The raft of UK Top500 retailer results out this week show not that retail is in the doldrums, but that, while everyone is suffering, some retailers have performed much better than others. So what is working and why?
One of the standout results out this week has been Shoezone. Admittedly it is reporting its whole financial year – rather than just the crucial Christmas-covering Q3 – but it has seen growth both in store and online.
Revenues at the low-cost shoe retailer may be up by a modest 1.8%, but it is seeing growth coming from its investment in both ‘Big Box’ stores and digital. The big stores contributed £7.1million to the £160million revenue total in the year, but they are growing faster than most other retailers store properties.
At the same time, the company has seen digital revenues grow by some 20%, with some 79% of its online sales coming from mobile and tablets.
Interestingly, the two are linked. The company attributes its success online – and on mobile – to improving how it uses technology in its stores. It has invested in touchscreen tills, which allow shoppers to easily enter their email address at point of sale for a digital receipt – and this is leading to more email marketing, which in turn is driving online and mobile sales.
The technology alone isn’t the only reason Shoezone is a success – it clearly has the right business model around what it sells and to whom – but it clearly is helping to develop the firms strategy.
Similarly, John Lewis Partnership (JLP) has come out as one of the online and High Street winners this Christmas. It’s secret too is investment in what Hannah Thompson, analyst at GlobalData calls “differentiation and not scale”.
She says: “With a network of 51 shops, it is not laden with underperforming stores, and it has been wise to facilitate growth of online by extending cut off periods for click & collect orders, as well as making this service available in more Waitrose stores. This allowed John Lewis to fulfil 52% more click & collect orders on Christmas Eve, which is especially important for satisfying last-minute Christmas shoppers”.
The company’s strategy seems to be working, although when taken across the whole year, the company is unlikely to make a profit.
M&S too is attempting to revamp itself out of the doldrums. While it’s figures were less than encouraging over Christmas, it is still very much a work in progress. Like JLP, it is looking to rationalise its store portfolio to make better use of a smaller number of stores in key locations. It is also investing heavily in digital to tap into the consumer shift towards online.
Another great example is Fat Face. According to Hugh Fletcher, Global Head of Consultancy and Innovation at Salmon, a Wunderman Commerce Company, the brand is counteracting its decrease in physical sales with a 16% rise in eCommerce sales year-on-year.
"The online approach has to be balanced though, by creating a strategy that encompasses marketplaces, retail websites and own brand websites, brands will be able to fully maximise sales throughout 2019," says Fletcher. "With no major retail peaks approaching, it’s no longer enough to drop the prices and ‘pray they pay’. Whether it’s confronting old foes like Amazon, or exploring social media shopping, the need for a strong online presence all year round has never been greater.”
So what went wrong at Sainsbury’s and Argos? Argos was the third most visited ecommerce site in the UK in Q3, yet the combined Sainsbury’s-Argos merchandise sales fell by 2.3%.
Analysts believe that, with low inflation and slightly rising wages, Sainsbury’s should have done better. While, consumers generally are being cautious ahead of Brexit, many believe that Sainsbury’s management team have taken their eyes off the ball, focussing instead on getting their proposed £13billion merger with Asda over the line.
Overall, Q3 has crystallised many of the issues in retail today. There is a surfeit of retail space, there is a huge drag on consumer spendingthanks to Brexit uncertainty and the internet is changing how people shop. While this isn’t news to anyone, what we can start to piece together from the results out this week is perhaps what strategic and tactical measures can help.
“Aligning high street and online sales will be a major challenge going forward and retailers need to integrate the two while continuing to innovate in store through customer experiences that build traffic and footfall," advises David Marshall, Professor of Marketing and Consumer Behaviour at University of Edinburgh Business School. "Retailers must consider how customers use physical stores to see, touch, feel, and try or taste items with online sites as a convenient way to buy things they need or want."
Marshall believes we are already beginning to see a strong push in this direction. "Established retailers with a high street presence are developing online sites that complement but can also cannibalise store sales," he says. "As online retailers like Amazon experiment with physical stores, traditional retailers are expanding their options with initiatives like in store ordering points, mobile apps or click and collect in the new retail omnichannel, which offers a series of customer touchpoints.”
What is clear is that a radical rethink of how stores are used and how they operate is vital. It is also clear that online – and mobile – strategies are now more crucial than ever. According to research by SOTI, 67% of shoppers are more likely to shop at a store that integrates technology, and over two-thirds believe retailers that utilise more technology enable a faster shopping experience.
According to SOTI’s UK MD, Leigh Moody: "Physical stores should be offering personalised services, and mobilising retail staff through technology to streamline intelligent customer interactions. Technology such as digital signage, kiosks and tablet scanners help shoppers find what they are looking for, while Mobile Point of Sale (mPOS) and self-checkout terminals make payment quick and easy." Something that Shoezone has already started to see traction from implementing.
Moody continues: "To thrive in today’s market, retailers must also adopt an integrated system that makes the online to in-store transactions seamless. Retailers must consider applying a mobile-first strategy across their entire on and offline operations to streamline the value chain, from supply to distribution to shop floor. Barcodes and RFID can be used as key enabling technologies for warehouse management systems. Knowing exactly where items are located and in what amount is essential, especially during peak season trading, and allows companies to shrink their inventory and increase product velocity through the supply chain.”
But perhaps the clearest thing that needs to happen is economic clarity. It is hard to not dwell on the impact of Brexit uncertainty. The run up to Christmas was also the run up to a (postponed) meaningful vote on the Brexit deal. It didn’t happen and a month on we still don’t know what is in store. Speaking as a consumer, I am being circumspect about my spending as I don’t know where we will be come the 29 March. I suspect I am not alone.
While there are structural challenges in the retail industry, it is perhaps the wider political landscape that is really hurting us all.