While 2015 was an unpredictable and often difficult year for many UK retailers, their customers have certainly prospered. The Christmas season, in particular, saw increased discounts for the fifth year in a row. This followed a period when changing weather patterns and price deflation had already offset predicted sales, both in-store and online. So, who were the winners and losers of 2015, and why?
Supermarket price wars continue
Supermarkets represent a microcosm of the many highs and lows retailers faced this past year. Sales have been on the decline for the likes of Asda, Tesco and Morrisons, with Asda losing 16.2 per cent of its market share in the last three months of 2015. Yet, the likes of Sainsbury’s, Aldi and Lidl managed to improve sales and increase market share in the same period. It’s true that Aldi and Lidl managed this through increasing discounts, which many of the major supermarkets are unable to keep up with, but Sainsbury’s cited strong trade results in more premium products, a feat mirrored by Waitrose.
The difference here comes with knowing what the customer wants. The successful supermarket chains have a clear identity, customers have a particular affinity to these brands, and they know what they’re getting when they buy from these stores. These are the winners.
To compete, other brands must find their place in this market by working out what their customer actually wants. The supermarket war is about loyalty and knowledge, as much as it is price. Using insights from real-time analysis can lead to better decisions on a number of otherwise unforeseeable factors. Knowing what your customers want provides invaluable insights that help purchasing managers determine which products to stock at which store location and, even more importantly, gives you visibility into cost of sales so that you can focus on remaining profitable.
Online vs in-store reaches its peak
2015's online retailers continued to reap the rewards of the shift to digital. Britain has been labeled "the online shopping capital of Europe," following the latest spending figures released by Eurostat. Indeed, online sales in the UK are set to reach £52.25 billion this year. The demise of in-store shopping on Black Friday, coupled with one of the warmest winter periods on record, makes it clear that customers are shopping online to find the products they need at a cheaper price. Indeed, customer footfall across the UK dropped by four percent for the week leading up to December 20 compared to the same time last year. This shift in spending habits signals the impact of online discounts and shows how online shopping is changing the rhythm of Christmas retailing.
However, when shoppers flocked online to grab a bargain during peak times, several retailers buckled under the pressure of increased web traffic. This could've been prevented had retailers used data analytics to get a more accurate picture of impending demand.
Using insight from the vast amount of data that retailers have at their disposal could've helped them understand and respond to the disrupted landscape and changing expectations in a far more effective way. For example, by adjusting price levels or promotions to keep demand at a more manageable level. And if retailers have a clearer understanding as to how and when customers interact with their website, they can improve outbound campaigns to target profitable customer segments when there is less online traffic.
Customers have the last laugh
Customers have enjoyed increased purchasing power for close to two years now, with Deloitte reporting that average discounts went as low as 41.8 percent during the 2015 Christmas season. Spending habits are becoming increasingly difficult to predict, so retailers need to do everything in their power to get ahead of the game.
Price wars are extremely difficult to forecast and plan for when squeezed into a short timeframe. If retailers don’t attract enough customers they lose out; if they can’t deliver on what they promise they lose out. To win, they need insights into current and previous shopping behaviour, stock performance and competitive discount ratios. That's the only way retailers will improve customer loyalty and prosper.
Conclusion? At the end of the day, customers were the biggest winner of 2015.
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