Christmas as demand for physical music and video products continue to drop off and more consumers take to tablets, e-readers and downloading. Price competition from online suppliers and grocers will continue to squeezes margins. Digital content does not fare well as a Christmas gift, while video games will not perform well because no new hardware and consoles have been launched in have been released in the second half of 2011.

Furniture & floor coverings

• This sector will decline by 5% in Q4 2011 as most shoppers made big ticket purchases last year in anticipation of the VAT increase in January and are wary of spending in the current climate.

Homewares

• Gifting will be the key driver of growth over the Christmas period but big ticket categories will continue to suffer. Retailers will need to be aware of consumer demand for decorations peaking in mid-November (12^th – 21^st November) and optimise prices to reflect this demand.

DIY & Gardening

• This is the worst hit sector with a 6.3% drop in expenditure on Q4 last year. The link to the housing market is the key factor behind its difficulties as consumers are reluctant to spend on big projects due to concerns with employment, household expenses and debt. Unless visiting for specific DIY purposes such as Christmas trees, consumers are unlikely to frequent these shops with the aim of purchasing Christmas gifts. As a result, it is more crucial for this sector than any other to closely monitor customer spending patterns and maximise sales opportunities during peak periods.

Verdict’s survey of over 10,000 Christmas shoppers has revealed that supermarket switching was higher over the Christmas period than at any other point in the year. In total, some 14.6% of supermarket shoppers abandoned their regular supermarket in favour of an alternative destination. Most of these were trading up to more premium offerings.

Source: Verdict Consulting; survey based on representative a sample of 10,074 consumers

Commenting on the survey, Neil Saunders, Consulting Director of Verdict said: “When it comes to food, many consumers put financial and meteorological concerns to one side this Christmas. They wanted treats and good quality fare for their Christmas table and were prepared to pay for it and travel for it. In many ways, this is a continuation of a trend we have seen since the end of the recession: consumers are no longer prepared to be food frugal and while they’re still careful with their cash, they put quality and taste ahead of pure price.”

As premium retailers, the two main beneficiaries of the trading up trend were Waitrose and M&S, both of which secured large numbers of additional customers over the festive period. Waitrose had 46% more main users (those who do most of their food spend at a given store) than usual, while M&S grew its main user share by 318%.

“As higher end operators, Waitrose and M&S should always do well at Christmas. However, they deserve credit for the amount of innovation and thought they put into this year’s Christmas food offer. Unusual products like the Heston Christmas Pudding from Waitrose really captured the public’s imagination and went down a storm” comments Neil Saunders.

As well as trading up, there was some trading down in the market as almost 5% of shoppers looked for cheaper alternatives. Tesco and Asda picked up customers here.

Looking forward to 2011, Verdict believes the premium trend will continue with most grocers looking to enhance the higher end of their offer, even as households become more constrained.

“Consumers will have to cut back in 2011, but it’s unlikely we will see a return to the food frugality of the recession. That trend has been and gone and consumers are more likely to prioritise food spending above other forms of consumption” says Saunders. “The challenge for the mainstream grocers will be to show that they are offering great value as well as great quality. This is something Waitrose has done to great effect, but it’s not a message that’s easily emulated.”

Source: Verdict Consulting; survey based on a representative sample of 10,074 consumers

London, 13 January 2009 – A poll of over 6,000 consumers, carried out by Verdict Research, reveals that department store chain John Lewis remains the nation’s favourite retailer.  After winning this award for the third successive year, John Lewis has now won the title before the recession in 2008, during the recession in 2009 and now in 2010 as we begin to see the beginning of recovery – demonstrating the enduring nature of the store’s appeal.

The survey – the Consumer Satisfaction Index 2010 – found that John Lewis was more highly regarded than any of its competitors. Despite a more price focused retail market with more demanding consumers, John Lewis managed to attain the same satisfaction score as last year.  However, many other retailers have improved their satisfaction scores this year and John Lewis scored only seven points above the second placed retailer, compared to a winning margin of 25 points last year.

For the survey Verdict quizzed customers about where they shopped most frequently, and then asked them to rate those stores in terms of range, price, convenience, quality, service, ambience, facilities and layout. The data were collated to give retailers a score for each of these criteria, as well as an overall consumer satisfaction rating.

Table shows the top five overall retailers in the Consumer Satisfaction Index 2010 and their change in rank since last year.

Source: Verdict Research

John Lewis is a perennial achiever in the Consumer Satisfaction Index, not finishing outside the top two for the eleven years that the survey has taken place  (7 times first place, 4 times second place).  In 2010 the retailer’s customers again ranked its service levels far and away above every other retailer, but it was its consistently strong performance across a whole range of measures that enabled it to defend its title.  Verdict’s Consulting Director, Neil Saunders, comments: “The recession has made consumers think more carefully about where they spend their money and part of that has been questioning the value they get from retailers. John Lewis has not been found wanting. It simply delivers on every level: an excellent choice of products, fair pricing, served in an attractive environment with staff who truly believe in the concept of good service. It’s John Lewis’s adherence to traditional retail values that make it a true leader in the modern retail scene”.

Online specialist Amazon has moved up from third to second position this year with service and convenience the two factors that its customers liked most about the retailer ‘’The secret to Amazon’s success is simple’’ said Neil Saunders ‘’it offers customers a fast, reliable service at competitive prices’’.  Amazon has also seen a large improvement in its satisfaction index since last year, and we expect it to challenge John Lewis closely next year for the top spot.

Another internet retailer, Play, completes the podium positions. Play’s exemplarily service levels, convenient website and low price ethos all helped it achieve an extremely high satisfaction score in 2010. Verdict’s Senior Consultant, James Flower, comments: “Play focuses on making things as easy for its customers as possible. Great search functionality, rapid purchasing processes and free delivery, as well as competitive pricing, combine to give customers a great level of service”.

Homewares specialist Dunelm Mill is a big climber, its rank rising 13 places since last year to fourth position. ‘’Dunelm’s proposition is based on offering customers a wide choice at value for money prices’’ says James Flower ‘’and unsurprisingly these are the two areas where Dunelm satisfies its customers the most.’’

Marks & Spencer takes the fifth slot in the overall index, up from ninth position last year. The retailer has seen improvements across the vast majority of measures with range, quality and service all driving higher overall satisfaction levels in 2010.  ‘’M&S continues to work hard at improving all aspects of its customer proposition, and this higher ranking shows the retailer’s efforts have not gone unnoticed by its customers‘’ says James Flower. Marks & Spencer’s strong performance in this year’s index has been underlined by it becoming the nation’s favourite clothing retailer in 2010.  A title the retailer has never won in the 11 years the survey has taken place. This performance is backed up by top three positions in two other product categories – footwear and food. 

Overall winner John Lewis also performs well on a sector basis, coming top in two sectors (homewares and electricals), while its sister company Waitrose has taken the award as the top food retailer for the fifth successive year. In the remaining sectors, Asda tops personal care and footwear, B&Q heads DIY and Amazon music and video.

 The top three retailers in each retail sector 2010.

Source: Verdict Research

Verdict, which forecasts that overall retail spending will increase by just 1.1% this year, maintains that satisfying and holding on to customers will be a key driver of success. “Overall there will be only limited growth in the market this year” says Neil Saunders “so holding on to every customer and every pound they spend is critical. Retailers that don’t understand, or don’t care for, their customers will quite simply lose out”.

Data from Verdict Consulting’s latest Food Price Tracker shows that the price of a full breakfast for a family of four has started to get cheaper, the first time it has fallen since January 2008. On average, the cost of making breakfast is 5p cheaper in June than it was in May.

Although the reduction is small, it shows food price inflation is starting to go in the right direction. Nevertheless, the decline is nowhere near sufficient to undo months of price increases and compared to June 2008 the price of breakfast remains £1.14 more expensive.

§ Prices for items in the Great British Breakfast (June 2009, May 2009 and June 2008)

Source: Verdict Consulting

Leading the fall in prices are sliced white bread, which has come down by 3.1% since last month, strawberry jam (down by 2.7%) and bacon (down by 2.3%). Some items, including cornflakes and butter have recorded slight price increases.

Neil Saunders, Consulting Director at Verdict, comments: “The fall in the price of breakfast is only small, but it shows things are finally going in the right direction. And the good news is that we expect to see stronger falls as we move through the year”. Indeed, Verdict forecasts that by the end of the year, breakfast should be around 84p cheaper.

Overall inflation

The overall inflation picture is less rosy this month, with shoppers paying almost the same for their groceries in June as they did in May. The price of a basket of 100 regularly purchased items was more or less static, rising by +0.1% from May to June. This follows two months of price falls.

§ Average change in food prices; month-on-month.

Source: Verdict Consulting

On a yearly basis food price inflation in June reached its lowest level so far this year at 6.5%. The year-on-year increase is now less than half that reported in earlier months when inflation peaked at 14.1%.

§ Average change in food prices; year-on-year.

Source: Verdict Consulting

Category inflation

Rates of inflation remained mixed across the basket, with categories such as dairy and laundry remaining strongly deflationary on last year and other categories such as health & beauty and frozen foods showing lower rates of inflation compared to earlier parts of the year. However, household goods and fresh fruit & vegetables remain stubbornly inflationary.

§ Average change in prices across various product categories; year-on-year from June 2008 to June 2009.

Source: Verdict Consulting

About the food price tracker

The food price inflation tracker is compiled by Verdict Consulting. It is based on a sample of 100 items purchased on a regular basis by a typical family. Items cover 13 separate product categories.

Where available, for each individual product 4 separate price points are recorded: the price of an own label product in store, the price of a branded product in store, the price of an own label product online, the price of a branded product online. These prices are recorded among the leading grocers. In total, up to 1,400 separate prices are recorded each month.

Where possible, like-for-like products are recorded each month. Adjustments are made for changes in size or quantity where necessary. A range of products across the price spectrum are recorded in the survey. For example, in bread a value, standard and premium loaf are all included.

London. Food prices in May were, on average, 0.4% cheaper than in April, according to the latest research from Verdict Consulting. This is the second month in a row that prices have fallen and means that, since March 2009, food prices have come down by around 1.5%.

§  Average change in food prices; month on previous month.

Source: Verdict Consulting

However, although food deflation now seems to have taken hold, shoppers should not celebrate just yet, as prices still remain some way above where they were last year. Indeed, Verdict calculates that the average family is still paying some 7.6% more for groceries than they did in 2008.

Neil Saunders, Consulting Director at Verdict Research, comments: “We believe that food prices will continue to fall, but they are coming down very slowly-so slowly in fact that some families might not really notice much of a difference each month.”

Promotional tools

Aware that consumers are feeling the pinch, the nation’s grocers have increased the amount of promotional activity on foods. In May 2008, Verdict found that 12% of all food products were on promotion, whereas in May 2009 some 15% were promoted.

However, most of the promotions are multi-buy deals (i.e. buy three for the price of two) rather than straight price cuts, meaning that only consumers who spend and buy more make savings. In May 2009, around 11% of products in a typical basket of 100 items were part of multi-buy offers, netting an average £8.36 saving on a £150+ shop.

Category trends

§  Average change in prices across various product categories; month-on-month from April 2009 to May 2009.

Source: Verdict Consulting

About the food price tracker

The food price inflation tracker is compiled by Verdict Consulting. It is based on a sample of 100 items purchased on a regular basis by a typical family. Items cover 13 separate product categories.

Where available, four separate price points are recorded for each individual product: the price of an own-label product in-store, the price of a branded product in-store, the price of an own-label product online, and the price of a branded product online. These prices are recorded among the leading grocers. In total, up to 1,400 separate prices are recorded each month.

Where possible, like-for-like products are recorded each month. Adjustments are made for changes in size or quantity where necessary. A range of products across the price spectrum are recorded in the survey. For example, in bread, a value, standard and premium loaf are all included.

London. Food prices fell 1.2% from March to April and were up just 7.6% on the previous year – the slowest increase so far in 2009. The data, based on Verdict Consulting’s monthly Food Price Tracker, indicates that food inflation may finally have peaked, something that will be welcomed by hard-pressed shoppers.

Inflation has changed habits

Consumers were first hit with higher food prices over a year ago when the rising costs of raw materials and high oil prices added millions of pounds to the nation’s weekly shopping bill. Since then, inflation has risen strongly every month, putting many household budgets under strain just as the recession and rising unemployment started to bite.

Verdict’s consumer survey data shows that almost 15% more food shoppers than a year ago say they select their grocery store based on price; consumers are also prepared to travel to less convenient locations to save money on their shop. Food discounters such as Aldi, Lidl and Netto have also benefitted, with Aldi nearly doubling its share of regular grocery shoppers since 2008.

“For the past year, food prices have weighed heavy on consumer mind and wallet” says Neil Saunders, Consulting Director at Verdict. “With the recession starting to bite and unemployment rising rapidly, a slowing of inflation could not have come at a better time”.

The worst is over, but inflation is not completely dead

With year-on-year inflation in April at almost half the rate recorded in February, the UK grocery market is finally turning a corner. Lower commodity prices, the much reduced cost of oil and intense competition among retailers are all helping to keep a lid on inflation.

Verdict believes that this trend will continue into 2009 and prices will ease significantly before the end of the year. However, it remains far too early to completely call time on inflation.

“As much as we’d all like to return to the prices we paid for food in 2007, we’re just not going to see those sorts of falls” says Paul Bashford, Retail Consultant with Verdict. “The truth is that most consumers will still be paying quite a bit more for their food than they did some years ago; the good news is that by December we believe they’ll be paying less than they did in January”.

A mixed bag

Although there are signs that inflation is finally easing with one of the strongest monthly falls in over a year, worryingly it remains more prevalent in basic items such as meat & fish and fruit & vegetables.  All but dairy products increased in price year-on-year, with dairy down 6.2% in April.

Average change in prices across various product categories sold in grocery stores; price increases measured year-on-year from April 2008 to April 2009.

“Despite overall food price inflation slowing in April, many basic items such as fruit & vegetables have recorded double digit growth in the past year. With basic items accounting for a large share of the average basket, consumers will still feel quite a bit of pressure on their purses” says Bashford. ”Nevertheless, we expect the prices of all items to start moderating as we move into the second half of 2009″.

London  – The credit crunch may well be changing people’s shopping habits but a poll of over 6,000 consumers carried out by Verdict Research reveals that department store chain John Lewis remains the nation’s favourite retailer.

The survey – the Consumer Satisfaction Index 2009 – found that John Lewis was more highly regarded than any of its competitors, winning by a significant margin ahead of second placed IKEA. Despite a more price-focused retail market with more demanding consumers, John Lewis managed to attain the same satisfaction score as last year.

For the survey Verdict quizzed customers about where they shopped most frequently, and then asked them to rate those stores in terms of range, price, convenience, quality, service, ambience, facilities and layout. The data were collated to give retailers a score for each of these criteria, as well as an overall consumer satisfaction rating.

John Lewis retained the top spot in 2009 after having taken the crown in last year’s survey. The result is the latest in a long line of success: the department store has come either come first or second in the survey ever since it began back in 2000 (six times first place, four times second place). John Lewis performs well across a range of measures, but it is in service that it really outperforms. Verdict’s Consulting Director, Neil Saunders, comments: “Today service standards on the high street are better than they were ten years ago – but John Lewis still stands out as being exceptional. Its partners really do care about customers and that makes all the difference. Unfortunately for other retailers, it is not something that is easily imitated – it is an inherent part of John Lewis’s culture and philosophy.”

IKEA the Swedish furniture giant comes in at second place, up from fifth last year. It scores well on both range and price, with an above average score for quality. “Shoppers are more focused on price than they used to be, especially when buying furniture and home products” says Neil Saunders. “IKEA is one of those stores that provides good quality products at a very reasonable price – and gives the customer lots of choice.”

The internet retailer Amazon moves up one place to third position. Convenience is a key driver of satisfaction, although Amazon also performs well on service where it has improved since last year. Verdict’s Senior Consultant, James Flower, comments: “Amazon is the top placed internet player, mainly because it makes life easier for its customers – the site is simple to use, has a wide range to pick from and there’s good service backup if things go wrong.”

Value player TK Maxx takes the fourth spot this year, up by 20 places since last year. “Price is the driving force behind TK Maxx’s entry to the top ten” says James Flower. “Shoppers are much more price sensitive now but they are still interested in designer and premium products – TK Maxx gives them the best of both worlds and its model now has real resonance with consumers.”

The world’s leading direct beauty seller, Avon, takes the fifth slot in the index. The retailer has built a strong reputation among shoppers for product quality and innovation and also scores well on convenience and service. “Consumers appreciate Avon’s high levels of personal service and they like convenience Avon’s direct selling method gives them” says James Flower.

When it comes to the individual retail sectors the strength of the John Lewis Partnership is further revealed. The department store side of the business comes top in three sectors (clothing, homewares and electricals) while Waitrose tops the food and grocery sector. In the remaining sectors, Wickes heads DIY, TKMaxx tops footwear, Amazon music and video and Avon personal care. “John Lewis is a department store in the true sense of the word” says James Flower, “it has real authority across all of the sectors it trades in and scores more highly than traditional specialists in those sectors.”

Verdict, which forecasts that overall retail spending will fall by 0.7% this year, maintains that satisfying and holding on to customers will be a key driver of success. “Overall there will be no growth in the market this year” says Neil Saunders “so holding on to every customer and every pound they spend is critical. Retailers that don’t understand their customers will quite simply lose out.”

2008 was a very good year for the European grocery sector with most growth driven by inflation due to exceptionally high oil prices and agricultural raw material price increases. As prices rose grocers reported healthy top and bottom line figures. Food price inflation ran at unprecedented levels, and enabled retailers to prop up their cash profits. As a result the European grocery market grew to €901.5bn in 2008.

However, both trends – high food price inflation and high oil prices – have now reversed. The oil price has fallen back to below $50, less than a third of its peak of more than $150 just a year ago. On the food raw materials side a glut of better harvests has driven up supply and depressed prices. Adding to the downward spiral of prices are discounters such as Aldi and Lidl and the influence they exert on price.

While price reductions will be dependent on currency fluctuations, the competitive environment in various EU countries, the different time lags involved in food production and not least the behaviour of manufacturers and suppliers, Verdict Research believes that falling oil and raw material prices in combination with the discounter threat will lead to lower prices in grocery across the EU in 2009.

Daniel Lucht, European retail analyst at Verdict research and co-author of the report comments: “While grocers are to a certain extent insulated against the downturn that is severely hurting the rest of the retail sector, the effects of the credit crunch and the onset of the global recession will still be felt across the European grocery market. Real estate bubbles have burst, credit availability is curbed and unemployment is rising again. As a result customers have become cautious. The result has been an overriding focus on value from a consumer’s point of view.” Pushing price increases through, as some hard up producers will demand from retailers, will be extremely difficult in the current economic environment.

Several grocers have suffered declining sales growth of their organic ranges as customers feeling the squeeze struggle to pay the premium charged for these products. Meanwhile non-food ranges, which have in the past helped grocers attract footfall and reap the benefits from the higher margin of these products, are no longer pulling in customers as they used to. Apart from inflationary pressures from exchange rate fluctuations and higher wages in producing countries, the non-food sector is also suffering from a slump in demand for home-related product, especially in countries where the housing market has crashed.

The credit crunch has brought a halt to most M&A activity. Lucht comments: “Tightened credit has made financing for any major deal almost impossible to get a hold of. Furthermore while opportunities may exist, in the wake the crisis any risky investments on the part of both retailers and the financial community are off the agenda for the time being.”

Similarly investments such as store refurbishment, multichannel and format development and innovative ideas to renew the sector have been firmly put on the back burner. Meanwhile the pace of international expansion is likely to be subdued as retailers will struggle to raise capital in a recessionary environment and are in any case suffering from a general freeze in liquidity. Another victim of the credit crunch has been sale & leaseback deals, with property prices falling off a cliff, appetite for retail real estate has been reduced significantly.

Despite all the doom and gloom Verdict Research believes that there are still opportunities in the market. Significant chances lie in ramping up private label development, gaining more efficiencies in buying and supply chains, cutting unnecessary costs, lateral diversification and in green retailing. Verdict Research believes that organics will be one of the first sectors to bounce back in the post credit crunch era.

Simon Chinn, co-author of the report comments: “Retailers with the necessary financial muscle should not let this crisis go to waste without emerging far stronger from it.” Now could be the time for Europe’s privately owned grocers such as Rewe, Auchan and E. Lerclerc to further strengthen their positions in the region’s food & grocery market. “Being privately owned, such retailers are not under the same kind of pressure from investors that publicly listed retailers have to deal with. The companies are able to take a more long term view of investment, which has been a key driver for many of these retailers’ expansion strategies in the CEE region.” explains Chinn. However raising capital is far from easy at the moment, even for players of the stature of Rewe and Auchan.

Loyalty rates down across the board

Loyalty to retailers in 2008 declined at its sharpest rate for the past ten years. Over 22% of shoppers – some 10.8m people – now say they are dissatisfied with the store they do most of their shopping at and that they would prefer to shop somewhere else. Although not every customer will act on their disloyalty, such a high level of fickleness is extremely worrying for retailers who are already struggling with weak consumer sentiment and spending.

“In the current environment it’s critical for retailers to hang on to every customer they’ve got; no one can afford to lose business” commented Neil Saunders, Consulting Director at Verdict.

“Such a low rate of loyalty demonstrates the extent to which people are shopping around and are increasingly willing to punish retailers that don’t meet their expectations. It should act as a wake-up call that retailers need to become better at meeting the needs of their customers”.

While the credit crunch, which has made consumers more inclined to shop around for bargains, is partly to blame for the increase in disloyalty – it is not the whole story. An increase in the choice of where consumers can shop has also driven the long term decline. The proliferation of new, often international, retailer entrants combined with an extensive selection of internet retailers has made it easier than ever before for shoppers to switch their custom.

“As competition has intensified it has become increasingly difficult to hold onto customers and retailers now need to work harder than ever before to retain shoppers” comments Saunders.

Discounters cashing in on low grocery loyalty

On a sector basis, food is a particularly fierce battleground with almost one-third of shoppers saying that, if they were able, they would shop somewhere other than their current main grocery store. Such a low level of loyalty comes despite the fact the major grocers have engaged in a variety of initiatives from price cutting to loyalty cards to retain consumers.

This is potentially good news for the discounters such as Aldi, Netto and Lidl which have been cashing in on disloyalty among the larger grocery chains and growing their own customer numbers. Verdict’s analysis shows that all three chains have increased their share of food shoppers over the past year.

“While their customer share remains low compared to the likes of Tesco, there can be no doubt that the grocery discounters have been successful in attracting significant numbers of new customers” commented James Flower, Senior Consultant at Verdict. “In the current environment their price focus has real resonance with hard pressed families”.

Loyalty leaders

While the general picture is bad news for retailers, some do manage to secure higher levels of loyalty. Verdict’s analysis shows that John Lewis in electricals has the highest loyalty rate of any retailer in the country: almost 91% of its main shoppers say there is nowhere else they would rather use. The retailer has achieved such a high level of loyalty by offering exceptional levels of service, good value for money and having deep ranges on offer.

“John Lewis understands its customers and it delivers on their needs in everything it does” said Neil Saunders, “it is a simple formula, but it’s one that’s extremely difficult to execute consistently.”

Marks & Spencer in footwear, Amazon in music and video and Dunelm in homewares, along with John Lewis again, this time in homewares, are the other top four retailers.

Lessons for retailers

Over the next few years retailers will need to work much harder in terms of understanding what their customers want and delivering this through products, prices and the store environment. Some of this will not be easy and may involve additional expense in terms of investment in customer service initiatives. Nevertheless, those that do not invest risk ceding customers to those that do.

The findings of the report, launched at a Barclays Commercial Bank industry briefing, confirm the retail sector’s increasing challenge to retain a constant customer base. Jeremy Rance, National Director of the Retail and Wholesale Sectors at Barclays Commercial Bank added:

“The research shows that the current climate is causing consumers to shop around not just for price and value but also for a distinctive quality of service and connectivity with the retailers. They are proving to be more discerning than ever, requiring phenomenal consistency of performance from the retailers in return for their loyalty. For those retailers that can uniquely combine range, convenience, layout, facilities, customer service and price into a compelling proposition, they will be rewarded and rewarded well, striking a chord of intrinsic and intangible values in the heart of the consumer.”

Tightening their grip

Over the past five years, the number of consumers regularly using supermarkets for non-food has risen dramatically. Nowadays, almost two out of every three shoppers in the UK claim to use grocers for items other than food, up from 45% of consumers just five years ago. The figures demonstrate the extent to which the supermarkets have tightened their grip on the £177bn UK non-food market of which they now take a share of £19.7bn or 11%.

On a sector level supermarket dominance is no less impressive. A fifth of UK consumers regularly buy clothing, homewares and music and video at grocers, while just under half of consumers use the grocers for personal care products.

“What the grocers offer is convenience with very competitive prices,” says Neil Saunders, Verdict’s Director of Consulting. “For the time pressed, cost conscious consumer it is a great advantage to be able to pick up good priced clothing or electrical items at the same time as doing a food shop.”

Squeeze on the specialists

The growth of the grocers has undoubtedly piled on the pressure for traditional specialist retailers. The grocers’ growth rates in most non-food categories has been faster than the growth of the market as whole, meaning they have taken market share away from other players.

As an example of their dominance, in terms of regular customer share, Asda is the UK’s fifth largest clothing retailer while Tesco is the ninth; both players now have more regular clothing customers than well established chains like Bhs, Gap and H&M. Meanwhile, in personal care, all of the big four grocers (Tesco, Sainsbury’s, Asda and Morrisons) have larger market shares than health and beauty specialist Superdrug. 

“Almost everyone has to go grocery shopping and that means the grocers have a huge base of customers who regularly visit their stores,” says Saunders. “That’s an enormous advantage because it allows them to easily put non-food ranges in front of those customers.”

But, the research stresses, the grocers’ success in non-food is much more than just opportunistic selling. While there may be an element of opportunism, what most supermarkets are doing is much more advanced: many actively understand what their consumers want and tailor their offers accordingly. In some cases, they even attempt to lead and create fashion trends, especially in clothing.

Although the entry of the grocers into many non-food markets has created pressures for other players, Verdict’s research concludes that the end result has been a better deal for the consumer. “It is easy to knock the big grocers” says Saunders “but in the case of non-food they have acted as consumer champions: they have increased competition which has helped keep prices down across the board.”

You ain’t seen nothing yet!

Although the grocers have experienced rapid growth in non-food over the past five years, Verdict believes their influence will only increase over the next five. By 2012, Verdict forecasts that, collectively, grocers’ sales of non-food could be worth £24.4bn – 24% higher than currently.

Two key things will help drive their growth. First, the premiumisation of their offer which will see supermarkets selling a greater range of higher priced merchandise: this will help them attract a wider spread of consumers and allow them to take more business from specialist players. Second, the growth of the internet as a sales channel for non-food items: grocers are actively involved in this space and, because of their comprehensive delivery networks, could leverage an advantage over smaller specialist players who can find it difficult to accommodate shoppers’ delivery requirements.

“Today’s supermarkets are no longer simple grocers,” says Neil Saunders. “They are cathedrals of consumption, the department stores of the modern age. We expect them to build on this position over the next few years and that will certainly make life difficult for other specialist players.”

“The price conscious nature of German consumers is reflected in every sector of the German retail universe”, says Daniel Lucht, Senior Analyst at Verdict Research and author of the report. “In DIY, Praktiker has embarked on a downsizing and price cutting exercise with its easy-to-shop concept. In electricals, Metro-owned Media Markt and Saturn, while strictly speaking not discounters, have both adopted an aggressive position on price and captured the public’s imagination with the now abandoned ‘stinginess is cool’ campaign. In furniture discounting has become endemic and there are a number of dedicated discount players such as Lutz Group’s Mömax or Roller.  In clothing KIK and Takko are proving to be the best performers in the arena, while in homewares/general merchandise players such as Tedi and Kodi are beginning to flex their discounter muscles.”

By 2012 one in every two Euros in German grocery retailing will be taken by the discounters

2007 was an extremely tough year for retailers in Germany. The 2007 VAT hike from 16.0% to 19.0% curtailed growth for some retailers and sectors, but not for all. Retailers of big ticket items, primarily DIY and furniture, have borne the brunt of this, while sectors such as clothing, perfumeries and luxury proved to be quite insulated from its effects.  With the exception of alcoholic drinks, grocers were largely unaffected as the VAT rate remained static for their key proposition.

Verdict Research predicts that by 2012 one in every two Euros in German grocery retailing will be taken by the discounters.  Of Germany’s €131bn grocery market, the main players – Aldi, Lidl, Netto, Norma, Penny and Plus hold a combined share of 42%.  Aldi and Lidl are trading from an inherently strong position in the country, with the former double the size of the latter. However, Lidl is slowly starting to narrow this gap following its policy to introduce branded goods into its stores. With the sector leader Edeka’s might behind it, Plus will be invigorated and embark on an aggressive expansion policy once converted to the Netto fascia. However, Rewe’s Penny fascia now needs attention after recently suffering sluggish performances and Rewe’s loosing out on the Plus deal. No doubt Rewe will be determined not to let its rivals enjoy all the glory and will demonstrate its commitment to the discounter with a sizeable investment to ensure it benefits from the juicy growth prospects for this segment.

Wheels of the consolidation bandwagon have begun to turn

A direct result of extremely tough trading conditions is that the wheels of the consolidation bandwagon have begun to turn. The German grocery sector, in particular has been in a period of consolidation, which was kick started by Metro’s Wal-Mart acquisition in 2006. A race for Tengelmann’s Plus chain then ensued with Edeka coming out as the winner of that bid. Rewe, Germany’s number two grocer, responded by strengthening its supermarket chain through the purchase of Metro Group’s Extra stores.

Retailers in Germany’s DIY (Praktiker, Hagebau, Toom), furniture (Lutz, Möbel Höffner) and health and beauty sectors (Schlecker, Douglas Group) have followed suit, with M&A’s made by the key players in those sectors.

Looking ahead Verdict expects more retailers to jump on the consolidation bandwagon, especially in the furniture sector given that it is so fragmented and the pharmacy market, which is currently in a process of liberalisation. A possible merger between Germany’s leading department stores, Karstadt and Galeria Kaufhof, could also be on the cards, which would create a formidable German player in European department store retailing.

Despite the push towards consolidation there remain other significant opportunities for retailers in Germany

Verdict Research has identified three main themes which spell significant opportunities for retailers in Germany, firstly the development of a more profitable ‘price plus’ proposition; second, the liberalisation of the pharmacy market and thirdly the booming organic sector which has yet to reach its peak.

1. A move towards ‘price plus’, as polarisation continues. There are tentative signs of a move beyond the hegemony of price. One example of this is Aldi passing on price increases, a first in many years, forced on it by rising food prices and cost inflation. Metro Group’s electricals division has also started to innovate and move beyond the relentless focus on price and relaunched its advertising. However Verdict is sceptical as to how far retailers will be able to wrestle the German population’s entrenched fixation with price. In some sectors particularly department stores, clothing and health & beauty, moving to a price plus proposition seems to be an attractive option, especially as polarisation continues. Over recent years luxury and some segments of clothing have effectively proven that they can be insulated from vagaries of the broader economy. Naturally German retailers possessing strong service credentials will be able to make significant inroads in the future, but the issue of price will remain the overriding factor.
2. The prospect of pharmacy liberalization, forced on Germany by the EU, would create a massive opportunity for retailers, particularly drugstore chains and grocers. Should full scale liberalisation be introduced, then the sector can look forward to a number of years of hearty growth, especially against the backdrop of an ageing German demographic. As current health and convenience trends continue their path of convergence, there is potential for a raft of new formats to appear. Initiatives such as grocers creating dedicated health zones comprising a pharmacy, organic food and a health & wellness section could become a distinct reality if liberalisation takes place. The pharmacy market in Germany could also start to resemble the UK in future and Boots could provide a model for retailers in Germany. Indeed Alliance Boots are certain to be looking at the growth potential.
3. Finally, Germany‘s green retailing sector is the most advanced in the EU, yet it still has massive potential for further growth, according to Verdict. “The trend towards health consciousness, the convergence of premium/organic ranges and convenience alongside environmental concerns offer potential for a lucrative revenue stream for players in the sector” adds Lucht.  Sales achieved by specialist organic grocers such as Basic and Alnatura reached €600m in 2007 and these retailers are performing strongly to the extent that Basic attracted the attentions of the Schwarz Gruppe, the owner of Lidl and Kaufland. While the attempted takeover had to be terminated in the face of public protests and a supplier backlash, the growth prospects for the sector on the whole remain buoyant.

Department Store sector set for third consecutive year of growth

According to Verdict Research, the Top Three luxury department store operators, Harrods, Selfridges and Harvey Nichols, have collectively outpaced the overall department store sector by a significant margin for the past six years and have been instrumental in sustaining its growth in 2007.

The UK department store market contracted in 2004 and 2005 as a result of a weak performance from market leader Marks & Spencer combined with the exit of struggling players, in particular the Allders chain.  Since then the sector has enjoyed two consecutive years of growth and Verdict Research expects it to enjoy a third in 2008.  While it is Marks & Spencer’s recovery that was a major factor in boosting the sector in 2006, in 2007 strong performances from premium operators has underpinned its growth.

Premium retailers reaping rewards of investment

Apart from market share gains, profit densities have improved at all three of these department stores.  Harrods, Selfridges and Harvey Nichols occupy three of the Top Five places for profit densities, alongside Marks & Spencer and John Lewis.

Of the Top Ten department store retailers, Harrods recorded the biggest improvement in operating profit per sq ft between 2005/06 and 2006/07 with a rise of £30 per sq ft, followed by Selfridges with an improvement of £16 per sq ft. This has been achieved by making existing space more productive rather than opening new stores.

“These retailers are creating a virtuous circle by investing in their stores and ensuring the store experience matches the aspirational status of the brands they stock”, says Maureen Hinton, lead retail analyst at Verdict Research.  “This not only differentiates them from the rest of the high street, and crucially from supermarkets’ burgeoning non-food offers, but also provides consumers with a pleasurable shopping experience that combines the convenience of having a comprehensive offer in one location with leisure and indulgence.”

John Lewis pulling ahead

John Lewis, which leads the pack of traditional department store operators, has also enhanced the shopping experience for its shoppers with store refurbishments, improved product ranges and the introduction of more contemporary brands.  These, and the success of its online offer, have been a major factor in it growing its market share from 16.8% in 2002 to 19.1% in 2007 widening the gap with Debenhams and closing in on Marks & Spencer.

These trends show that it is wise of House of Fraser to focus on enhancing its own premium positioning with its store refurbishments, the introduction of new, exclusive brands, and improved customer service.

Verdict forecasts more growth in 2008

The market leaders, Marks & Spencer, John Lewis, Debenhams and House of Fraser all have extensive store opening plans in 2008 and this will ensure market growth.  But Verdict also expects consumers to continue spending with the premium operators.  “As money becomes tighter, consumers are more selective about where they spend and are more in need of a rewarding and indulgent shopping experience to lighten their mood,” concludes Hinton.

Market maturity begins to impact Tesco 

While Tesco extended its lead over its rivals in 2007 for the ninth successive year, Verdict found that its 0.8 percentage point rise (to 27.6%) was the smallest market share gain since 2002.  It was also the first time for five years that Tesco’s share increase was less than the combined market share gain of its principal rivals (Asda, Sainsbury, Morrison and, formerly, Safeway).  While Verdict cautions against interpreting this as a sign that Tesco is beginning to falter, the retail analysts do believe this reflects a stronger competitor set and the extremely tough comparatives the retailer has created for itself.

Nonetheless Tesco continues to hold a clear lead over its rivals.  Despite signs that growing market share is becoming harder, Tesco still recorded both the largest market share gain among the leading players and, due to Tesco’s size, by far the highest cash gain in sales.  Tesco’s ambition and customer-driven approach to all facets of its business remain a potent formula.  “One example of how Tesco still eclipses its rivals is that the retailer added more space during 2007 than its three key competitors combined, while an obsession with meeting – and surpassing – customer demands ensures high loyalty levels,” says Nick Gladding, retail analyst at Verdict research and author of the report.

Big Four continue to dominate

In 2007, Verdict estimates that the Big Four – Tesco, Asda, Sainsbury and Morrison – accounted for 65.4% of the £118.2bn market, up from 63.6% in 2006, and grew their sales (excluding fuel) by a combined £3.3bn during the year.  These retailers not only outperformed the market, but also played a huge part in driving market growth, deepening their ranges in core categories, and expanding into new areas.  The success of these retailers is based on the depth and make up of ranges, a value for money mantra and strong convenience credentials.

Asda, Sainsbury and Morrison all up their game

Number two Asda enjoyed a buoyant 2007.  Achieving its strongest market share gain since 2004, the retailer now accounts for 14.1% of the market.  Under chief executive Andy Bond it has simplified its operations and made significant changes to its product offer, customer service and marketing strategy, while maintaining and communicating its low price credentials.  Furthermore, the retailer looks set to press on with the rollout of its Asda Living non-food only format and will develop an integrated online and in-store multichannel offer during 2008.

Sainsbury and Morrison have also made solid progress.  Both have been in recovery mode and have achieved like-for-like and total sales growth as well as operating profit margin improvement in 2007.  “Sainsbury has continued to develop its food offer, leveraging its brand values based around quality and value.  It is also rapidly improving its complementary non-food offer and achieved particular success with its TU clothing range”, says Gladding.  “Morrison, on the other hand is focusing on fresh food and low prices sold through its unique Market Street store format.   Indeed Morrison achieved stronger like-for-like growth over its Christmas 2007 trading period than any of its rivals as changes implemented by chief executive Marc Bolland began to make a positive impact.”

Second tier operators gain ground

Beyond the Big Four, second tier of grocery operators such as Somerfield, M&S, Co-op Group and Waitrose are also growing in scale with each now holding a market share of between 3.0% and 4.0%.  While Somerfield and the Co-op see their future in local grocery and convenience store retailing, both M&S and Waitrose have built propositions based on quality, ethical trading and value.  The merger of the two largest co-operative societies in 2007 has given the Co-operative Group a much needed boost in operational scale while M&S aims to expand its food business through new food halls in department stores, standalone Simply Food stores and forecourt franchises.  Waitrose continues to build its presence both organically and through acquisition.  All operators are keeping a close eye on Somerfield for opportunities it could offer them, given the likelihood that it will be sold during 2008 by its venture capitalist backers. 

Hard discounters grow share from a low base

Hard discounters Aldi, Lidl and Netto continue to grow share from a low base.  The three Continental retailers all achieved strong double digit or high single digit sales growth in 2007.  By improving their customer offer and enhancing shopping environments, they have boosted customer perceptions.  However, given the strength of competition and expansion plans of major grocers, discounters are set to remain peripheral to UK grocery retailing.

Outlook for smaller players is bleak

According to Verdict Research, with just one of the Top 12 grocery retailers in the UK failing to add market share in 2007, the outlook for smaller operators and independent retailers looks bleak.  “The grocery sector is rapidly consolidating and those without operational scale and a sustainable point of differentiation will struggle.  Most leading grocers now have the capacity to open sites in any UK location and independent operators have no choice but to compete directly with them for business,” says Gladding. While a supreme challenge, Verdict notes this can be done. Booths – a North-West based 26 store supermarket chain – has reported solid growth in recent years trading on its local heritage, and focusing on its core customers.  “Other small operators can follow this model, providing customers with a tailored offer leveraging the flexibility that smaller operations have over larger national competitors.”

For the survey Verdict Research quizzed customers about where they shopped most frequently, and then asked them to rate those stores in terms of range, price, convenience, quality, service, ambience, facilities and layout. The data was collated to give retailers a score for each of these criteria, as well as an overall consumer satisfaction rating.

John Lewis regained the top spot in the 2008 Index, having been nudged into second position last year by its sibling, Waitrose. The department store business performs well across a range of measures, but it is in service that it excels: John Lewis has been ranked top on this attribute since the survey began eight years ago. Author of the report and Verdict’s Consulting* Director, Neil Saunders, says this is unsurprising: “The idea of good service at John Lewis isn’t simply a fad dreamt up by management for short term gain – it’s an integral part of the business, supported by an ownership structure which reduces staff turnover and gives partners, at all levels, a real incentive to perform well. The result is an enthusiastic workforce which is knowledgeable about products.”

Waitrose, John Lewis’s sister company, came second in the Index after attaining the top ranking last year. The retailer does particularly well in both ambience and layout where consumers give it top marks. Joint report author James Flower,  Retail Analyst with Verdict Research, said that Waitrose’s score was impressive: “Because of the intense competition in the grocery sector and because most people dislike food shopping, it is very difficult for supermarkets to attain high satisfaction scores – Waitrose is the exception and that demonstrates the degree to which it really offers something different and relevant to its customers.”

Dunelm, the specialist homewares retailer comes in at number three in the Index. Shoppers rate the chain for the amount of choice available at its stores and for its keen prices. Dunelm offers consumers a comprehensive range of own-brand merchandise which helps differentiate it against other players in the homewares market. “This combination of range authority and good prices will be increasingly important in allowing Dunelm to compete against the grocers as they keep expanding into homewares,” comments Flower.

The internet retailer Amazon retains its position of fourth place this year. Customers are particularly satisfied with the depth of its range, its price competitiveness and its convenience. Amazon also scores well on service where it is ranked fourth. “Amazon constantly strives to make life easier for its customers” says Saunders, “it has one of the most effective, efficient and innovate delivery services of any internet retailer which is vital for satisfying busy consumers.”

IKEA the Swedish furniture giant comes in at number five. The extensive product choice available at the retailer’s massive stores is the primary driver of satisfaction. However, IKEA has improved its rating for convenience this year after introducing its online home delivery service.

When it comes to the individual retail sectors the strength of the John Lewis Partnership is further revealed. The department store side of the business comes top in three sectors (clothing, homewares and electricals) while Waitrose tops the food and grocery sector. In the remaining sectors, Wickes heads DIY, TKMaxx tops footwear, Amazon music and video and Avon personal care. “John Lewis is a department store in the true sense of the word” says Flower, “it has real authority across all of the sectors it trades in and this is part of its appeal among shoppers – people go there because they know they will find what they’re looking for.”

Verdict believes that over the next year, as trading conditions become tougher and consumers more demanding, building loyalty will be a key driver of retail success. “The fact is that consumers today have more choice than ever before” says Saunders. “If a retailer gets it wrong it’s very easy for a shopper to go elsewhere. It’s no longer sufficient to pay lip service to ‘keeping the customer satisfied’ – it has to be a philosophy placed at the heart of a retail business.”