Value in retail

The new value paradigm

As Australians grapple with the deepening cost-of-living crisis, retailers are faced with a pivotal moment to reassess the concept of value and its expanded significance for consumers, especially as we approach the holiday season.

In the current economic climate, consumers are facing the reality of dwindling disposable income and more of their earnings being directed towards servicing the essentials in life. Compared to last year, 60 percent of Australians report spending more on necessities like utilities and 38 percent on mortgage and rent, according to the November 2023 Australia Pulse Survey by FiftyFive5.

With this shift in priorities, retailers are bearing the brunt of a redirect in spend: one in five are spending less on entertainment, one in four are less likely to drink alcohol while out in a venue than this time last year, and we are less likely to be visiting large retail stores, instead favouring the bigger discount retailers and pharmacies.

As consumers reevaluate what is “essential spend”, they are doing so not in the vacuum of a cost of living crisis only. Changes in culture are impacting our future behaviours at retail – and getting ahead of these changes is where retailers will reap the most reward.

Understanding the evolving value equation

It is well understood that the definition of value is the everchanging trade-off between how much a consumer pays, price, and what they judge a product or service to be worth.

The value equation is made up of two facets: the price paid, which goes beyond dollars to include our time, our attention, our energy and increasingly our data, and how well that price marries with our needs at that moment in time.

The new value paradigm looks at where our needs are impacted by the transformational drivers that influence the culture in which we live. We tend to focus on the economic pillar to define value. However, this often comes at the potential detriment of the impact on our needs from the ever changing societal, technological, environmental, and political drivers of change. How consumers define value is therefore in a state of constant flux, shifting with the cultural climate at any given moment in time.

Australian culture stands at a crossroads, with the 2023 Collins dictionary word of the year, “Permacrisis,” reflecting the enduring chaos in the world.. However, there’s an opportunity for retailers to deliver hope and optimism by embracing a broad range of socio-cultural drivers across the retail landscape.

Value in local over global

Initially we had no choice but to accept local brands at retail, with the lockdowns and supply chain restrictions around the world. The big shift is we are now loving local. Buying locally is now driven by a desire to support the Australian economy, local businesses, and communities.

It also comes with a recognition of affordability, which is critically important as cost-of-living soars. And many consumers believe buying local is the more sustainable option.

This shift is evident. Two in five Australians are shopping in local stores according to the FiftyFive5 November 2023 Australian Pulse Survey and consumers are perceiving local companies as having a stronger sense of purpose.

AI and tech advancements delivering personal value

The advent of ChatGPT has taken AI into the mainstream at a rapid pace. Where it took 16 years for the internet to reach 100 million people, it took 2 months for ChatGPT.

Rapid digitisation is transforming retail and AI is set to augment the human experience. We will continue to see value in immediate, seamless omni-channel experience. But delivering personalisation or infinite individualism – that many consumers will come to expect – comes with a data privacy trade off, as the uniquely “yours” retail experiences move to the mainstream.

Meeting the values of younger generations

In the next decade, soft and financial power will be transferred to Gen Y and Z. They will make up the majority of the political landscape and workforce, bringing with them their values on equality, environment and social justice.

They will consume with intent – demonstrating wallet activism and conscious consumption aligning their retail experience and expectations with their values that prioritise ESG. Increasingly, socially and environmentally conscious demand is pushing the industry to explore circular models at scale.

Value in new models and innovation

New innovation in retail is challenging models of the past. Concepts like the sharing economy, peer-to-peer commerce, gig economy and new unregulated currencies like crypto all signal value in reinvention. ‘Re-commerce’, for example, is in full swing. New circular models are on the rise, with rent and resale economies on the up. Facebook Marketplace alone saw a 72% YOY increase in second-hand listings in Australia in 2022, according to its owner Meta.

Many of the retail models and constructs we have today were born in the industrial revolution era of the past. We are entering the fifth industrial revolution; one built on technology and changing cultural values. Where experience at retail is challenged, we will continue to see models of old reinvent, and continued industry innovation to get ahead of consumer needs at retail.

Michelle Newton is head of cultural forecasting for Fiftyfive5, part of Accenture Song.