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Fragile retail budgets: agencies please handle with care

By Anna Bravington, Director of retail

May 17, 2018 | 6 min read

The ONS Retail Report told that retail sales fell in the first quarter as a result of the poor weather keeping many shoppers indoors. That slump on top of a difficult Christmas for many is starting to show – recently we're had the loss of staple brands like Toys R Us, and there are big names like Carpetright and Mothercare teetering on the edge. It feels like the 'death of the high street' omens are coming to fruition.

High Street

However, it's not all bad news, March's snow actually helped boost online spending as UK online retail sales grew by 18.9% year-on-year, and online sales in general have soared over the past five years, from 11.6% 2012 to 24.1% 2017.

Looking at the brands that have fallen there is a clear pattern of those that have put their head in the sand and not embraced a changing market. Agencies have the challenge of helping retailers shift their mindset from the high street to an online, or omnichannel, focus… and how they do it without costing the retailers a fortune.

The smaller picture

These are the 'dipping the toe in the water' situations. If a retailer is struggling to allocate the budget or is just unsure of changing direction, an agency needs to think about what they can do to offer a quick win, or a small project to help ease the retailer's mind. To an agency the adoption of digital strategies may seem obvious, but retail clients don't always have the digital know-how or experience to see the full picture, so need to be guided so they feel confident spending their budgets.

Consider small steps to start the omnichannel journey by implementing a simple online stock check on a retailer's website to offer some transparency to the high-street store, or perhaps a small Facebook remarketing campaign just to start showing the effects paid advertising has. These projects won't have as big an effect as spending £6k a month on paid advertising, or a full omnichannel experience, but they will offer some physical proof that these methods work, increasing retailer confidence, and they can then increment the budget accordingly.

Don't reinvent the wheel

When I first entered the digital industry many moons ago, we developed our own CMS systems in-house as the ones available on the market weren't really that good. But technology moves on, the market is full of fantastic CMS systems, it's universally acceptable these days to use a pre-built one as a base for any website.

But there are other areas that it's still not mainstream to use outside technology. For example, if a retailer wants to have an omnichannel experience they need to connect their systems together so data is synchronised and equally available across every channel. A development agency will probably be able to architect the most amazing integration between a retailer's systems, but the cost will be reasonably high – so it's important for agencies to think about how they can reduce budget impact by using technology that already exists, eg integration and automation platforms.

In software-as-a-service/platforms-as-a-service, the market for cloud-based software is growing – market research company Forrester suggests the total global public cloud market will grow another 22% in 2018. All of this means that the choice of good-quality, cloud-based services is growing and can be a very cost-effective method of offering retail clients advanced services and functionality.

Don’t run before you can walk

Recent research from Begbies Traynor (an insolvency specialist) tells us that 43,000 retailers are experiencing ‘significant’ financial distress after a tough first quarter. This includes high-street staples like New Look and Select who recently announced company voluntary arrangement (CVA) proposals and store closures.

Begbies Traynor partner Julie Palmer said: “The UK high street has been having a torrid time of late, with the Beast from the East, growing competition from online rivals, higher staff costs, rising business rates and declining consumer spending, pushing many retailers to the point of no return.

"With competition on the high street fiercer than ever and sales volumes expected to be flat at best this year, those retailers with sophisticated delivery options and a strong multi-channel offering are likely to come out on top. At the same time, any businesses who are still playing catch-up on the technology front, or have failed to grow their customer base or invest in modernising legacy systems, are only going to lag further behind the pack.”

These are wise words Julie Palmer. I believe before trying to take on Amazon or striving to be a market leader, it would be better for some retailers to get their basics right.

With less than a third of retailers offering customers even a simple online stock-check (this includes big brands like John Lewis and Mothercare), the best course of action is to take care of the smaller, crucial stuff to get to a level playing-field before leaping into bigger digital projects such as AI and chat bots.

Agencies need to help lagging retailers catch up on their technology shortfall, but after a tough first quarter budgets are going to be tight. Working on smaller projects with a good return-on-investment (ROI), achievable key performance indicators (KPIs), and most importantly thinking about innovative ways to solve problems that will allow those budgets to stretch further. These are key to helping retailers keep up with the marketplace and consumer demands.

It’s important for retailers to adapt to their customers, but it’s equally important that agencies adapt to their retail client market. In this fragile market, agencies, please handle those retail budgets with care.

Anna Bravington is director of retail at Talisman Innovations

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