retail trends 2017

Retail trends to watch in 2017

There is no disputing that 2016 has been a tumultuous year for many retailers, corners have been turned, green shoots have appeared and store doors have closed for the last time. The question is, what will 2017 have in store for retail? Here we set out our thoughts on what retail trends in 2017 will be creating a buzz.

The grocery sector in the UK is worth a staggering £180bn so any minor bump in the road can have significant financial implications for the retailers in the sector and for the consumer. The key trends we predict are not surprisingly centred on price, costs and driving margin per square foot.

  • Price architecture will dominate promotions. Opening price points that are competitive across all the grocers including the discounters will be a focus much like Tesco’s Farm brands offer. Remember the backdrop will be price inflation caused by Brexit and the consequences of fuel price hikes.
  • Sainsbury has acquired Argos and will be using it as a margin enhancer rather than a traffic driver. All the grocers will be looking for ways to grow store margins that don’t depend on price increases. Volume led events will be one way to achieving that.
  • The ebb and flow of innovation suffers in times such as these. Volume is king as retailers rationalise ranges to gain clarity and increase margin from suppliers by driving item volume. The fewer items a retailer has, the more potential they have to enhance volume and therefore margin. Next year’s battle will not be won on price alone however.
  • Retailers will be looking to reduce the cost of the labour charge to offset the increasing national living wage commitment. The balance will between easy wins like anti-social pay rates and social conscience and bad PR. The more sophisticated retailers will look to reduce complexity in-stores and streamline tasks, to genuinely give more time to stores. It’s not easy to do though and we would expect a period of operational weakness as better processes bed in and resistance to change lessens.
  • The use of technology available to customers will explode in 2017. Some will be heralded as the future of retail, but none of them will be. Hype and PR driven, they could be highly promising but none will payback in 2017. The only exception will be revenue earned from suppliers who have been asked to fund some of the development and execution.
  • Online grocery is still in its infancy and will continue to grow in 2017. Investment in online sales and infrastructure and tech to support it will be more than can realistically deliver a return and the risk is that store investment could fall short, leaving stores under-invested, and customer service exposed.
  • Space will be filled in larger format stores by known footfall and profit drivers. Expect to see reviewed and possibly renewed collaborations in the grocers on a store by store basis dependent on demographics. The results could be a mixed bag of store offering.

 

The luxury retail sector is just as susceptible to economic ripples as any, but that impact can be somewhat cushioned by international trading. With Brexit comes another scenario and we expect Luxury brands and retailers to be looking to protect their brand positioning and build on developing consumer shopping channels.

  • As the country becomes increasingly worried about the BREXIT impact there will be some slow-down in the purchasing of high value items and more people will adopt the purchase cycle from the recession of ’08 – ’14 where they are more selective about their spend and more likely to try own label / tertiary brands.
  • We expect a high degree of direct marketing from Luxury brands next year as they seek to grow the portion of online trade from 5% to 18% by 2020. They will need to improve their platforms and their ability for customers to purchase particularly on mobile.
  • The “See now Buy now” effect will further accelerate mobile commerce. Burberry are an early adopter have some of the best technology to enable this. More retailers and brands will follow in 2017 as they seek to engage with their audience faster to beat fast fashion retailers to the sale.

 

2017 will inevitably see more facias close on the High Street as economic pressure persists. These will be brands that have not differentiated, innovated or created a good value proposition for their customers in a price savvy market. The risk is brands employ short term tactics to the detriment of long term strategies.

  • The weakened Pound will negatively impact margin in 2017, pushing up prices to consumers and forcing retailers to add value to their range. The retail environment, customer service and personalisation will have to come into focus to compete with the value retailers that stand to gain.
  • Interest rates have nowhere else to go except up, increasing mortgage payments and credit. A cut in disposable income will put pressure on retailers to maintain prices but with cost increasing too, we expect to see retail closures in 2017. More pension fund deficits will inevitably come to light leaving retailers with a hole and nothing to fill it with.
  • Tourist purchase power will offer an opportunity to retailers in tourist hot spots if they are agile and adept enough to react. New ways of embracing technology to reach international customers will abound.
  • Staycations will be attractive in 2017, UK holidays to UK citizens will appear relatively cheap. Local tourism has an opportunity to ride the wave as do retailers in travel hubs. The downside is fewer UK travellers for the airlines and travel companies.
  • Exports will continue to rise and those retailers that are brave enough may feel they have a burning platform to push expansion outside of the UK.
  • There will be a significant focus on what the fast fashion brands will do to react to ‘see now buy now”. Currently they have approximately six months before the catwalk collections hit the shops, to create their own versions. But this time frame will be eroded in the future. So they will definitely want to sharpen their lead times, but there will obviously be a limit if they are going to wait for the catwalk. Therefore, we expect brands to start their own cat walk campaigns, as Top Shop have, and recruit designers to lend their name to ranges.

For retailers to navigate the uncertain path that Consumers will carve, agility and creativity will be the key skills they will need to nurture. Take the assets that they have and make them as relevant and as productive as possible.

Nothing is more certain than change and 2017 will see the retail landscape change. If you want to know which retailers are likely to struggle in 2017, simply walk the shop-floor in a number of stores in the same week, and then visit their competitors. You cannot hide the neglect in corporate strategy or the failure to execute it on the shop-floor. In this space everybody can hear you scream, if they know what to listen for.

 

Tesco focused on the business of grocery

The resurgence continues with a third positive LfL quarter in a row and shows profits growing. Project Reset appears to be doing exactly what it promised.

The offer that Tesco puts forward has evolved yet not significantly changed, it has been rationalised and the flow of goods on the shop floor made more accessible, simple changes, executed well.

The clearly defined store shopping missions, seeing customers journeys broken down into eat now, eat later today, top up and full shop is not only sensible, it is also effective. This in turn informed the Tesco range rationalisation and price architecture clarification which will have significantly helped customers navigate to the product they want more easily, thereby improving sales.

tesco farm value pricing

Price perception has been helped significantly with the Tesco Farms brands and despite media mutterings, the customers aren’t feeling misled, they are feeling well provided for with a product that meets price and quality needs. Tesco read the need and supplied it.

Away from the shop floor in the board room, the side show of the accounting fraud and the fact that 60 shareholders are potentially suing the company for loss of earning to the tune of £150M is just that, a side show. The best way forward is concentrating on the growth of the business and delivering value to the shareholders the only way they can. We don’t think it will be long before the skeleton is buried.

There are big steps still to take, the offloading of fringe businesses such as Giraffe, Euphorium Bakery and Harris and Hoole coffee shops lays a marker for concentrating on the core retail offer. Curious then that they have just climbed into bed with Holland and Barret for a 6 store shop within a shop concept.

tesco prosecco crisps

Can Tesco maintain the momentum through the vital Christmas trading, particularly when Morrisons are displaying some green shoots, Asda are being defensive and Sainsburys has a new ally in Argos? With the discounters’ growth slowing, Tesco do have an opportunity to push again on price should they need to and will no doubt have a rash of offers lined up to deploy tactically.

Dave Lewis has been the breath of fresh air that Tesco needed, an inside voice would not have dared to rip up some of the flights of fancy of previous regimes, Lewis has been the right man at the right time and while he remains focused on selling groceries, and not be distracted by any side shows, we see no reason why Tesco should be positive in the next quarter too.

Sainsburys footfall

Sainsburys footfall is falling short

Sainsburys has reported another slip in like for like sales which echoes the drop in market share of 0.2% points in the latest Kantar data.

This is not the Sainsburys we have come to know over the last few years, this is a new Sainsburys that is facing up to a resurgent Tesco and Morrisons. In the next 12 months Asda will also start to regain its footing, and Aldi are in fighting talk mode, standing by their pledge to be the lowest priced grocer.

Quite simply, Sainsburys footfall is falling short.

Sainsburys brand building marketing is admirable however what it is not doing is driving footfall into the stores and sales are flagging as a result. Typical footfall driving activity you would expect in UK grocers involves price and multi-deals and what is missing from Sainsburys marketing is price messages.

We are quickly approaching the most marketing-dependent sales period, Christmas, and while the Sainsburys marketing campaigns of the last few years have been acclaimed for their artistic merit, they have not delivered.

The Christmas ad will already have been signed off but we sincerely hope that this year it has product at its core. Not a cuddly cat, not a single bar of chocolate, a family Christmas meal that reinforces the brand and quality messages, but also gives us a really clear reason why we should go to Sainsburys for our Christmas food shopping this year.

The other opportunity to be grabbed over Christmas hangs on the clothing rails. In the past we have lambasted the TU clothing offer: poor merchandising, confusing communication and availability issues, and as yet we are still waiting for something to change.

The addition of a TU Premium range shows commitment, but the success of a range does not begin and end with good design and buying. It must be deliverable in store with processes and customer service to support it.  Attention to the in-store execution of TU clothing could give Sainsburys a very welcome margin boost.

We fear that the Argos takeover has distracted the leadership team from the core business of grocery retailing. Our next concern is that the plans to increase the number of supermarkets with an Argos concession before Christmas will now distract the retail teams.

Of course a £1.4bn purchase will be distracting and the pressure to ensure that it delivers a return will be immense. However, at what cost to the core business?

Sainsburys has huge brand equity but it is value-less without footfall to drive volume and sales. The challenge to convert that equity into sales in on. There are opportunities to be had, but speed is key. Our advice, keep it simple Sainsburys. Don’t keep adding little twists. If the main ingredients aren’t right, no amount of little twists will help.

next facia

For the good of the long term strategy

When profits are falling you could be forgiven for looking for quick fixes. But taking your eye off the long term strategy is where trouble lies. Step forward Next and John Lewis.

Yes, Next and John Lewis have reported weakening profits making headlines in retail press, and shaking city prices, their figures a barometer for general merchandise retailing, a guide to consumer confidence and an indicator of what a post-Brexit economy could look like. However while many frown at he short term outlook, we smile at the long-term growth potential.

After a profit impaired 6 months of trading Next outline plans to accelerate store opening plans; counter-intuitive as Lord Wolfson admits himself. John Lewis profits have also been hit but they too are looking longer term, investing in price, customer service and staff pay.

Both businesses are positioning themselves for when current economic pressures are lifted, positioning themselves for growth.

It’s tough out there and when it gets tough, most businesses’ outlook shortens and you look to the financial year end and not too much further.  Price cuts to increase volume and revenue, job losses to reduce costs, and then what? There is only so much fat to trim before you start cutting into muscle.

Next are talking about price increases to protect margin, their numbers indicating a drop in volume from higher prices is better for profit than a margin cut. John Lewis are talking about fewer partners, but ones who contribute more to the business. Both strategies indicative of a ‘more from less’ approach, be clever about how you use our assets.

While much noise is made about falling profits, it is refreshing for us to see the confidence these businesses have in their strategy and the purposeful way it is communicated. While markets may rock in the short term, long term is where the returns lie.


For advice about your long term strategy and how Retail Remedy can help you plan in the short term for long term growth, please get in touch.

 

Sports direct peterborough

Sports Direct, a soap opera with a happy ending?

Sports Direct is turning into a soap opera, another story to tarnish the retailing industry. From the reports we have read, the Sports Direct AGM this week was a culmination of badly timed PR stunts, hot air and bluster.

The Chairman Keith Hellawell, offered to resign, was asked to stay, was given a vote of no confidence and then offered to leave in a year if he was still doubted.  This is symptomatic of a business that is in turmoil and what is needed above all else is strong, fair and consistent leadership. What is missing at Sports Direct of course is strong, fair and consistent leadership.

In principle the proposition is sound, buying up brands and end of lines at a heavily discounted cost and offering them at very competitive prices in a no frills environment. Perfect for the target customer. In reality many of the brands are tertiary, the savings feel arbitrary and the stores are confusing enough to bring on migraines.

sports direct in store chaos

So where does Sports Direct go from here?

During the open day, journalists were invited to walk through part of the warehousing facility. It was explained that they had seen only a fraction of it and it might require a staff member to walk a mile to pick one item for a website order. Based on that, we would suggest one direction Sports Direct could go is automated picking.

In their plans is the statement that they want to be the Selfridges of sports retailing. Never say never but there are probably only a couple of people that believe that is possible as the business stands today and those people are on the board. It will take more than a wad of £50 notes, Mr Ashley.

sports direct email

Sports Direct online is another story: email campaigns that attract attention with quality images and brands; rolling offers that convey a sense of urgency to buy today and faultless home delivery. The downside is the negative PR that will undoubtedly affect sales online.

Online, ranges can be collated in multiple ways. For instance, a customer can shop by brand, by product type or by sport which effectively presents the customer with lists that are easy to navigate.

Sports Direct Nike wall

In store it is altogether more complex: by brand within a product group within the football locker. It’s sensible but is challenging to communicate and is only executed well in part.

Sports direct range confusion

At the moment customers might be feeling resentful that they are shopping at Sports Direct, supporting unfair working practices, and without change the real danger is that they will go elsewhere. If Sports Direct don’t sort it out, they will be opening the door for other retailers.

With change, with a move towards an instore experience that echoes the ecommerce experience, with better working practices and with auto-picking, Sports Direct are a force to be reckoned with.

Can’t wait for the next episode.

Introducing Amazon Dash

Can the grocers compete with Amazon?

Amazon Dash, another weapon in Amazon’s armoury to steal market share from the Grocers adding to Prime and Fresh and seemingly creating an impenetrable wall. Can the grocers compete? Should the grocer compete?

Dash on its own, in its current format will not even make a dent. However what it is doing is a remarkable job on brand awareness for Amazon itself who will be the biggest winner and for the brands represented by Dash. (How many photos have you seen in the press of an Ariel Dash button?)

Amazon Dash Ariel Button

It’s a marketing gimmick. How many people take up the buttons and dot them around their houses is almost irrelevant. What is relevant is that Amazon are shouting loudly that they are serious about grocery and have the coffers to weather any storms that might come their way.

Amazon will not convert supermarket shoppers into Prime customers outright. They may encourage some to add Prime to their shopping channel portfolio and use Fresh but the supermarket will still be their grocery shopping channel.

The more interesting battle field is the online grocery market. At the thinner end of the online grocery market share chart there are retailers with smaller share and slimmer margins that can’t afford to lose any of their slice to Amazon.

Amazon Dash Andrex Button

As with all things in grocery, we know that fighting head on does nothing except tick a box and weaken the core offer. Matching prices erodes margins, limits customer abandonment temporarily, but does not grow sales. Adding faster and cheaper delivery options adds cost and complexity but does not grow sales.

What does grow sales is a quality offer in an interesting and inspiring environment at a price that the customer deems as good value for money.

It sounds so simple doesn’t it?

So to answer our own question, yes the grocers can compete with Amazon, but on their own terms, not by replicating the Amazon offer (at a higher cost to themselves than Amazon).

Play your own game, do what you are good at, innovate not imitate.

 

RW_Asda

Is it too late for ASDA to reignite its innovation gene?

The limping ASDA ship has a new captain and for Sean Clarke’s first trading update, it could be no worse.

It is too soon for the new CEO to have had any significant impact but a 7.5% decline in like for like sales is apocalyptic. At least the statement has acknowledged that ASDA has a problem rather than glossing over declining sales with a ‘gross margin holding up’ brush. Sean Clarke’s brief will be clear, get your feet under that table quickly and get a plan on the table. There won’t be a honeymoon period for Sean Clarke: it’s a case of get in there and power up the defibrillator.

The decline has been like watching a car crash in slow motion; Aldi and Lidl took Asda’s place as the lowest priced grocer in the UK and ASDA were unable or unwilling to react. By the time they realised a crash was inevitable, it was too late.

The discounters had already convinced price savvy customers that they were not only cheaper but also offer good quality, making their goods excellent value for money.

ASDA must win on price. It is the core value of their business. Price deflation will continue as will further investment in price by all the grocers. The price war is far from over. ASDA will come back fighting on price but price alone will not be enough. The value for money formula has got to be key.

ASDA arguably have the biggest and best clothing business of the four supermarkets, strong non-food and a good core business of grocery and fresh. Stores are efficient and systems strong. But the shopping experience feels soul-less.

ASDA colleagues were the retail giant’s greatest asset. You used to feel a real point of difference from the colleagues in an ASDA store creating a palpable difference, a fun and engaging experience. ASDA invented and brought retail theatre for the masses, but then hit pause and watched others pass them by. The innovation gene was put to sleep and left the retailer just a bit boring.

Absolutely there must be a challenge on price, but bring back the customer experience. Make shopping fun again and give us a reason to choose ASDA.

Crantock-Beach-copy

Tourism, the forgotten realm of retailing.

Postcard from Phil Dorrell, partner, Retail Remedy.

Tourism would do well to follow what retailers have long known: in order to be successful they must follow one overarching simple rule (the number one rule in our retailer’s rules to success as it happens), “Listen to your customer”. Think what they need and then go all out to provide it above all competition. Do that, as complicated as it might be and you will grow a profitable business.

Numerous retailers crash and burn every year as they fail this simple rule. It’s easy to convince yourself that you are delivering great service and that your feedback is good, our customers love us, yet the truth is we find out too late that being on the okay list means you are on the down-slope. If you are not reaching to go beyond customer’s expectations and build on that constantly then you will at some point be overtaken and lose ground and eventually your business.

Tourism is the same but unfortunately the number of attractions, sites, events and local tourism boards who do not get this is rather sad.

In commercial terms it just needs someone to step up to the plate and they will clean up.

For example,  if I was Crantock Beach on Newquay’s south side in Cornwall I’d be going all out to make sure I knew what people wanted. Toilets that worked, showers to wash the sand off a beach user, covered parking, electric car charging points, a decent café with people who understood food service, an improved option for the hire and assistance of Kayaks, Surf-Boards, dog drinking fountains, etc.etc.etc. The list is off the top of my head and based on a short visit asking nobody.

I’d do these things because I know it would make the place THE destination, where I could expect a better return for people staying longer and coming more frequently. I am sure numerous such places have a broad set of stakeholders yet this does not stop High Streets, shopping Malls and European beaches offering an improved service, they know to do so is commercially wise.

It’s not just beaches though, it is virtually every visitor attraction I have visited whilst on holiday in Cornwall. We’ve loved it, yet the truth is as a UK tourist you have to put up with a lot, that in this day and age, is just wrong, and that always means lost revenue and lost advocacy.

Remember, all retail wants is constant footfall, all tourism needs is constant footfall. Drive this with great facilities and make it easy for people to spend time and money in your location. If you do not stand out in a good way then as purses tighten so will your business.

independent next

What Next for Next?

Next reported an uncharacteristic drop in sales in its first quarter and Quarter 2 could be even more disappointing.

What has changed in the last 3 months? Not much. The weather in June was dreadful, the country voted to leave the EU and we are talking ourselves into weakened consumer confidence.

So is there now a case for Next to look inward to its strategy and try a different approach?

marketing week next

It has been held in high regard as a leader in fashion retailing in the UK and there should be no reason why that opinion should change. Yet, there does feel to be a degree of complacency about Next.

If we were being critical we could suggest that Next are in danger of heading in the same direction as Marks and Spencer. The fashion starts to become a little samey, the website a little uninspiring, and the prices a little short of good value for money when value clothing is forecast to outstrip the rest of the clothing market.

But being generous, the Marks and Spencer customer did head in the direction of Next so its offer was more compelling. Next would do well to now look at that offer and consider where it is positioned in the market and remind customers what it has to offer rather than assuming they are loyal.

There isn’t very much retailers can do about the weather or the Brexit effect so if consumer confidence continues to dip, how can Next counter the effect?

We would suggest that Next looks at the product:price dimensions of its offer and consider how those levers can be pulled to protect sales and hold margin. Considering the forecast growth in value clothing Next might consider a value range for core fashion essentials. Bigger buys and good quality fabrics can deliver the value for money that customers will be looking for.

next next day

Delivery options are a battle ground in grocery and we can see this heating up for fashion too. Next already offer a competitive same day delivery service and click and collect giving Next a point of leverage that few can replicate.

Finally the stores themselves are a competitive advantage if the in store environment can be optimised. Next have some big stores with space that could be used for fashion shows, product launches or collaborations with some of the designer labels they already work with.

Next is not about to crumble, it is a strong retailer that has resisted difficult trading conditions well in the past. There is no reason to suggest that Next are not strong enough to trade through whatever the market has in store for the coming months and years with a little introspection and some creative thought.

sainsburys mission format clothing

Growth in Value Clothing opportunity for Grocers

With the risk of a downturn in consumer confidence and a predicted boom in value clothing, the grocers have a fantastic opportunity to grow clothing sales and market share, which in turn opens up potential to better utilise excess space.

The risk of a significant impact on retail spending as consumer confidence falters is very real according to the BRC and law firm Bond Dickenson’s latest retail employment monitor. Also reported this week by Verdict Retail is the report predicting growth of 23.6% in 5 years looks quite possible.

As confidence diminishes, and spending is reigned in, consumers will be looking for better value for money in their clothing purchases, which implies cheaper prices. However, they are not looking for poorer quality or fit which places retailers in another margin squeeze.

Retailers already established in the value clothing sector are well placed to grasp the sales opportunity and maximise scale to achieve the quality and price consumers are looking for.

Key for grocery clothing is how it is marketed and merchandised to the consumer. Quality is still a critical facet of the purchase decision and if the environment in which the product is offered is cheap, then the value perception will be affected.

We have been critical of Sainsburys in store clothing offer in the past and are still waiting to see consistent improvement. However, online TU clothing is a very strong offer: trend-led edits, fast changing ranges (although that is a perception from the edits and regular website refreshes) and good value endorsed by Gok Wan.

tu clothing online

https://tuclothing.sainsburys.co.uk/

George at Asda and F&F have a way to go to take advantage of the value clothing boom and could lose out if they do not up the pace significantly in the coming 12 months. We have seen poor use of space in store, weak ranges and some uninspiring product in the past.

What must happen to take advantage of the value clothing trend is a translation of the online communication and messages into store. Alongside this, staff training and in store operations must be optimised to provide customer service at every point adding value to the proposition which will reflect on the value perception of the product.

The opportunity therefore is not so much in price, rather in value and environment and that is where margin can be supported. Value clothing retailers can use merchandising techniques, range editing, clever buying and fast fashion to achieve growth. Any retailer with any degree of complacency will miss the boat.