Retail is claimed to be in its worst place ever. According to the latest Retail Sales Monitor from the BRC and KPMG, overall retail sales in the UK decreased by 0.1% in 2019, compared with the 1.2% growth in 2018. Many people have written how there were more losers than winners in 2019. There have been some real surprises in the mix this year.
Previously standing out from the crowd in offering a customer first experience, the biggest surprise is the position that John Lewis find themselves in. After the years of digital and instore innovation that they have brought to their customers and stand out Christmas TV ad campaigns, one wouldn’t have expected them to be in a position where they would be profit warning and uncertainty over staff bonus’.
Rather than just understanding the specifics of why brands have succeeded or otherwise, it is first important to recognise why retail sales are down overall. Clearly consumer confidence is at an all time low.
Even though consumers disposable income hasn’t dropped when comparing 2018 with 2019 (in fact it has increased by 1.4% year on year), the uncertainty with the economy has caused the public to reign back their spending. In 2020, I expect the average disposal income to remain relatively flat if not decline with Brexit on the horizon on the 31st January. This means retailers not only have to face increasing competition and high street costs, but also a reduction in the wallet or purse size that they are attempting to get a share of.
So how can retailers get on the front foot and learn from the tales of 2019 to ensure they can have a prosperous 2020? Here are some thoughts based on where retailers have succeeded and faltered:
Join up the digital and instore customer experience
With falling footfall in combination with shopping behaviour showing more people research offline prior to purchasing online, the high street must be looked at look differently. With many brands having to close high street stores, the multichannel retailers who are succeeding are looking at the store dynamic with a different lens. Many leading brands have broken down the barriers of a siloed P&L, enabling offline store to be experiential shopfronts which can complement online. JD Sports revamped stores using a range of technologies to make shopping easier have understood how they need to change with the times.
Have a product that caters to your customers’ needs and desires
Whilst John Lewis may fail to honour their annual bonus’, Greggs gave their staff a surprise with a £300 end of year bonus. This is off the back of a stellar trading period, with sales up by more than 8% year on year. This has been driven by the launch of their highly popular vegan sausage roll, with Greggs realising the increasing uptake in people taking a vegan option. On the flipside, Marks and Spencer’s continues to suffer especially on the fashion side, criticised for not moving with the ages. Brands who will do well this year will (like Greggs) have spotted the latest trends and will be well ahead of the curve with developing new product ranges or approaches to fulfilling products. A great example of this will be brands taking an eco-friendlier socially responsible approach to retailing.
Use promotional vehicles at the right time
Many brands have attempted to be less reliant on promotions, trying to increase margin without supressing sales. However, in the current climate, such is a dangerous strategy especially where loyal customers of established brands habitually expect them. Traditionally a strong vehicle for sales growth, was Argos moving away from 3 for 2 on toys a root cause of their sales decline? Retailers need to understand the effectiveness of their promotions, including impact on overall basket size, margin and customer lifetime value before disposing of them or reducing their frequency.
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