Social licence: Retailers that reflect shopper values to win big

Australian consumers want to shop brands and retailers that align with their values, research shows.

Consumers are increasingly shopping brands and retailers that reflect their own values around issues such as the environment and sustainability, with companies that best reflect this gaining shoppers, sales and better returns. Picture: NCA NewsWire/Jenny Evans

Consumers are keen to shop with retailers that align with their own values, with more than half more likely to buy a brand if it aligns with their views, generating a valuable opportunity for retailers that can reflect the values of their customers.

Embracing a “social licence” isn’t just a feel-good factor, with the growing importance of consumers seeking out a relationship with businesses that reflect this trend to grow returns for retailers.

These values can be built around issues such as sustainability, energy use, waste, sustainable packaging and data privacy.

In a note from Jarden, analyst Ben Gilbert says Australian shoppers are 56 per cent more likely to buy a brand if it aligns with their views.

“Embracing social licence should grow return on invested capital. A Harvard Business Review report found only 23 per cent of customers have a relationship with brands, with these customers having around three times the lifetime customer value of those that do not, while Bain & Co found a 5 per cent lift in retention drives a greater than 25 per cent lift in profit,” Mr Gilbert said.

“Having a social licence is a brand being accepted and respected by its stakeholders – staff, shareholders and customers. We believe that by embracing social licence, brands can build greater customer loyalty/engagement to drive higher sales/returns and ultimately improve brand value.”

In 2021, Australia’s five most trusted brands were also some of the most valuable, the analyst added, including Woolworths, Coles, Bunnings, Aldi and Qantas.

 

The Jarden report said consumer engagement with brands could typically be split into two categories: awareness and affinity.

“Awareness is how many consumers know about a brand and affinity is how much consumers care about a brand – this drives loyalty and sales. To build affinity brands need to embrace social change. Most brands are doing this via various strategies, but a significant opportunity remains.”

However, a review by Jarden found that while consumers value social licence, ultimately this needs to be balanced against experience and the value proposition. The risks include poorly executing implementation.

“A good example is the removal of single-use plastic bags by Woolworths in the first quarter of 2019, a period when sales slowed as the initiative was brought in too quickly, frustrating shoppers.

“It is now accepted practice, with more than 2 billion plastic bags per annum out of circulation for Woolworths.”

Mr Gilbert said consumer companies have long embraced social licence. However, in the age of digital and Gen Z, brands needed to be more strategic in building social licence and how they embrace it.

“Consumers want to shop brands they relate to. By building brand around social licence, we see scope to lift retention and engagement. This is important for return on invested capital.”

He said it could also help drive culture by attracting and retaining the best people, with a study by LinkedIn finding 74 per cent of candidates preferred to work in a role where their work mattered, and Deloitte finding that almost 9 in 10 of millennials believe that “the success of a business should be measured in terms of more than just its financial performance”.