The prestigious KPMG/Ipsos Retail Think Tank discuss how retailers should use seasonal events to shore up sales.
Seasonal events have long been used by retailers as an opportunity to boost sales.
KPMG UK head of retail Paul Martin points to the substantial growth in UK retail over the past decade – from £286bn in 2006 to £360bn in 2016 – and suggested that events-based retail “surely plays a part in this growth story”.
However, given the decline in annual growth in recent years – from 1.6% in 2015 to 1.2% last year – Martin and the wider KPMG/Ipsos Retail Think Tank (RTT) questioned whether retailers were struggling to exploit seasonal events fully or if they could plan for them better.
Why is events-based retail losing traction?
Today’s retail landscape is filled with myriad events, ranging from the more traditional and religious – such as Easter, Valentine’s Day or Halloween – to ‘manufactured’ newcomers, such as Black Friday, China Singles Day or Amazon Prime Day.
“Saving money on everyday essentials is no longer just a coping strategy for when prices rise or incomes fall, but a planned way to pay for indulgences”
Mike Watkins, Nielsen UK
However, the RTT question whether the promotions that retailers tag on to these events have become lost in today’s highly promotional retail market.
Nielsen UK head of retailer and business insight, Mike Watkins, says its research illustrated that “savvy shopping is now the norm.
“Saving money on everyday essentials is no longer just a coping strategy for when prices rise or incomes fall, but a planned way to pay for indulgences and incremental spend for celebrations”.
Heavy and prolonged discounting has also endangered a retailer’s ability to charge full price. Big questions remain around whether events like Black Friday cannibalise everyday trading and full price sales.
RTT members believe that limiting the time window of promotional events could help reignite shoppers’ interest.
Advance planning was also highlighted as an important factor, although Hayward Strategy and Futures founder, Martin Hayward, says this could raise issues.
He says: “The challenge for many retailers is that their promotional activity is scheduled months in advance and centrally controlled, giving little leeway for local spontaneous activity and therefore creating a rather dull and very predictable event calendar”.
Indeed, it was innovation, imagination and an emotional connection with customers that many RTT members flagged as the main avenue for reinvigorating growth from retail events.
In order for events-based retail to be successful, the key is promotional “saliency” and “resonance” with shoppers and their lives.
Personalisation and regionalisation are both means of achieving more engagement among customers and perhaps stepping away from the rigid and predictable events calendar.
Hayward said: “There is ample opportunity to be more imaginative around the creation of other smaller events to create excitement, news and footfall at an otherwise quiet time of the year.”
Similarly, other RTT members suggested that retailers should look beyond simply marking pagan or religious festivals by crafting celebratory promotions around more regional events.
“Retailers that do not have a considerable physical presence should strongly consider pop-ups”
Jonathan De Mello, Harper Dennis Hobbs
Jonathan De Mello, head of retail consultancy at Harper Dennis Hobbs, says: “Retailers that do not have a considerable physical presence should strongly consider pop-ups in order to capitalise on this increased demand [created by holiday periods]”.
In a similar vein, James Sawley, head of retail and leisure at HSBC, says that retailers who were most successful at capitalising on seasonal events were those whose supply chains allowed them to test and repeat orders to stay on top of changing trends and those who use data science to personalise products and offers.
The RTT members stressed that online retail must not be overlooked when considering how best to gain traction.
Practicology chairman, Martin Newman, suggests that having a single view of inventory would allow retailers to react more quickly to sudden changes in customer demand – whether it be the weather, a football team’s performance in a major competition, or a surprise promotion by a key competitor.
What can retailers learn from this year’s late Easter?
While some events occur on the same day each year, the timing of Easter is dependent upon the lunar cycle and as such its date changes each year - occurring anytime between 22 March and 25 April.
In fact, this year’s Easter on Sunday 16 April was relatively late.
With such a potential shift in Easter’s date, this can cause a headache for retailers planning promotions or marketing. However, it also has the ability to distort retail performance as seen in BRC-KPMG Retail Sales Monitor.
In March, UK retail sales dipped 1% on a like-for-like basis compared to a 5.6% jump in April. This illustrates the size of the distortion caused by the movement of Easter.
De Mello says: “Whilst many like to focus on Easter sales comparables, these … are nearly always distorted by the timing of the Easter weekend, [and] given Easter is solidly in April this year, some retailers may well report lower sales [as a result]”.
The RTT members stress that the weak retail performance in the first quarter of 2017 could not solely be attributed to the later occurrence of Easter.
ING senior global economist, James Knightley, points to the underlying economic issues, including the sharp rise in inflation – reflected in higher food and fuel prices – as well as weakened wage growth, squeezing consumer spending further.
“Members discussed the importance of exercising caution when interpreting like-for-like retail performance and stressed that retailers must not overlook the broader retail environment”
Crucially, the members discussed the importance of exercising caution when interpreting like-for-like retail performance and stressed that retailers must not overlook the broader retail environment, by focusing too heavily on the timing of a seasonal event and its impact.
Distortion aside, the RTT members also highlight the benefits of this year’s relatively late Easter and what retailers might be able to learn from it. Maureen Hinton at GlobalData says the warm weather could encourage spending on categories such as home and garden.
The RTT members point to the importance of remaining responsive to external factors, including the weather.
Indeed, whether early or late, the members broadly agreed that the success of Easter sales would be driven by a retailer’s agility and ability to remain relevant to its customers. Sawley says: “Seasonal variances in consumer taste, fashion trends and of course, the weather, can often mean a hit or a miss for retailer’s fortunes and can make or break their year”.
A growth driver
Whilst retail growth has lost traction in recent years, the RTT members agree that events-based retail would continue to play a vital role in achieving growth.
Hinton says: “As time has progressed and the retail sector in the UK has matured, events and occasion have become ever more essential to encourage consumers to spend that bit extra retailers need to drive growth”.
“Successful events-based retail will be driven primarily by a retailer’s agility and ability to react”
Many of the members highlight that this is particularly poignant when considering the variety of strong economic headwinds facing the retail sector more broadly.
Successful events-based retail will be driven primarily by a retailer’s agility and ability to react to the external environment; the flexibility of its supply chain, and of course it’s relevance and resonance with customers.
The latter could be enhanced by regionalisation and personalisation, as well as a more innovative approach to events that seeks to create a better emotional connection with today’s consumers.
Hayward concludes: “Against a backdrop of home delivery, self-scanning and online interactions there is a huge opportunity for retailers to make more of this fundamental need to share and engage amongst consumers, to create some fun and interest.”
Who is in the KPMG/Ipsos Retail Think Tank?
Nick Bubb – retail consultant
Dr Tim Denison – Ipsos Retail Performance
Jonathan De Mello – Harper Dennis Hobbs
Martin Hayward – Hayward Strategy and Futures
Maureen Hinton – Global Data
James Knightley – ING
Paul Martin – KPMG
Martin Newman – Practicology
James Sawley – HSBC
Mike Watkins – Nielsen UK