Preparing for Christmas now may seem extreme to the everyday shopper – but that’s exactly what retailers are doing. Getting a head start will take the pain out of the busiest retail period of the year and deliver a degree of predictability in an otherwise unpredictable year.
In the heat of the battle to find a good bargain, consumers were spending £1 out of every £5 online in December 2015, up three per cent since last year. The latest figures from the British Retail Consortium also reveal that online sales growth has surpassed growth in physical stores, which is actually shrinking.
Overall, footfall in December was down 2.2 per cent compared to a year ago, according to the research. However, footfall in retail parks increased 2.1 per cent year-on-year, despite a decline on the high street and shopping centres, which reported falls of four and two per cent respectively. Whisperings about the "death of the high street" returned once more as retailers look for ways to recover from the sharpest decline since November 2014.
What else is revealed in the resarch? And how can retailers use it to plan for the 2016 holiday season? Keep reading for some insights.
Online channel is a key driver of growth
While overall performance was strong across online channels, there are number of key contributing factors that have helped some retailers hit the jackpot.
Those that have improved their sourcing and supply chain management have certainly reaped rewards. Consumer confidence improves when they know products are high quality and from credible suppliers. Shoppers also find comfort in having better visibility of stock volume and more accurate delivery schedules.
With bargain hunters traditionally expecting and holding out for heavy discounting, retailers have learnt a valuable lesson from last year. Many restrained themselves from price wars and heavy discounting heading into Christmas 2015, instead focusing on delivering quality customer service to attract shoppers. The end result: a more agreeable pricing structure that benefited both the retailer and consumer.
Tesco is the latest grocer to move away from promotions in favour of a simpler pricing model for consumers. However, it still needs to make important decisions on what products it will continue to offer at a discount and the degree to which it shifts to “everyday lower prices”
With the shift to online, might 2016 be the year of store closures? There are now questions about the profitability of all of that physical store space and associated costs. The year started with the largest of retailers, Walmart, announcing a reduction. I believe that most retailers will review this and shrink their expensive high street and shopping centre locations.
Integrated Click & Collect services boosted impulse buys
The concept of Click & Collect – allowing shoppers to choose online and collect from a store – continued to be instrumental in linking online and in-store sales. As well as providing a more convenient service to consumers, it encouraged higher footfall in stores and in turn promoted impulse buys.
John Lewis Partnership is a prime example for collaborative success across its two brands. The British retail giant reported 35 per cent of its John Lewis online department store orders were collected from its Waitrose supermarket branches. Overall customer numbers increased by 5.8 per cent in the six weeks to 2 January against the same period last year. This showed the strength of its distribution and IT capability to ensure trading performed confidently even on very busy shopping days.
Convenience stores benefit the most from demand forecasting
A number of retailers, including major grocers like Sainsbury’s, have launched new seasonal products and range improvements to entice shoppers back from discount stores. Knowing which products to stock and where to shelve them is a dark art that many store managers still struggle with today.
The rise of convenience stores only adds to the challenge of demand forecasting. However, the supermarkets that have executed solid planning ahead of time have certainly reaped rewards from a growing group of consumers looking for a quick purchase. Sainsbury’s, for example, saw the biggest ever day for convenience sales on 24 December, a strong indicator that its investment in opening new smaller format stores has paid off.
2016 will be another challenging year but retailers can take comfort from early planning – especially if decisions are based on data rather than gut instinct and guesswork. Read our Christmas survey and see how your business fared against consumers’ expectations. And before you head into the next planning meeting, find out how analytics technology can help you better prepare for the year ahead.