Retail Pulse Report: UK Consumer Confidence, Grinch Bots, and the Death of Generational Marketing
UK shopper confidence and a US shopper survey may give insight into why the economy is not so bad but consumers are still down as we get ever closer to Holiday 2024.
This week’s coverage of retail happenings is meaty, mostly because I refused to let many stories go by and had some things to say along the way. A bunch of UK retail indicators were published last week, but as usual delivered a mixed bag of results. I found some high quality research and some research with questionable interpretations (I did ignore the survey found that consumers were ready to spend and that this will be blow-out holiday season. While I hope that is the outcome, so far all the more realistic surveys and forecasts are much more conservative. Careful how you project forward the stated intent of “1,000 consumers” in any country).
I also did finally cover some GenAI that is focused on product description and images. We need to be careful about how image generation technology is used for product images. I found a lot of retailer news, including Bed Bath & Beyond’s return to brick & mortar, sort of. Let’s dive in.
Retail Economic Indicators
If last week was all about holiday predictions, this week is all about the UK when it comes to retail economic indicators. UK retail sales volumes reached their highest level since July 2022, and increased by 3.9% year over year. This was not generally reported as good news, as the opening of the report focused on month over month, where August sales increased 1% and September sales increased 0.3%. However, in general, once you get past back to school spending, fall sales tend to slow down almost as a deep breath before holiday season spending. So it’s not so helpful to look at month-over-month comparisons (it almost never is when it comes to retail sales). But when you compare the 3.9% increase to inflation, which came in at 1.7% year over year, this is actually really great performance.
None of that matters if consumers aren’t confident, and UK consumer confidence dropped in October to -21, according to the GfK index. Personal finance changes in the last year dropped one point to -10, and the consumer view of the general economic situation of the country during the last 12 months was down 5 points to -42. However, the future is slightly brighter, with forecasts about personal finance up one point to -2, which is six points higher than this time last year. Inflation may have contributed to these small signs of emerging optimism, but its impact may not be long-lasting: the fall in inflation was driven mostly by falling energy costs, but a cap that helped that along will expire in October so it remains to be seen if those benefits will continue.
Retail Tech & Research Data
Ibotta, a performance marketing platform for grocery, released their 2024 State of Spend, based on a survey of over 5,000 US grocery shoppers and 400 CPG marketers. I like these he said/she said surveys, because it’s always pitifully easy to find very large gaps between what consumers say they want and what marketers say they think consumers want.
There were a lot of good stats in this one, too much to cover here, but one key area that held some very interesting perspective came from the perception of the economy. Consumers reported that their overall perception of the economy rose by 1% in 2024. This isn’t exactly how Ibotta reported it but it is what the numbers say. In general, the consumer vibe has been doom and gloom, so I was startled to see that this was not reflected in the survey. However, you didn’t have to scroll too much farther to understand why the answers vs. the vibe appear to be so different. For consumers, last year 51% thought they would be better off in 12 months. But now only 34% say they are better off today than they were a year ago. Only 36% of consumers say inflation is slowing and that things are improving. When we’re all trying to figure out why things are better – not great, but better – but consumers are still down, this may be why: an expectation gap between how much better things should be vs. how much better they actually are.
CPG marketers are more sanguine about the economy, in what looks like a risky disconnect: 72% of marketers say inflation is slowing and things are improving. If you don’t match the consumer vibe, your brand messages will fall flat.
One more disconnect to cover in tech or consumer research, but this one will be familiar to long-time readers. Consumers say a lot of things in surveys, but that doesn’t mean they actually act on any of those things. HubBox, an eCom software company, conducted “original research” with a little over 1,000 US shoppers. They found that 53% of US orders arrive late, damaged, or at the wrong address. Breaking that down, 27% were delivered late, and 15% went to the wrong address. My favorite stat, however, is that 30% of the shoppers researched were annoyed by packages left with neighbors they don’t like or don’t speak to. That’s kind of sad – nearly 1/3 of the US shoppers researched hate their neighbors more than they hate the risk of porch pirates?
But here’s where things diverge from “actuality.” 49% of the shoppers researched say they are considering out of home delivery collection points to overcome poor delivery service. 53% say they expect money off their order if their delivery is delayed. 63% expect delivery charges to be completely waived. 54% expect a free delivery code for their next order. And 25% say they will return an item if it is late.
Call me a skeptic. Behavior does not reflect these sentiments. First of all, 53% of all orders are wrong in some way? That error rate is unrealistically high for retailers to be OK relying on the service, and for any parcel carrier, with razor-thin margins, to stay in business. Second, of course consumers want money back for mistakes. Do they get it? This is me laughing hilariously. Of course they don’t. Do they stop buying when they don’t? Of course not.
AI & Retail
Google announced a bunch of new AI-based shopping features, which they will be releasing over the next several weeks. They’ll use AI to show the most relevant products. And an AI-generated brief will appear when consumers search for a category, detailing the top things to consider when researching a product, plus targeted products that could meet their needs. This part is interesting to me, because I think retailers often skip over that top part of the funnel where a consumer is educating themselves about “if I want to buy this product, what are the important things that I should now about” which is exactly the part that this summary addresses. It will be labeled as generated by AI, too.
I’ve seen a few other announcements from Google, Adobe, and Amazon about AI-generated product images, either taking a 2D image and making it appear 3D and rotate-able, or replacing the photo’s background with an AI-generated image. Or generating what a product would look like on different sized models. I think these are all cool and interesting – as long as the original real-life product shot is not lost. And I can see a future where mandating that at least one image in a product listing be a genuine real-life photograph of the object is required.
In less potentially creepy news, Amazon is planning on equipping 1,000 electric vans with an AI package retrieval system. They’ve developed what they call AI Vision-Assisted Package Retrieval, or VAPR – it was originally developed for fulfillment centers, but the company has adapted it now to work in vans (no small feat). VAPR will project a green O on packages that are to be delivered at the next stop and a red X on everything else, eliminating the need to sort and group and resort and group as a driver progresses through their route. Early tests showed 67% reduction in perceived physical and mental effort for drivers and more than 30 minutes saved per route.
In news that is definitely about the dark side of AI, AI-driven attacks are on the rise, and retailers are in the spotlight. Imperva, a Thales company focused on cybersecurity, reported the top 3 types of cyber attacks being powered by AI:
Business logic abuse (30.7% of all attacks) - exploits the legitimate functionalities of an application or API to carry out malicious actions, like manipulating prices or abusing discount codes or bypassing authentication
DDoS attacks (30.6% of all attacks) - leverages AI to coordinate large botnets more efficiently
Bad Bot attacks (20.8% of all attacks) – these focus on credential hoarding or inventory hoarding
API violations (16.1% of all attacks) – exploits vulnerabilities in APIs that let attackers gain unauthorized access to sensitive data or functionality
I had to look up why bad bots were a thing that anyone would want to do, and ended up down the rat hole of Grinch Bots, which hoard inventory during the holiday shopping season, focusing on very hot items (I knew people did this, I didn’t know they were called Grinch Bots – but also, I never thought of them as “hoarders”). They’re basically ticket scalpers except for the hot holiday toys or sneaker drops that they can then scoop up and resell for 2-3x the original price. From cybersecurity firm Radware, from 2022, they estimated that up to 97% of all online traffic to retailer login pages during Black Friday and Cyber Monday come from bots. Ugh.
Retail Winners and Losers
My favorite article of the week comes from Adweek and is titled “Generational Marketing is dead and rather irrelevant.” My term for this phenomenon is “uncategorizable” which may be inelegant, but captures the same intent. But what the author, B Lalanne, brings to the table is how digital marketing and the all-ruling Algorithm really makes generational marketing irrelevant. Some choice quotes:
“Clinging to these outdated segments is not just lazy—it’s inefficient, inaccurate, and can be dangerous.”
“[G]enerational labels have never been scientific because they are actually a socially constructed shorthand used for convenience. In an era where an algorithm delivers a piece of content to a 20-year-old and a 52-year-old with equal ease, the assumptions made about underlying generational divides are obsolete."
"Platforms like TikTok, Instagram, and YouTube place little weight on your age; they prioritize content based on your behaviors and interactions. This algorithmic focus on behavior over age is flattening the generational divide, creating shared experiences across age groups, which in my professional opinion is incredibly dope."
So what do we do about? The author has some suggestions. Read the article.
Across multiple geographies, including supposedly polite Canada and Japan, staff abuse by shoppers is on the rise. It started coming out of the pandemic and just hasn’t stopped. In the UK, Retail Trust, a charity organization, has launchedfree training to help store staff deal with abusive behavior. They published a study that covered ground I think every retailer should already know: nearly half of shop staff surveyed (1200 workers in the UK) say they don’t get enough support from their employer, 80% of staff and 90% of managers say they have faced abusive incidents, and 64% said it came when they confronted a shoplifter. Retailers don’t do a good job training store staff how to interact with customers in general (if they invest anything at all). But any training on how to de-escalate, redirect, or generally handle abusive customers should now be a base expectation. And not have to be provided by a charity.
Amazon is evaluating its many experiments again, and the Amazon Today delivery service is one that has not made the cut. The service offered to connect Amazon.com orders to local in-store inventory for same-day delivery. Amazon Flex drivers were supposed to drive to the brick & mortar location to pick up and then deliver to customers, but the service never garnered enough volume to fill up a Flex driver’s car, which pretty much doomed the service.
Back to the holiday season, this is your reminder that Singles Day still exists – 11/11 – and also that it’s under the same exact holiday season pressures driving October sales from Western retailers. Alibaba has already kicked off Singles Day direct sales. But one big difference between Singles Day and Prime Day sales is the sheer volume that Singles Day can drive, even in October and three weeks before actual Singles Day. Alibaba reportedly racked up $140 million worth of Apple purchases within the first five minutes of launching sales, and saw similar demand for Lululemon. It is a force to be reckoned with, even when overall demand in China has been faltering.
Target has announced they are cutting prices on 2,000 more items heading into the holiday season. This brings their total to nearly 10,000 item price cuts this year, after nearly 8,000 cuts in May. This round focuses on food and beverage, everyday essentials, and holiday home décor and gifts.
Bed Bath & Beyond will be making a brick & mortar comeback through a deal its parent company Beyond made with Kirkland’s. I did not put this in the Store Innovations section as it is hardly an innovation. And I’m not sure if this is a winner or a loser story. Beyond will invest $25 million in combined debt and equity into Kirkland’s capital position and in return the retailer will become the brick & mortar operator and licensee for new, smaller Bed Bath & Beyond locations. This follows another Beyond deal that paid $40 million to The Container Store to add Bed Bath & Beyond storage assortment to the company’s own.
Store Innovations
While on the one hand, Amazon is closing down innovations like Amazon Today, on the other hand it is touting its Amazon lab store. I’m really confused by this one, because Amazon had previously announced that it was shutting down its Just Walk Out (JWO) technology, but I guess that was actually just the Amazon Go stores? And the JWO tech in the Whole Foods stores they had started to roll out to? The company is apparently still pitching the tech hard, and coincidentally (perhaps) right after a major JWO competitor – Grabango – abruptly closed its doors. Go figure.
And my second favorite article this week is about… Foursquare. Remember that app? It gamified trips to stores and let you check in often enough to become the “mayor” of a location. I don’t think I’ve paid attention, except to wistfully reminisce, since sometime in 2009, but apparently, in 2014 the app split into two: the Foursquare City Guide and Swarm. And now the City Guide is coming to an end. The company is going to focus on Swarm going forward. Swarm makes money through its Pilgrim SDK that other companies like Uber, Spotify, and Airbnb use for location-based features that work based on knowing where a user is automatically. Apparently, this service drives $100 million in revenue, so no surprise it’s the app that wins. In the announcement, the company hinted that some features of the City Guide will make its way back to Swarm, which include some of those gamification features that launched the whole thing ages ago.
What Did We Learn This Week?
We learned that UK consumers are not confident now, but are slightly more optimistic about the future. We revalidated why you want to look at year over year sales comparisons and not month over month, as the UK did better in September than monthly comparisons would suggest. I also learned that one more plausible explanation for why consumers are in general so pessimistic is because they keep expecting things to get better far beyond what we’ve achieved. You can point to how much things have improved, but if consumers still feel like they’re missing out, that’s not going to help change their minds.
I’m late to the game but I learned about Grinch Bots. It still feels like an awful lot of work, and capital investment to buy the goods, when oversupply or one product recall could destroy your opportunity for that 2-3x return. And finally, I’ll call out that the solution to abusive shoppers is not to kick them out or prosecute, but to find ways to remind them to be human. If it takes a security guard to do that, so be it. But train your people! Training is always cheaper than dealing with the consequences of a lack of training.