Street Life trends
With consumers tightening their belts and the growth of online, experts examine the future of the retail sector.
Analysts calculated a 0.5 percent sales volume fall for April, but the Office for National Statistics revealed this week that the slump was less drastic, curtailing at a 0.2 percent drop. Retailers might not be feeling the pinch as immediately as expected, but it remains pertinent that retail sales fell in successive months for the first time in more than two years. Now, consumers’ frugality is starting to show itself.
Despite growing consumer prudence, retailers can ride the storm, according to Live and Breathe chairman Adrian Watts, although he argues some will be better placed than others to do so. “People will still need to feed and clothe themselves,” he says, before tempering that the way in which we stock up on these essentials is liable to change.
Watts reasons that premium outlets will hardly be affected because people with above average incomes won’t be hit as hard. At the bottom end of the scale, he says, “the likes of Aldi and Netto should perform well because they’ve built a solid proposition centring on their reasonability”. He has less confidence for those retailers who find themselves in the middle. “M&S, for instance, can’t suddenly lower their prices and compromise the quality of produce, because they’ve spent so long hammering home this message of quality food. Once you’ve got a fruit salad on the shelves at four quid, which will now be too rich, you can’t suddenly change the product because cheapening the produce would go against the whole positioning.”
While the figures for April show that, across the board, retail has not performed as poorly as expected, food stores are feeling the pinch. Sales volume for food retailers fell by one percent during the month, with some statisticians already signifying a noticeable shift in the food market to the discount sector.
Gratterpalm managing partner Gordon Bethell, suggests that, with mounting consumer cautiousness, and the growth of online food stores, our conventional definition of what a supermarket should be is about to evolve.
“Supermarkets will mould themselves around growth areas,” he predicts, noting that we’ll see them less as mere places to stock up on food supplies and instead as more rounded outlets. “As an example, gardening is a big growth area at the moment, so more supermarkets will probably add that to their in store offering soon.”
Larger goods can’t be stocked without extra square feet though, and Bethell believes that bigger stores, albeit then heavily compartmentalised, could be the future for this flagging sector. “The crucial thing is that supermarkets have to avoid being bland. This compartmentalisation will be crucial; I’ll walk into a store with an amazing CD or video offering, or a great beauty section. At the same time, it will also still fall under the retailer’s single brand umbrella. We’ll see stores within stores.”
While larger, tailored outfits may be the route for some retailers in the future, consumers’ immediate priority is to hunt out bargains in the face of rising prices. “Whatever happens economically in 2008, the desire to shop is still very much with us,” assures John Sanders, managing director at McCann Erickson Brand Response. However, he suggests that it isn’t just the credit crunch that is stoking our desire for a good deal.
“This consumer focus on getting a genuine bargain has also been fuelled by the internet, where it’s incredibly easy to get price or product comparisons,” Sanders explains. “Many retailers even offer better prices over the internet, and of course it’s all from the comfort of your own home.”
“This is certainly backed up by the success of the High Street retailers’ online stores. Boxing Day was the busiest day of 2007 for online retailers, and a study by Hitwise shows that online stores from high street retailers such as Argos, Comet, Currys and Marks & Spencer received twice as many hits as their online-only rivals.
Extraordinarily more than four million people bought goods online on Christmas Day last year with sales up 269 percent on the previous year.”
There is much dancing around the figures that show online retailers cleaning up at peak times, not least Christmas last year. While it’s all very well talking up days like ‘Mega Monday’ – last December’s online spending stampede, figures are harder to ascertain to determine how web stores are performing year round. It is accepted though, that for some products, the beauty of the hassle free couple-of-clicks online purchase is gazumping the pedestrian high street.
Sequoia managing director, Carl Whitney, affirms that internet shopping is a blessing to many of us as it works around our increasingly hectic pace of life. “The internet is convenient for people because a lot of us have much less disposable time now. Many people purchase online purely for its speed and convenience and for the fact that we don’t need to trudge down to the store.”
It’s isn’t all doom and gloom for the high street, according to Whitney though, who reasons that, “some shoppers still enjoy those stores for not being as faceless as their online counterparts”. For this to resonate though, Live and Breathe’s Watts says that stores need to have well-versed staff.
“An informed sales advisor, not on commission, would give high street retailers more approachability, and the human touch that the web lacks. They can also act as the clincher in a sale which is also something the web is missing,” Watts says.
Ultimately though, with retail pickings currently slim, Whitney doesn’t believe the high street and the web should be struggling against one another. “Online and traditional retail have to work in tandem. A retailer’s communications should drive consumers to both the store and the website because there are some items that are the same wherever you purchase them; a CD will be convenient enough to buy online, but for the more bespoke item, you probably still want to go down to the high street. It is, therefore, imperative to cross-promote.”
In testing financial times, it’s perhaps difficult to pin retailers to the kind of investment necessary to instigate a sales upturn.
And while many have their theories about where retailers need to spend their money in store, including maximising fixtures to ‘sell-on’ to shoppers only making the odd purchase, Ledgard Jepson MD, David Exley, says above all else, financing good marketing remains paramount.
“Ensuring the brand stands out is key to customer recognition and confidence but it is essential that retailers ensure that product availability and reliability are there in order to delight the customer and not disappoint,” Exley says.
“Investing in driving consumer loyalty is crucial. Being in personal touch with your customer is the most effective way of encouraging repeat spending from your most valuable customers. Marketing methods need to become much more sophisticated though to ensure the right message is reached by the right target audience or else,” he warns, “it’s investment down the drain.”
And right now, with no retailer in any position to throw its money away, convincing clients in the sector not to drain their budget is the formidable challenge that faces all agencies with retail marketing agendas.
The crunch, it seems, will be felt by all.