The unpredictability of the UK weather has once again hit the clothing sector, with a colder than expected March and April, followed by a wet and dreary June.
A number of retailers on the British high street have been quick to hold the weather accountable for a slowdown in sales and weakened profits. However, given its near four-year run, the viability of this repetitive excuse has become questionable.
Next, like many retailers, has been quick to blame the weather for its slowing sales, especially during its first quarter in 2016/17. In its most recent set of results, Next claims weakened demand throughout the first half its 2016/17 financial year resulted in significantly more clearance stock than last year.
While this has sold through well, higher markdown costs directly affected full-price sales at the brand, down 0.3% on last year. However, its retail sales were hit the hardest, down 4% on last year, as most of the increase in sales stock was cleared through its store estate.
While there is truth in the matter that the weather plays a part in the weakening or strengthening of clothing demand, the blame on weather as an excuse for a slump in sales comes around far too often in the clothing sector.
Instead, retailers need to understand where their own weaknesses lie, and acknowledge how their fundamental operations may be affecting their failure to drive strong sales growth.
The first step is for retailers to accept the unpredictability of the UK weather, and that they can no longer rely on typical spring summer and autumn/winter planning cycles to drive sales.
“Retailers need to minimise the effect of markdown possibilities, and move away from buying high volumes across lines too far ahead”
Additionally, fashion and trends have developed over the last five years as the extremity of social media and celebrity culture has fuelled demand for product newness, making transeasonal dressing and product choices more desirable.
While the availability of core seasonal products will remain important, the development of an all-year-round collection will subdue the effects of weather unpredictability. This strategy has proved exponential for Asos’s performance during its latest quarter, with UK sales accelerating 28% during the four months to June 30, 2016.
Many British retailers, such as Next and Debenhams, rely heavily on overseas supply chain models where key seasonal lines are negotiated with suppliers up to a year in advance to achieve lower production costs during downtime manufacturing periods.
Effective managing of open-to-buy objectives will allow retailers to take advantage of the growth in UK manufacturers
However, to remain in positive territory, retailers need to minimise the effect of markdown possibilities, and move away from buying high volumes across lines too far ahead.
Instead, effective managing of open-to-buy objectives will allow retailers to take advantage of the growth in UK manufacturers in providing fast responses to the changing market and consumer needs – an area which Next is yet to explore widely.
The consumer experience
Additionally, the overall shopping experience plays growing importance in consumers’ purchases, with retailers aggressively investing in data analytics to better understand their customer’s shopping journey.
While Next was once a leader in fulfilment and convenience, the retailer has lost its competitive edge as the market has not only caught up, but outpaced the retailer with one-hour delivery slots, utilising pick-up-and-drop-off points such as Doddle, and the emerging trend of freelance Uber-style delivery drivers as seen with Amazon.
Overall customer experience will prove particularly important if retail prices hike up following the devaluation of the sterling
The weakened competitiveness of Next’s fulfilment offer will have proved detrimental to its sales over the first half of its 2016/17 financial year, especially against strong comparatives last year when it held one of the most convenient fulfilment services.
Looking forward, overall customer experience will prove particularly important if retail prices hike up following the devaluation of the sterling. Next announced today that current estimates show cost prices for 2017/18 will rise by less than 5% on like-for-like products.
Nevertheless, while it is undeniable that weather conditions can result in sale slumps and hikes week-on-week, Next, like many British retailers, must stop relying on this excuse year-after-year and instead realign its buying and merchandising strategies to match that of consumers’ changing needs for ‘all-year-round’ fashion, taking advantage of quick response lead times.
- Rebecca Marks is a senior analyst with Retail Week Prospect