Summer is nearly over, the kids are back at school and now it’s time to turn our attention to Christmas.
But, before we do so, let’s take a moment to reflect on how the retail industry performed over the summer and what we can learn from that as we fast approach the golden quarter.
According to Helen Dickinson, Chief Executive of the British Retail Consortium, “August provided a welcome pick-up in retail sales across channels, with non-food returning to growth as shoppers’ attentions turned to homewares, autumn clothing ranges and the new school term. However, scratch beneath the surface a little and the figures tell a less positive story about the health of consumer spending than at first glance. Non-food sales have only just recovered to levels seen two years ago, after a dismal August in 2016; while strong figures for food are largely the result of rising prices, leaving growth in volume terms weaker than last year.”
It seems consumers are continuing to prioritise experiences over products, a sign that the weaker pound encouraged “staycations” this summer. There are also signs of a so-called “lipstick effect”, with consumers spending more on small treats, such as beauty products, trips to hair salons and jewellery.
Although consumer spending rose last month for the first time since April (it was up by 0.3 per cent compared with a year ago), growth remains sluggish at an average of 0.2 per cent each month this year, according to Visa’s consumer spending index. These figures indicate that spending is on course for its weakest 12-month period in four years.
Throw Brexit into the mix and more brands having to pass on price increases due to currency fluctuations, and it’s certainly a volatile time to be in the retail business.
And while the high street still accounts for the vast majority of all retail sales (94%), we will no doubt continue to see a contraction and consolidation of retail stores, as the underperforming ones are killed off.
We are already seeing conventional department stores struggle (with the exception of John Lewis), as they grapple to find a USP that resonates with a younger, tech-savvy consumer. Who will be the next casualty?
Despite all this doom and gloom, we still believe there are some great opportunities for retailers and brands to rise to the challenge and be successful.
You only have to look at the increasing number of pure play brands that are opening physical stores (Amazon, Google and Warby Parker to name just a few) to see there is still a lot of life left in bricks and mortar.
“Many customers want to have an experience that allows them to hold and touch and in some cases, try on, the products,” said Brendan Witcher, principal analyst at Forrester. “Many shoppers still relish the experience of walking into a store and walking out with merchandise.”
In addition to this, innovations in technology and store design, visual merchandising, logistics and the ongoing development of some fantastic products (see our top picks from IFA 2017 here) can still make shopping a joy. Then add in the people – the cherry on top – that can turn a good retail experience into a memorable one, and you have a recipe for success.
Brands and retailers that get these things right will certainly stand a greater chance of succeeding in this challenging new world.
We’ll be exploring some more of these topics, as well as sharing new strategies for how retailers and brands can succeed in 2017, in our forthcoming Masterclass ‘retail uncovered: what makes a successful retail strategy’. You can find out more information on the agenda and sign up by clicking here.