This recently published Retail Customer Survey looks at six key themes influencing retail in 2020:
‘Black Friday: a firm fixture in retail and consumer diaries. What factors are driving consumers purchase decisions and what are the impacts on the broader Christmas trading period?’
Black Friday revenues are now bigger than Christmas week’s non-food purchases. Shoppers are savvier, deliberately holding off their desired purchases until the sales periods, despite Black Friday falling one week later than the year before. Barclaycard reported a 16.5% increase on 2018 sales, and three quarters of shoppers were motivated by price. Online comparative tools and apps have further helped consumers find ever cheaper bargains. A higher proportion of customers last year took advantage of the convenience that multi-brand, third-party retailers such as Amazon and Argos offer.
KPMG UK Head of Retail Paul Martin expresses longer term concerns over the customer increasingly calling the shots:
‘Retailers are in the unenviable position of complying with consumer demand for drawn out deep discounts and realising what commercial gain they can in doing so.’
Productivity analysis from experts such as SWL is essential to maximise businesses’ effectiveness as sector-wide peer and margin pressures dig deeper.
‘Are consumers’ routes to market changing and therefore do retailers need to be thinking ahead about how to succeed in trying times?’
With nearly 16,000 shops closing – a 77% increase from 2018 – some retailers are adapting quickly, and successfully, to the quicksand of ‘rising costs, political and economic certainty and changes in the way we shop.’ Omnichannel approaches employing a cocktail of disruptive technologies have allowed these businesses to get even closer to their customers.
The 2020 survey provides a mixed picture on online behaviour:
‘72% of all purchases across the festive period were made online, with 25% of these shoppers buying via the internet for convenience alone, compared with just 17% for price. The remaining 28% of shoppers bought their goods instore, 44% of whom did to to try their goods out for size, and 39% to compare items before making a purchase.’ Half of the online shoppers say they do so because they believe they will get cheaper deals. Almost 100% of them feel that the product offering is better online.
However, the role of the High Street is also important here, for an integrated, three-dimensional offer. As KPMG partner Sue Richardson states,
‘Retailers who combine this newfound proximity to their customers with investment in technology are already reaping the rewards of an enhanced customer experience, and a loyal following to boot. Based on face-to-face feedback, the customer is brought closer to the brand, and vice versa.’
The frictionless, seamless customer experience must be agile, with ‘a responsive operating model underpinning it.’ In addition, ‘market players must be careful not to overlook their business fundamentals: ensuring stores are well stocked, customer service is good and products are perceived to be value for money.’
SWL offers many years’ experience in Retail Operations Management, providing the necessary Data Fact to make informed decisions about your effectiveness in capturing your customers’ routes to market.
‘The political and economic environment has had an impact on UK retail – what does the current climate mean for UK retail?’
Brexit uncertainty has continued to affect consumer behaviour, but arguably less so than last year. Just 17% of consumers expected to tighten their belts this year. With UK retailers employing 300,00 EU workers, immigration restrictions have become crucial. As pockets remained proportionally shallower with the weakened pound and slow wage growth, the turbulent political winds did not offer the best surroundings for retail comfort. But we cannot lay all blame at Brexit’s door:
‘there were macro-economic challenges impacting on global sourcing, shifting geopolitics and increased compliance […] legacy debt, talent constraints, fast-moving consumer dynamics and the over-supply of physical stores.’
Some forward-thinking retailers are tackling this climate head-on, and with a gentle breeze of optimism:
‘They’re thinking laterally to make things work instead, cashing in on the experience economy to add renewed purpose to their shops and investing in their omni-channel capability to satisfy consumer demand for social search and personal edits.’
KPMG Partner Don Williams offers further hope for the brave-hearted:
‘While unsettling, disruption presents a swathe of opportunities and those retailers who can innovate, edge closer to their customers and invest in their people can look to thrive, rather than simply survive in these unsettled times.’
The key is being able to analyse the integration of these disruptive approaches to bring your business’s operations into sharper focus. SWL provide expert guidance, experience and accurate data fact in all Retail Operations strategies.
‘Understanding the all-important end customer is increasingly important – what changing factors need to be considered to stay afloat or even to prosper today and tomorrow?’
The quality and consistency of the customer experience throughout the journey from purchase to delivery and returns is paramount. High Street casualties have largely failed to ‘evolve with the all-important customer’. Factors are economic of course, but now increasingly social and ethical. Standing out from the wider market is therefore crucial for gaining customer confidence and brand equity. Even more important is to get even closer to the customer.
The past twelve months has seen a huge and rapid sea-change in consumers’ ethical thinking. Now as many as 37% base their buying decisions’ on retailers’ ethical and sustainability policies. These include sustainable packaging and low-emission delivery. Loyalty among UK shoppers is an ever-changing and uneven playing field, where brands such as Amazon Prime have seen a huge rise from 49% to 61% of customers. Nearly two-thirds of customers have stated that they actively seek out new brands.
Another recent trend towards ‘buy now, pay later’ credit terms has caused significant ripples in retail in the last year.
KPMG Partner Joanna Stringer emphasises the importance of the retailer’s values to stay in tune with their customers’ changing and more ethical demands:
‘the success stories of the companies who’ve listened to the tempo and adjusted their own beat in line with customers’ changing expectations. As values hold more weight than ever before they must ring true in every stage of the retail experience.’
Productivity experts SWL offer the essential expertise required to provide and interpret this customer data, giving you accurate, real insights on your Retail Operations.
‘Consumers are expecting enhanced service options from retailers with delivery options representing a key driver for purchase choice.’
The consumer of course finds many attractive benefits in shopping online: wider stock availability, excusive product ranges, greater savings and customer service going beyond the point of sale. But the crucial ‘last mile’ operations are a notorious challenge for retailers who entrust this all-important phase of the customer journey to third parties. It has never been more important for retailers to ‘work with them to improve location accuracy, timing, tracking technology and customer service. Only then will the coveted brand experience remain intact.’
Indeed, long delivery times are a key factor (17%) in brand abandonment. A massive 80% of Millennials opt for delivery as their preferred method of obtaining goods. Three quarters of online shoppers claim to have shopped elsewhere in order to secure free delivery. Time and economic savings are paramount, but so is the quality of customer service, and retailers must not take their eyes off that ball.
Iain Prince, KPMG’s Supply Chain and Operations Partner, sums up this need not only to know the customer, but to also closely monitor ones courier services :
‘Retailers will be well placed to invest in the technology and operational know-how they need to manage drivers, routes and accuracy in order to put the final furlong on a par with the customer experience they’ve worked so hard to create.’
Retail Operations experts SWL provide your ideal solution to provide, analyse and understand your Retail Operations data.
‘Retailers must manage both delivery and returns on demand, as a number of products delivered boomerang straight back into the supply chain creating logistical challenges in both directions.’
A massive 18% of shoppers returned their products during major sales periods. This costs British stores a staggering £7billion a year. For over half the UK’s customers, a free returns policy is a major factor in their purchase decision. So-called ‘serial returners’ are also a major headache for retailers. To compound this, nearly two-thirds of consumers stated that they demand this returns service for free, and this is a 9% increase on last year.
There are of course environmental considerations in this problem of unused stock, with ‘fast fashion’ receiving much of the flak. Savvy, eco-friendly shoppers have, and will increasingly have, taken advantage of the growing market in the ‘recommerce’ market of second-hand shops, which is set to explode in the next five years. This could prove a saving grace in tackling the returns problem.
Some retailers have introduced ‘digital receipts’ to enable direct communication with the buyer, as well as proof of purchase, which in turn gives them a transparent and accessible method of tracking and authorising returns.
This contradictory question is a crucial one, in the opinion of KPMG’s Iain Prince:
‘Enforcing rules and restrictions can be diffcult to do even in the most buoyant of markets, and retailers need to strike the balance between keeping a lid on costs and keeping the customer on side.’
Retail Operations specialists SWL are ideally placed to help your business navigate these finely balanced and vexing parameters.
The outlook for 2020: optimism
December’s General Election brought 2019 to a close with an undeniable sense of clarity. High Street activity increased as a result. However, as this new decade unfolds, we will begin to see the reality of our new trading relationships come into sharper focus. March’s Budget should announce large increases in public spending. KPMG predicts that we will see more ‘heightened activity’ – of up to 1% – on the High Street as a result, and these factors should lead to some economic growth.
Outside this political sphere, retail is in the process of a radical metamorphosis:
‘While value, convenience and experience still factor in shoppers’ purchasing decisions, new determinants are emerging: choice, purpose and privacy.’
The more fleet-footed retailers are already reaping the rewards from such approaches. Social and ethical responsibilities have never been more prevalent:
‘it pays to have a clear driving purpose, and environmental and social conduct and end-to-end governance will only become more important as the nation looks to shop guilt-free.’
Finally, the importance of GDPR (General Data Protection Regulation) is a double-edged sword. ‘Retailers who can entrust consumers to part with their personal data will stand in good stead for the future.’
With this predicted small increase in revenue and footfall, there will be a sense of ‘progression’ in Retail, and businesses should capitalise and thrive on this new freedom.
Link to KPMG’s Annual Retail Survey 2020