17 Oct 2019
Are we about to reach the lowest point of retail?
By Will Gillingham
Its October. The clouds amassed over London dont seem to be going anywhere. In fact, if anything, theyre thickening up. It only seems to rain when you step outside, optimistically wearing canvas shoes with your umbrella still hanging on the peg in the hall. The reds and oranges of early autumn have become well-trodden mush, and people have flocked to the Tube in such inconsiderate numbers that you can no longer turn the page of your sodden Metro for fear of slopping the text against three separate passengers coats. Misery incarnate, isnt it? Well, while were here, we may as well go the whole hog. Online retail isnt having a brilliant time. Sales are sliding like a glacier (slowly and resolutely), and if you were to assemble all the retail headlines this year into a patchwork collage, you could probably name the piece melancholia and win some sort of reflective art prize: both December 2018 and July 2019 reported the worst sales growth of their respective months ever; the Electricals sector has been in decline since December; in August, the Home & Garden sector trudged to its worst result since 2015. Retail is the limbo game at the party which nobody wants to play anymore, but for some reason the bar keeps getting moved down. Can it go lower? Is there a lowest it can reach? A veritable nadir? Are we, in the final stages of 2019, on the cusp of bottoming out? There is a light flickering in the gloom which could be a healthy peak period. Or it could just be an angler fish, ready to swallow what chance remains for a comeback in 2019 and seal the year as one to forget. We approached experts in our community for their insight on the close of the year “ heres what they had to say.The Bad News
From twenty years worth of data-tracking, IMRG has identified a trend which spells trouble for this years peak period: the first ten months of the year tend to foreshadow the final two. In other words, peak doesnt operate independently of the climate. Shoppers arent suddenly instilled with carefree festive cheer as soon as November comes along, ready to pull on their purse-strings “ instead, the frugality is more than likely to continue, despite the widespread discounting. This is supported by Paul Durkin, Director of Home & eFulfilment, Wincanton, who notes that on the eve of November, confidence among UK households has fallen to a 3-month low. Durkin: Recent findings show confidence among UK households has fallen to its lowest in three months, according to the latest IHS Markit household finance index, and show British households have grown more cautious in their appetite to make major purchases, while concerns over Brexit and a possible recession also make households increasingly pessimistic. The competitive landscape has never been more ferocious across all Sectors and those players without a clear differentiated offer, loyal customer base and agile supply chain will continue to suffer. We are seeing a greater focus on inventory efficiency (depth and breadth) and increasing acceptance of collaboration models sharing Fleet, Property and People to improve cost to serve and customer proposition. Courtney Wylie, VP of Product & Marketing, Mention Me, agrees, showing that the British population have fallen out of love with brands and marketing: Global consumers increasingly distrust brands and marketing as highlighted in Edelman's 2019 Brand Trust Survey, and, coupled with Brexit, this will no doubt have a knock on effect on consumer shopping habits, and the impact may well be felt this Christmas. In short, this years peak period isnt expected to be a strong one in terms of sales growth, and December 2019 may well succeed last years as the worst on record. However, every cloud has a silver lining, and while the one hovering over this years peak is dense and unforgiving, what it could mean for retailers as we head into 2020 is a far brighter prospect.
The Good News
There is still going to be a whole lot of buying occurring across the peak period. Not only that, but more than half of those doing the buying wont ever have shopped with that brand before. What this means is that peak this year, while likely being unremarkable in terms of growth, could be exceptionally rewarding in terms of being a loyalty mechanism. This is argued by Mike Harris, International Vice President and General Manager at Bluecore: This Christmas season may well be a low point, but retailers can take action to avoid falling victim to this trend. It all comes down to the ability to gather insights from customer data and take action accordingly. The retailers who can do that will be well-positioned to re-engage first-time festive buyers after the peak season ends and skyrocket growth heading into the new year. Data reveals that retailers see a spike in first-time buyers during the peak season. Retailers that use data effectively (e.g. by targeting shoppers with relevant product recommendations based on site behaviours and predicted interests) to re-engage those first-time buyers and drive them to make a second purchase contribute to an increase in second purchases during the first few months of the new year. Critically, driving these second purchases delivers significant short and long-term revenue growth for retailers, as converting one-time buyers into two-time buyers increases customer lifetime value by 130% and improves the likelihood that shoppers will make yet another purchase by 95%.
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