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How can retailers make the most of the tough trading environment?

By Will Gillingham

Peak 2018 didn’t resemble the Matterhorn so much as it resembled a nondescript hill somewhere in the South Downs. November was subdued, while December was the worst-performing month in the entire history of the IMRG Capgemini eRetail Sales Index, let alone the worst-performing Christmas period.

The market has yet to bounce back from this trend. At the beginning of the year, IMRG issued a data-informed estimate of the predicted market growth for 2019 at 9%; the current year-to-date growth is only 5.5%. There’s a chance that the scales will balance in the second-half of the year to counteract 2018’s flattened H2, but whether that will actually occur has yet to be seen. For now, retailers are facing a rather tough trading environment.

So, what can retailers do to weather the storm? Are there any tactics which can be implemented to encourage shopper traffic at a time where shoppers are being a little more frugal? We approached our community of experts for their insight into the tough trading conditions and alighted on a number of ways to stay afloat. Let’s jump in.

A little less expense, a little more experience

Retailers and shoppers alike are keeping a slightly closer eye on their purses at the moment. And that’s okay. Engagement in 2019 isn’t wrapped up in buying and owning products; it’s more to do with relationship cultivation and brand experience.

An involved audience is a generative audience. It’s a group of people discussing your brand on social media or over a coffee, inviting friends, family, and followers to throw an eye over your wares. And the best way to get these people on your side? Service them with a riveting anecdote. Give them a talking point for their next social gathering: the story behind their new purchase, rather than the purchase itself.

To kick off this more story-driven brand experience, the first thing retailers need to do is identify that unique nuance which stands them apart.

Katie Woodhead, Head of Experience Optimisation, Attraqt: ‘When times are difficult in retail, it pays for retailers to take stock of their unique brand positioning and look to how they have achieved successes in the past. By analysing the reasons that customers love their brand and their unique product offerings, the answers to a route to success during troublesome times will become clearer. The best retailers remain resilient in tough trading environments by fully understanding their unique point of differentiation in the customers’ eye and enhancing this brand equity to the best of their ability by investing in the right mix of technology and people.

‘Being able to empower the creativity of your brand is also key during times where consumer demand is sluggish. Generating buzz and captivating consumer interest typically stems from those retailers who can think outside the box to create irresistible brand campaigns, editorial stories and product promotions that engage a diverse range of consumers.’

Once the individualism in a brand has been identified, retailers can capitalise on their unique offering by cultivating a creative experience both online and in-store. This latter, particularly, has a wealth of potential stored up in it, as evidenced by Natalia Zakel of FACT-Finder, who has pinpointed two examples of retailers who have maximised on the store’s positioning as an experience hub.

Zakel: Retailers fail not always from a lack of product demand, but because people simply aren't excited to visit their stores. Retailers can generate revenue in unique ways by focusing on the non-merchandise aspect of their business: the experience. By taking the traditional brick-and-mortar and transforming it into a space that bundles products and services, retailers can provide shoppers with an all-around experience. Ulta Beauty and IKEA are great examples of retailers, from opposite industries, who have taken on this trend and have capitalised on it.

‘Ulta Beauty offers the total beauty experience in store through their combined offerings of "All Things Beauty, All in One Place.” Shoppers can enjoy hair, skin, brow and makeup services provided by professional stylists and any product they like can then be conveniently purchased without leaving the store. Their sales for fourth quarter 2018 alone grew by 9.7% which included a 6.2% gain for salon services*.

‘In a similar way, IKEA turned the tedious furniture trip into a learning event by offering 'how-to' workshops for their customers. These do-it-yourself classes teach shoppers everything from designing their dream home to cooking traditional Swedish dishes, and Sales for IKEA's 2018 fiscal year rose 4.5%.

‘These customer-focussed retail experiences build buzz, create community, and nurture customer relationships. It also allows retailers to showcase their industry expertise, which creates trust with shoppers. And we all know that happy customers, memorable experiences, and more trust equals more sales.’

A good experience, however, is only as good as the people who know about it. In this sense, retailers not only need to craft a creative proposition for shoppers, they also need to actively communicate with customers at every step of the journey.

Shopping and wine

Speak Up

A recurring theme of modern-day retail is clarity. Shoppers want as much information as it’s possible to receive: how products are manufactured, returns costs, where their package is while it’s in transit, and everything in-between. Retailers should seek to accommodate this want to the best of their ability. Alecxa Julia Cristobal of AsiaPay goes so far as to say communication should be proactive rather than reactive.

Cristobal: ‘Black Friday 2018 gave shoppers a variety of ways to shop. It offered customers their preferred buying options, whether that be setting foot in the actual brick-and-mortar retail stores or using those platforms that allow shoppers to stay at home and scroll through the products available through web-connected devices.

‘This year, those retailers reaching out to their avid customers in the online sphere are likely to add to their expected target audience in the seasonal sale.’

But how exactly should retailers ‘reach out’? Retail has evolved into being something multifaceted. It’s now possible to purchase through social media and apps and by multiple devices, as well as the more traditional methods. And, according to LiveArea, retailers should be in conversation with the customer at each one of these touchpoints.

Shane Orchard, Head of Digital Trading & Marketing Operations, LiveArea EMEA: ‘We know that the ‘linear’ path to purchase has morphed into something much less defined. People are discovering, researching, and buying products online, on mobile, social media, and in store. Brands should ensure their social, website, and in-store teams are meeting regularly to curate a blended, consistent customer experience across all these touchpoints.

‘In-store purchases can be accompanied with prompt cards to review online or share on social media. Email campaigns can push brick-and-mortar footfall with exclusive in-store discounts or freebies. Yes, as digital commerce continues to grow and optimise, converting websites and engaging social profiles are vital. But a wholesome omnichannel approach is an excellent way of promoting brand loyalty.’

But it’s not only at the pre-purchase stage where retailers should focus their conversational efforts: customers want to hear about the delivery stage of their purchase as well. In fact, customers are invested in this process to the point where the vast majority of shipping emails are opened and read, which represents an apt (and somewhat underused) marketing channel.

Tobias Buxhoidt, Founder and CEO, parcelLab: It’s also important to remember that the customer experience doesn’t stop at the checkout. Providing a fast, efficient, good value and informed shipping service is also vital to building a loyal customer base.

‘If possible, make sure you stand out among your rivals by offering a free next-day service. If you can’t afford this, give your customers options, such as paid-for next-day delivery, along with a free standard service where goods will reach shoppers in two to three days, plus local self-collection.

‘Another way to both stand out and increase loyalty is to communicate directly with your customers during shipping to keep them up-to-date with the progress of their order and inform them of any issues quickly, along with how you’re going to solve them.

‘Most retailers let their logistics partners handle post-purchase communications. However, if you do it yourself you’ll not only offer a more personal service, but also open a new marketing channel, which will both raise awareness of your brand and encourage repeat purchases.

‘Clearly branding your shipping emails reinforces your image. Meanwhile, you can also use your order status updates to inform your customers of relevant sale items or discounts, along with suggesting complementary purchases. The fact that around 70-80% of these emails are opened by customers makes this a highly effective way of driving repeat business for relatively little cost. And, of course, these techniques will work even better when customer confidence returns.’

Engaging with shoppers wherever possible is key to having shoppers engage with you. But there’s another layer which can be added onto this engagement to ensure a committed audience is in place as and when the tough trading conditions loosen: personalisation.

Communicate

Get Personal

To be in with their best chance of customer retention, brands should cater their messaging to individuals on a personal level. Whether this be replying to Tweets, acknowledging reviews, or simply ensuring their marketing emails are relevant to those receiving them, getting down to a personal level is a good idea.

This is demonstrated in data provided by Tiffany Carpenter, Head of Customer Intelligence, SAS UK & Ireland: ‘As retail shifts increasingly online and as the consumer base watches its pennies amidst economic uncertainty, spend is much harder won. At the same time, customer loyalty is increasingly based on brand experience rather than price, which means that retailers need to focus on giving customers a seamless experience across all touchpoints, physical or digital.

‘If your customers enjoy interacting with you, if your brand feels relevant to their lives, they’re that much more likely to buy your products. Our research found that over half (54%) of shoppers expect a personalised service to include pricing, special offers and discounts tailored to their interests and needs, and a quarter (26%) find irrelevant recommendations “very irritating”. Getting personalisation right is essential.’

Samuel Kellett, Head of Content, Exponea, is in agreement, noting that the best way for retailers to navigate the slow market is in fostering loyalty among engaged shoppers.

Kellett: ‘The number of new online customers entering the market has been dropping since the 90s. The reason isn’t surprising: the number of potential new customers is limited, and only 18% of companies are focused on retention over acquisition. Even fewer are focused on the most important new determiner of growth, customer loyalty.

‘With most consumers already doing some of their shopping online, every year brings a smaller number of net new online customers to appeal to. The path to increasing revenue doesn’t involve bringing in more customers, it’s about increasing the spending of the customers you already have by fostering loyalty.

‘New advances in marketing technology have made it more possible than ever to foster this loyalty. Customer Data Platforms can un-silo a company’s data and reorganize it around the customer, allowing for automated personalisation at scale: custom recommendations and offers for every customer, drastically improving the customer experience for each one.

‘So, in short, there will be no bounce back of customers to acquire; this number will continue to drop every year. Fortunately, the age of customer loyalty is now upon us. And a focus on perfecting the customer experience with personalised communications will pay off in the end.’

Customer experience is vital to any retail proposition, particularly during the current retail climate. But there are other ways for retailers to thrive in the tough trading conditions that aren’t directly interwoven with customer experience, and the first of these is in looking at funding and pricing.

Talking

Work the Finances

As the influx of revenue ebbs slightly, it’s perhaps rather easy to put a dampener on funding projects, or, indeed, put them aside entirely, to revisit once the taps open up again.

However, Gavin Masters, Ecommerce Industry Principal, Maginus, says the best way to forge through the tough conditions is to abolish this mindset; that is, to maintain an air of agility at all times.

Masters: ‘Controlling costs and operating with an agile mindset are key to survival for businesses in trying times. Being able to shrink the amount of expenditure relative to their incoming revenue is a business no-brainer, but countless retailers have fallen into the trap of agreeing long-term, inflexible deals for liabilities such as rent, which don’t reduce when the economy slows.

‘An agile mindset also counteracts a tough trading environment by allowing a business to capitalise on an opportunity at reduced cost and increased speed. An example of this would be the ability to react to a competitor going into administration, or reacting to a new product on the market that is suddenly in high demand.

‘Financial decision makers will have to get creative to free up funds for investment and keep the wheels turning, or else retailers are going to continue to suffer a slow decline. Reluctance to spend is compounding the current suffering for retailers and those businesses passively waiting for a magical event to turn the tide back to their advantage are being deluded.’

And in regards to pricing products, retailers can look to tactically discount to reel in a larger customer base.

Thijs Algra, Solutions Consultant, Omnia Retail: ‘Apply a high runner strategy. Discount heavily on popular products to increase the number of clicks to your site as well as visits to your physical store. Once you have this traffic in your store, present consumers with up-sells and cross-sells on less price sensitive products at full price. This is where you make your margins.’

Tactics such as these are offered on the premise of UK ecommerce. However, looking across the borders, there exists a wealth of opportunity which isn’t necessarily being stoppered by economic uncertainty.

Money

Looking Overseas

Brands with the capacity to do so may consider looking cross-border to temper the current trading conditions.

This is the viewpoint of Naqel Express, who have visibility on Middle East trade, and have recently seen a wide adoption of western products.

Anita Hayward, Country Head UK, Naqel Express: One option for retailers to approach the tough trading environment domestically would be to look to other consumers internationally and potentially to markets they may not have considered previously. For example, in the Middle East, annual e-commerce growth is at least 30% and e-commerce is still less than 2% of the GDP contribution so the market still has great potential for growth.

‘Furthermore, for the key markets there - Saudi Arabia and United Arab Emirates, B2C shipments have simple customs requirements with low customs duties and VAT. In addition, the local population is drawn to UK and western brands associating them as being on ones of quality or on trend. Therefore, the fact that in countries such as Saudi Arabia, they have a young population (70% of the population under 30 years old) with high buying power, smartphone and internet use, can truly offer retailers a viable alternative market to their more traditional trade lanes.’

And reversing the picture, data from eShopWorld shows that UK shoppers themselves looked overseas during 2018’s peak, further clarifying the opportunity which cross-border commerce represents.

Scott Lindsay, Head of Marketing, EMEA, eShopWorld: ‘While Black Friday may have been sluggish from a domestic perspective, UK shoppers were very active shopping across borders during peak, a trend that was consistent globally. Data eShopWorld released showed that cross-border global e-commerce sales grew by 35% across major markets during the 2018 peak pre-Christmas shopping period (November 15–December 20) year over year, with sales growth led by the UK, Canada, Australia, Mexico and Germany. In Mexico alone, cross-border online sales grew by a massive 120% year over year during the pre-Christmas peak, with Australia recording 44% growth.’

But the cross-border question is one which some retailers don’t have the means or resources to ask. For the homegrown retailer who’s looking to be domestic for a while longer, is there a definitive path to follow? Well, it’s by no means definite, but online retail continues to grow at a faster rate than its physical counterpart. Homing in on ecommerce optimisation may provide that much-needed uptick.

Shipping

Bolster Your Online Presence

For some retailers, refining the online store has a chance of giving profits a nudge in the right direction. This assertion comes jointly from eShopWorld and PFS, who both voice their support of online’s continued expansion.

Scott Lindsay of eShopworld: ‘The tough trading environment stems from the shift in retail channels, and in spite of the dramatic headlines, this is an area where retailers have a lot more control over their own destiny. The majority of purchases are still made in store, but online is where the real growth opportunities lie, both within and across borders. This shift shows no sign of reversing, so in fact this challenge brings real opportunity for retailers who have the appetite and the ability to invest in their online offering.’

Joe Farrell, VP International Operations, PFS: ‘Yes, retail growth in the UK overall is declining, however it's not consistent across all sectors. For many ecommerce verticals, including health & beauty, clothing and home & garden, sales have actually been increasing for the year. According to the IMRG Capgemini Online Retail Index market results for April 2019, the Health & Beauty sector has experienced 8.5% growth, Clothing 3.7% and Home & Garden 9.8% for the year to date.

‘The time to start prepping for 2019 peak readiness is right now. Retailers who struggled during the holiday peak period in 2018 must address any forecasting, supply chain or systems issues that may have contributed to the poor performance. But as the growth of ecommerce continues to affect shopper behaviour and the typical retail calendar, it's important that ecommerce retailers look more to YoY growth to track performance rather than just looking to peak as the success indicator moving forward.’

Until such a time as shopper confidence returns, a state of optimisation and refinement should be in place: garnering an engaged audience is the name of the current game, and those brands who intrigue and coax in the passing customer should see themselves flourish before long.

Laptop glow

In Summary

Modern day retail is a little less about the product, and a little more about the brand. Shoppers want to share the beliefs of the brands they buy from; they want to experience something new; they want to be spoken to.

In these slightly slower trading conditions, these things matter that much more: after all, an engaged audience is a buying audience, no matter whether that’s now, or during peak, or at some future point when the retail growth scales seek to balance themselves out.

Retail, more than ever, is customer-oriented. And here it is, a second smooth transition in so many weeks: IMRG are hosting a conference on 26th dedicated to understanding the behaviours and preferences of modern-day shoppers. If you haven’t yet done so, book your place at Customer Connect 2019. It’s geared up to be jam-packed full of expert insight.

Will Gillingham, Content Manager, IMRG

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