airport retail

Location and the retail marketing mix

 

airport retail

We know the phrase ‘Location Location Location’ and the impact it has on house prices, the effect it has on fuel prices if you are on the M6 and the fact that retailers can differentiate on price if you are shopping in a convenience location like a train station or airport.

The advances in technology and tills means that many retailers could set a different price for every store. Higher prices have been charged in convenience locations, where a retailer ‘takes advantage’ of the fact that a customer in that location has less choice and will pay a higher price in order to purchase the item, thus boosting the retailer’s profits despite higher rents in premium locations.

The recent revelation that retailers request boarding cards in airports is not a matter of security but rather a way to reclaim tax, has brought into question the ability for a retailer to differentiate its prices and to deduct tax at airports for customers travelling outside the EU.

The short answer is yes, retailers can have different prices for the same item and could pass the tax saving back to the customer. There is a longer answer though which considers the retailers ability to be competitive, the cost to operate in premium locations, and the knock on effect to other locations such as High Street convenience stores.

This recent revelation could have a far reaching impact on price strategy for retailers and what impact it might have across the whole offer. If prices are reduced in convenience locations, how will shareholders be guaranteed returns on investment when margins are therefore cut? Dixons and WHSmith have said the price at an airport is part of a pricing mix which enables the retailer to offer the best price it can to the customer across all locations. A change in price in one location will therefore offset another price elsewhere.

The airport retailing debate will continue with probably little change to prices but possible change to in store process, following Boots’ lead. The customer may understand the reason for price differentiation and be tolerant of it as long as there is transparency. Mobile use in retail gives the customer easy access to price comparisons between retailers and there is no reason that this shouldn’t be possible between locations using geo-location technology.

Retailers can also utilise geo-locations for marketing purposes. For instance, Morrison’s has completed a trial of location marketing to promote its fresh produce, targeting customers within a 5 mile radius of a store using geo-location technology. The results are reported to be excellent and open the way for a more location based marketing strategy and a way for retailers to compete by location with a message unique to them and beyond that of price.

Location has always been critical to a retailer’s success, being where the customer is when they want your product, and this remains the case. Customers will not stop making last minute holiday purchases at airports because they now know the reason for showing boarding passes, they always knew the prices would be higher there than elsewhere, but they may have second thoughts for a short time. But if one retailer changes its pricing strategy others will inevitably follow.


For help with your pricing strategy or marketing mix, give us a call.

BHS sale

Why fashion needs a rethink on the High Street

BHS sale

The assumption that recovering consumer confidence translates directly to recovering high street sales is now outdated. High Street like for like sales slipped again in July for the third consecutive month while bars and restaurants faired better. The old economic model no longer works.

Habits are hard to break and just because the consumer has a little more cash in their pocket at the end of the month doesn’t naturally flow that they will be spending it on the High Street. Fashion makes up a large percentage of high street spending and, as is often the case, the weather hasn’t helped summer sales this year, but the changing shopping behaviour we have seen in the grocery market is also working its way through to other markets and fashion is not immune.

Consumers know that at the end of the season retailers will mark down summer clothing. The problem is that the end of the season coincides with the weather starting to warm up and the start of the school summer holidays. Compound that with a typical British summer which is warm but rarely hot, often wet and sometimes just cold and it shouldn’t be a surprise that High Street fashion sales are weak.

Customer shopping behaviour is also shifting online and while most are offering ranges online, the seasons are still out of sync with the needs of the consumer.

The buying seasons are wrong. The principle of convenience shopping in grocery is that you can buy what you need when you need it. Translating that into fashion, buying summer clothes when you need it, means the customer will buy during the summer sales. If summer fashions were launched later, just before the point that those fashions are to be worn, retailers would benefit from more profitable sales, customers would benefit from better availability.

Some retailers have benefited from the changes in grocery shopping behaviour over the last 5 years, and there will be early movers in fashion who will also benefit in the long run but any shift in buying pattern will have to be coupled with another compelling reason to buy if it is to compete with other retailers in sales mode.

The question is who will rise to the challenge? Perhaps Next which is already very clear in its promotional calendar? Perhaps a discount retailer like Primark that has strong pricing all year round? Perhaps a dark horse bubbling under the radar with less to lose like PEP&Co? Time will tell but not before another few months of sales decline we predict.

 

The #Ribenagate fall-out for Tesco

ribena

Tesco announced that it will remove added sugar Ribena cartons from its shelves in a bid to combat childhood obesity yesterday and caused a media storm in the process. Good PR or bad decision making?

The reasoning behind the retailer’s decision is admirable: a bid to reduce childhood obesity, and follows from the removal of confectionery products at the till. The move has the potential to push brands to invest in new product development and research to find alternative products that meet taste and quality standards but are also better for us, especially if other retailers follow suit.

At the heart of the ranging decision was a good PR story.

However given the social media fall out yesterday, the good PR story was turned into a joke that other retailers have the opportunity to benefit from.sainsburys ribena ad

Tesco were ridiculed for their decision to remove Ribena but not Coke or Haribo. In principle a stand against childhood obesity would sit well with Tesco which is well matched with families, but because it is limited to just Ribena cartons and Capri-sun pouches, the message is completely lost. If you are going to take a stand then do just that. Don’t offer a half-hearted nod to the problem.

Many parents were incensed by the idea that they were not able to say no to their children and that Tesco should make that decision for them. Other parents of children with diabetes also complained explaining that a high sugar carton of juice is exactly what is needed to prevent a child lapsing into a diabetic coma when they are unable to chew.

The knock on effect of #Ribenagate is that Tesco look foolish, they alienate parents and customers shop elsewhere. It must always be a considered decision to delist a product taking into account reduced choice, price gaps in the range, space, popularity and of course negative PR. The supplier may also be supplying other products and delisting one could have a price or listing impact on others.

The fallout from this has been such that we would expect Tesco to relist the SKUs shortly and let the whole thing blow over. Another stand against obesity can be made if other retailers are likely to follow, if alternative products have been developed that can meet customer’s taste expectations, and if Tesco don’t move faster than the customer is prepared to.

Being cynical, Capri-Sun was also de-listed but there was less of an outcry over that. Perhaps this was a ploy by Tesco to see which brand is least popular?

supermarket promotions sqr

The Power of the Customer over Supermarket Promotions

supermarket promotions

Suppliers, or more specifically brands, used to be in the driving seat, they would dictate when a product would be on offer and the supermarkets took it or left it.

Then the power shifted, supermarkets were stronger, the lure of distribution too great for a supplier to resist, and the suppliers would create promotions to suit the supermarket’s calendar and budget.

Then the power shifted again, this time towards the customer. Many would say that is where the power should have always rested but in fact, without choice, the customer was in the hands of the retailer. However with greater choice comes more power. If the customer doesn’t like something they can complain but ultimately they can walk… to the next supermarket.

The trail of lost market share is testimony to that migration to the discounters, who don’t have the same business model as the Big 4. Their model is everyday low price. Few promotions, if any, simple low prices and special buys. There is no illusion, no mental calculations, no smoke, no mirrors, and the customer likes it.

The complaint that supermarkets are misleading customers with confusing price promotions, particularly was/now strategies, has been taken seriously by the Competition and Markets Authority, but the question remains whether the supermarkets will also be taking it seriously.

While the supermarkets have believed they hold the power in the grocery supply chain they have maintained the tried and tested promotional mechanics with good effect. But the £1billion spent on price reductions by the Big 4 in recent times is indicative of an overhaul.

Asda have a new strap line, “Save money. Live better” and the pocket tapping advert are a big indicator that perhaps their promotional strategy might be shifting, slightly. Waitrose’ Pick a Promotion is a shift away from the tried and tested model, passing the power to the customer to select the promotions most relevant to them. The signs are there that retailers are trying to think beyond the norm and move with the times.

As much as 40% of grocery spending is on items on promotion so there is a very long way to go before there is measurable movement in supermarket promotional activity, and a long way to go before customers are re-educated to not expect brands to be on promotion.

Brand loyalty is only as flexible as the amount of time between promotions. The risk for supermarkets is that the customer has been educated to expect a promotion, and if one doesn’t materialise they are likely to switch brands, or supermarkets. The only way out of this trap is to reduce prices permanently, hence the vast investment in price cuts. The effect on margin is painful, suppliers lose leverage, and the return to good old fashioned brand marketing takes precedent.

Ultimately it won’t be the CMA that changes the supermarkets promotional strategy, or the suppliers, it will be the customers. They will continue to switch their shopping choices, and supermarkets to follow price but more importantly to go where they feel they are valued and where there is trust with the retailer.

Supermarkets take heed.


If you would like to talk to us about your promotional strategy, please get in touch.

 

MandS facia

Does Marks and Spencer need a central operations review?

M&S front

So the general merchandise blip was just a blip. Marks and Spencer reported another decline in like for like sales of its general merchandise business, in most part down to a sluggish womenswear range where the troubles have been and continue to be.

One or two key pieces that get a lot of press does not a season make. Last quarter did better than most expected, on the back of good PR and having enough stock of what the customer wanted to buy. However the underlying issues have not been addressed. A good womenswear season skews the results as does a poor womenswear season. A cooler Spring will be blamed leaving the business with excess summer stock that is probably selling now it is in sale and the weather is more seasonal. How that will affect the gross margin targets we will not know until later in the year but at the moment the forecast remains unchanged.

suede skirt ms

Marks and Spencer do very well in attracting press to one or two key pieces each season which is to be applauded, but while the buyer receives the praise, it is coupled with criticism for a lack of stock, either due to limited distribution or because the marketing team have released a garment to press that is not yet available in store.

The good news is that Marks and Spencer is confidant and competent in its food business. The food team have a proven track record of organic growth, strong marketing campaigns and disciplined execution to deliver consistently. Add to that headroom for further growth as food expands further into new space and you can’t help but look at M&S as two separate businesses, one operating seamlessly, the other stumbling from one quarter to the next.

If we were asked by Marks and Spencer to make suggestions for its business we would definitely start with central operations, creating functions that plan, filter and channel into stores to fulfil the customer’s needs. Restructuring central operations is something that Retail Remedy has delivered in other fashion retailers very successfully and something that we know is incredibly effective in delivering profitable results in the short and long term.

It’s all about coordination and a central operations team managing retail operations and in store execution efficiently and seamlessly. If a piece of PR lands well then the customer will be asking for it in store. That’s when you want the product there ready to satisfy that customer, not weeks down the line when actually there is something else that has caught their attention.

While we hope that the womenswear buy is as strong as the next red hot piece to hit the fashion press, it is ultimately about how it is delivered in store. While the store formats leave customers drifting from one sub brand to another without knowing where they are going, the best range could still be disappointing without a concerted effort in visual merchandising and branding.

What we would like to hear from Marks and Spencer is two-fold; firstly a review of central operations, coordinated and efficient teams delivering what is best for the customer; secondly a visual merchandising overhaul to present what are on the whole good ranges in the best light possible. If we don’t, we could be writing the same thing again in another 3 months time. Let’s hope not.


Retail Remedy has successfully implemented  restructured central operations into many retailers with proven results. If you’d like to know more, get in touch today.

pepandco

PEP&Co – Spend a little. Get a lot.

andy bond pepandco

Andy Bond previews PEP&Co, Kettering

Retail Remedy was invited to attend a preview of the opening of PEP&Co, a new family fashion retailer to open in 50 High Streets in the next 50 days; an aggressive opening schedule that if Adrian Mountford, CEO, had his way would have been an even more aggressive two weeks. Funnily enough the take up of that offer wasn’t widely applauded internally, although there are lots of advantages to it, not least of which launching with the same range at the same time.

As it stands the chain will be launching with the same range in each store but spread out over the 50 days. Will Kettering look as fresh as the last store to open 50 days into its life? The Trading Director Cathy Haydon, thinks it will be a challenge but one that won’t hold them back. A nice problem to have will be a shortage of stock but there is Open To Buy available before the next season ranges come in October and stock can be brought forward if needed.

pepandco womens

The price positioning is extremely competitive, read low, with 95% of the range under £10, £1 entry price point and a maximum £25 for an overcoat or dress, To achieve these incredible prices the buy is very much built on depth rather than breadth, but with an average 4000 – 6000 sq ft, 7000 SKUs and 5000 options seems plenty.

Womenswear extends to lingerie and a couple of key outerwear pieces, footwear and a small range of handbags although at several points Haydon wistfully talked about the additional range she would like to add. It is safe to say that range selection has been more a question of what to leave out rather than what to include.

pepandco kidswear

Kidswear is very well represented and capped at age 12 with a strong element of PEP&Co branded merchandise as well as very competitively priced Disney merchandise.

pepandco babywear

The mix is a good balance with Disney not overpowering what looks like a good fashion range. Like all the ranges the £1 entry price point is well featured in Baby clothing and accessories, and includes a range of consumables like dummies, bottles and nappies.

Homeware was limited to one fixture and a wall bay and was reminiscent of a Wilko’s High Street offer, that is, enough to be a token gesture but not really saying anything comprehensively. Again the prices, from £1 are very good and fit the proposition well, a mum popping in to pick up a couple of pieces and adding a little something into the basket to liven up the living room. No surprise that Haydon has an extended range in the back of her mind for a time in the future when she has more space to play with.

pepandco store

What’s missing? Menswear. Men aren’t part of the family at the moment, much like Matalan’s Oxford Street flagship store. The proposition is family and within the target demographics Mum is just as likely to pick up a t-shirt for her partner as for herself so this is an element that could significantly boost the offer at a later date.

Market positioning is well thought out. Low prices, actually budget prices, and family fashion which translated as low fashion on the chart Adrian presented at the briefing, but in real life was very much current fashion for the modern mother. Prices are on a par with Primark but cheaper than Matalan, and fashionability is on a par with Matalan and lower than Primark so there does seem to be a gap based on those metrics.

pepandco positioning

Location is the other metric which again stands PEP&Co apart from the competition. The business is backed by Pepkor Group, a Cape Town based investment company with global retail interests and deep pockets. When we asked Andy Bond, PEP&Co chairman, about the future potential of PEP&Co beyond the 50 planned stores, his reply was candid. They saw 350 locations to select 50 to open in. The store potential is limited to the number of locations they can distil from the units available in secondary high streets. Matalan and Primark aren’t on secondary high streets so the limit is purely based on a good site fit and investment, the later not being a concern at present.

PEP&Co could be a force to be reckoned with. In the locations they are targeting, at their price point, the competition isn’t strong, and with the right buy, they will be a feature on the fashion retail landscape.

Update: First day trading targets at Kettering were achieved within 2 hours, so that nice to have problem Haydon talked about looks like it may materialise.  Congratulations PEP&Co on an excellent start.

Tesco – what next?

The question ‘what next?’ could be asked of Tesco trajectory into crisis’s since the last year has brought nothing but bad news, profits free-falling, share erosion, accounting black holes, supplier relations strained, c-suite musical chairs and redundancies across the whole business.

The rough terrain has been traversed in a competent and professional way, and if more rough terrain were to present itself the retailer is well practised in its negotiation, better than any other retailer at this point.

But it is ‘what next?’ in the path to regaining some of what Tesco has lost that interests us.

The balance sheet isn’t positioned to support much more in the way of price cuts and store investment, so the sale of the South Korean business and Dunnhumby are eagerly awaited to provide the cash the business needs. A share issue may have been a possibility in January off the back of a stronger trading quarter but as it stands with another quarter of negative like for like sales, this has ruled itself out.

Assuming that the cash comes in, and with Google interested in Dunhumby, there is no reason to assume otherwise, where should Tesco invest in order to restore profitability and growth?

The big hole in Tesco’s bucket is trust, the trust of its suppliers and the trust of its customers. Let’s leave the trust of its shareholders as one that will be solved as a result of the other two.

Customers have felt ripped off, price cuts to compete with the discounters have only amplified the extent to which Tesco has profited from its customers and where the cuts might help in the short term, they do not restore loyalty or trust in the long term. So while more price cuts might be necessary, they are not going to achieve any increase in sales.

To plug the hole in Tesco’s bucket, it must invest in marketing. A brand re-launch and advertising are planned for later in the year and are desperately needed. If you look at Aldi and Lidl campaigns, they are effective in many ways. Yes price is a factor, but the core message is quality. Both retailers have used blind taste tests or comparison taste tests to reinforce quality at better prices and have done so in innovative and imaginative ways, innovation and imagination that Tesco has sadly lacked thus far.

We will see in time if Tesco has a campaign that can capture the minds of its customers and attract them back to its stores which are in better shape than they have been as they undergo refits and refurbishments. The staff to customer ratio is improved and service levels are better than they have been in a long time. However, the estate is pulled down by the largest stores where excess space is a weight that Tesco can’t afford to continue to carry as customer’s agility sees them being more efficient with their time and shunning Tesco Extras.

Finding a use, or a concession for the excess space seems to be proving harder than Tesco had hoped. Coffee shops and restaurants aren’t delivering the goods. As much as lifestyle and experience are buzz words tossed about in retail, the customer doesn’t want the experiences that Tesco are offering. Tesco made a big deal about asking customers what they wanted early in Dave Lewis’ tenure as CEO but the problem is the customer rarely knows what they want, and doesn’t always realise they want it until they see it.

There is still clearly work to be done on delivering against the customer’s wish list, but it is the ability to look beyond that, see what the customer will want in 2 years time, or 5 years time that has eluded Tesco so far. The customer is continuing to evolve, competition is continuing to innovate and the longer Tesco take to deliver change, the bigger the gap becomes.

Will they deliver a phoenix like performance, our guess is yes to a degree they will, it just might be one that slowly crawls out of the flames rather then flies out.

Decision time for Sainsburys

sainsburys facia full size

Sainsburys lacks dynamism

The last year has not followed the path of the previous 10 for Sainsburys. With the departure of Justin King came the anticipated departure of a wave of customers, culminating in the 2.1 percent like for like sales decline of today’s Quarter 1 trading update. Although expected, it won’t be sitting well for Mike Coupe, or his city backers who will be looking for a plan to return the business to growth.

We’ve had decisive action from Morrisons with the arrival of Dave Potts the new CEO and a new wave of price cuts earlier this week. We’ve had Tesco cuts jobs, prices and waste, designed to save costs, protect margin where it can and appeal to the discounter audience where price is the key criteria on which purchase decisions are made.

But as yet, we have not seen anything quite so decisive from Sainsburys.

We see three areas of opportunity for Sainsburys:

  1. The Sainsburys brand has an excellent reputation for values, fair trade and is already associated with causes close to the nation’s heart but, simply put, it isn’t marketed well and is not pulling the customer into stores. Sainsburys desperately needs footfall and a memorable marketing campaign can do that. What was the last Sainsburys advert you can recall? If it was the Christmas WW1 advert then that pretty much sums up the problem. Lidl are the biggest media spenders in UK grocery at the moment and it shows in its market share. Sainsburys must invest in its marketing, and the power of its brand, to keep it top of mind.
  2. Sainsburys Tu Clothing launched online recently to select customers with a full launch expected imminently. Online the range looks strong, fashionable, very well priced and presented in inspiring outfits. In store however it looks like an afterthought: the merchandising is lazy and often obstructed by sale rails.
    sainsburys clothing sqr 600

    Inconsistent merchandising of Tu clothing

    Some of the design credentials from the clothing should be translated into in-store presentation to generate interest outside of the frequent 25% off events.

  3. Finally, the need to compete on price is ever more pressing. Our recent Sainsburys walk through with execs and PR did little to address the issue. Sainsburys has more to lose when Tesco resurges as it faces Tesco with more of its stores than any other grocer. In the meantime Aldi and Lidl have considerable headroom in terms of postcode penetration and basket size. A good response to its simple pricing initiative is desperately needed.

sainsburys great offers

We will eagerly await decisions and strategic choices that do more than just follow the crowd because following will not be enough when Tesco and Morrisons are fighting so hard. Add Asda on a mission too and the landscape is only going to get more threatening for Sainsburys.

With supermarket sales predicted to fall over the next 5 years according to IGD, Sainsburys must make some hard hitting decisions and work out how to stand apart from the pack or it will find itself scrapping over leftovers.

Matalan Opens on Oxford Street

matalan oxford street

We have written about Matalan before, how we admire its strategic direction against strong competition from other value fashion retailers. What was missing was a presence in City centres favouring out of town retail parks in the past.

Well that missing link is being addressed with store openings in Liverpool and Cardiff city centres and on Thursday, the opening of its flagship store on Oxford Street, London. In close proximity is Primark, H&M, Zara, all well established on High Streets so opening on the capital’s busiest street is a bold move.

Range, price, fashionability, stock density are all there in spades at Matalan but it is not the first retailer you think of for any of them. Because they lack that city centre presence, the customer does not have Matalan top of mind, and historically low key advertising campaigns do little to change that. However, new collaborations like the exclusive beachwear range from Julien Macdonald, and the addition of brands like Falmer, plus further in city openings planned can start to make an impression.

matalan macdonald

A visit to the Oxford Street store on opening day reinforced our belief that the strategy is spot on. The store was laden with all the latest store fixtures and visual merchandising highlights that pleasantly interrupted the shopper’s journey screaming high fashion and excellent prices. It is not a large store by Oxford Street flagship standards but manages to remain airy despite holding an impressive stock density.

matalan denim

However conspicuous by its absence was a home department or any menswear. Leaving homewear out of the mix can be forgiven with space at such a high premium but neglecting menswear is a massive omission given the current brand message of “Made for modern families”. Dad’s, you need to shop elsewhere.

Matalan know they have made a mistake in this. Space will be found from somewhere, according to the management team seen walking the store with furrowed brows. We might suggest the first floor which was over-ranged with Disney merchandised clothing which although providing a premium offer, was over-spaced and confused what is an already strong kidswear range.

Teething problems aside, a city centre Matalan is an exciting addition to the competitive set and gives Matalan an edge over supermarket clothing ranges which cannot access that shopping occasion. Calling the Oxford Street store a flagship is an overstatement but as a model for further City centre rollouts, it has the right mix of visual interest, stock density and high fashion to cater for families on budgets.

retail strategy

Does your Retail Strategy need revisiting?

Does your Retail Strategy need revisiting?

When was the last time you revisited your retail strategy? When will you next be reviewing it? One thing is certain, your business and the factors that affect it will have changed in the interim and your strategy will need to change, it’s just a matter of how much.

When you are working in the same space day after day, with the same stock, in the same environment you can become blind to what is in front of you. Your customers, walking past the same displays day after day will also become blind to them. You start to make assumptions, your memory fills in the gaps that you are no longer seeing and what was once effective is no longer.

All too many retailers have been caught out in the past by being complacent. Sainsburys might be one. It was on a roll and seemed unaffected by the discounters that stole a march on other grocers. However, looking at its current trading, it is easy to see that it became complacent, lazy and assumed what was working would continue to work even when the market was changing around it. Marks and Spencer was the same. It had its heyday and suffered years of backward sales only now starting to see light on the horizon. It assumed that the strategy it had aligned with was right and did not need to be reassessed.

Lack of vision, of foresight, of strategic thinking, is dangerous and we can all see what can happen no matter how big you are or how many pairs of eyes should be looking.

Retail strategy isn’t a one off exercise. A strategic plan isn’t written in stone. It is a working document, informed by customers, competitors, the economic environment, resources available and a large dose of creativity. It is an invention test. You take the resources you have available, your strengths and understanding of your weaknesses and put them all together to determine the most productive output. The input factors though are fluid, none more so than your customers, and as they move, so should your strategic plan. The only constant in the whole exercise is your brand and the values it stands for.

Asda is licking its wounds after a weak trading period, its retail strategy looking weak in the light of evolving customer behaviour and stronger competition. The way it is putting its resources to work is no longer as productive as it could be and a strategic review is now pressing in our opinion. However, if Asda had reviewed its strategic plan earlier it may have seen a better outcome, key performance indicators around customer behaviour may have flagged up concerns, a competitor review could have alerted the C-suite to potential threats.

To perform a retail strategic review a fresh pair of eyes is needed. That’s not to say you need to bring in a retail consultant, although we are always happy to oblige, it just means that you need to look at your offer through fresh eyes, as a customer sees it. Walk through the store and leave any emotional baggage at the door; be the customer, shop like the customer, actually ask the customers you meet, and take on board what you see and learn. Be brutally honest with yourself.

If that makes you question your offer, or raises any doubts in your strategy, it is time to review and conduct thorough research to inform your direction. Every single retailer conducts strategic reviews, some more often than others, and it is not a sign of a failing business, it is the sign of a business that doesn’t want to fail.


 

If you would like to have a fresh pair of eyes caste over your retail operation we are always available. Get in touch.