The UK retail scene is going through one of its most dynamic phases since the birth of the department store and the supermarket.
Everywhere you look there’s innovation, experimentation, and increased competition.
Here are just four areas of challenge for retailers in the run-up to Christmas 2015, and beyond.
Training the customer to chase discounts
Friday 27th November will be this year’s Black Friday which falls annually on the day after Thanksgiving. This will be followed by Cyber on the 30 November.
Last year many UK retailers were thrown into chaos due to their customer’s massive response to 20 per cent -30 per cent discounts a month before the peak present-giving season; maybe they should have anticipated this, especially given the sales history in the USA.
The problem is that UK retailers have opened a Pandora’s Box in following the USA. The sporadic use of the ‘pre-Christmas sale’ by weaker retailers has been transformed into a full-on discount war led by the major players.
Customers have been trained to wait for discounts and this is reducing profitability. Compounding the problem is the squeeze being put upon high streets by excessive business rates, car parking charges, retail parks, and click and collect and home delivery competitors.
Connecting bricks and clicks
The John Lewis Retail Report 2015 ‘How we shop, live, and look’, is an excellent document and it provides some fascinating insights into middle-England’s evolving shopping behaviour. In his foreword, chief executive Andy Street said: “Looking ahead to 2016 we expect shopping to become even more omnichannel, with ‘master shoppers’ becoming increasingly mobile-savvy, and apps and websites becoming faster, slicker and more intuitive.”
Source: John Lewis
Street’s reasoning comes from the fact that 60 per cent of the traffic to johnlewis.com originates from mobiles, and mobile revenue grew by 68 per cent last year. Nowadays two thirds of JLP customers use both physical shops and online channels, and the number who purchased from both channels increased by 9 per cent. Click & Collect is now the fastest growing method of shopping, accounting for over half of online orders.
Depending on the product category, JLP ‘Master Shoppers’ are interacting frequently with the brand and social media channels are becoming steadily more important.
Meanwhile there’s a hive of activity across the spectrum as retailers race to improve their offline and online presence and the links between them. Argos, another long-standing high street denizen, is working overtime to avoid going the way of dinosaurs Woolworths and Comet. Argos in the process of turning itself into a ‘click and collect’ and home delivery retailer, on top of its traditional catalogue in-store high street warehouse format.
Source: Trusted Reviews
And it’s not just ‘bricks’ retailers who are scrambling to win the convenience war. Amazon is still a market leader at this with its Lockers, Prime delivery service and it’s roll-out of Prime Now. This is the service providing delivery within one-hour for £6.99, or within a two-hour, same-day window for no additional cost, from 8am until midnight to Prime members.
In a first for Amazon the offer includes both chilled and frozen foods which must be sending a shiver down the spines of supermarkets with home delivery services.
Smaller on-line retailers who aren’t yet sure if a ‘bricks’ presence would be profitable could give their customers a live experience of their brand through a pop-up shop, perhaps located in one of the big shopping malls or retail parks. Filling their occasional empty shop space with an exciting new brand would enliven the visitor experience and could lead to a lease if sales justified it.
There are three retailers in the Radley Yeldar ‘Fit for purpose’ top ten published in October 2015: Lloyds Banking Group, M&S, and Kingfisher. Perhaps this isn’t surprising as it’s the FMCG and consumer durables brands which have being doing the most in terms of the visible area of sustainability.
Source: Radley Yeldar
However it looks as if fast-rising retailer Aldi has opened up a new front in the CSR arena by making the treatment of employees a factor. In the July 2015 budget the national living wage requirement for over-25s was raised to £7.20 per hour.
In October Aldi, at which half of Britain’s households shop, announced that it will introduce their new £8.40 minimum hourly rate from February 2016, regardless of age. In London Aldi will pay £9.45 an hour. Overall, about 5,000 employees out of 28,000 will get a pay rise. This is a clever move because not only will it attract employees from competitors from amongst whom Aldi can recruit the better talent, it’s also adding a ‘fair trade-like’ dimension to its brand. Ethics are increasingly on the consumer’s radar when it comes to purchasing decisions and we are seeing a rise in swapping to ‘good’ brands on the high street.
Source: International Business Times
A couple of years ago it was hard to get marketers excited about data protection despite the increasing pressure from regulators. Fast.MAP’s 10th annual survey in 2014 showing the discrepancy between the customer view of key issues and those of marketers should have been a warning that was heeded:
Now, following the TalkTalk debacle, and the M&S near-miss, it’s an issue staring nearly all companies in the face. As the move to add ‘clicks’ to ‘bricks’ accelerates, increasing numbers of retailers are collecting and warehousing customer data, often of a sensitive nature. The fact that a 15 year-old and now a 16-year-old have been arrested as suspects in the TalkTalk hack confirms the suspicion that marketers find data protection too dry a subject to be concerned with.
They have been too happy to leave it to their colleagues in IT without appreciating the reputational risks involved. We’ve seen the same sort of thing happen with serious customer complaints such as the one against Thomas Cook, where legal counsel have countermanded the natural instincts of chief executives and chief marketing officers to apologise, settle generously, and move on.
These four challenges are just some of the ones facing retailers. But there’s an overall concern about the UK being ‘over-shopped’. High streets are moving rapidly to become places largely populated, at least in better-off areas, by retailers with a significant element of service to their propositions. Hence the proliferation of cafés, restaurants, hair dressers, nail bars, estate agents, and fashion shops.
Retail parks and shopping centres face daunting competition from click and collect and home delivery operators. The retail environment is going to be tough for several years until the transformation to ‘omnichannel’ is completed, satisfying the ‘Master Shoppers’.
Hamish Pringle is strategic advisor to 23 Red. He tweets @hamishpringle