Why does your company exist? If you run shops, what is their point?
After what was a difficult Christmas period, many retailers may be asking themselves such questions – and if they’re not, they should be.
The highs and lows of a rollercoaster peak period were made stark in the BRC’s December retail sales data, which provided a vivid snapshot of the industry’s ongoing transformation.
Two numbers dramatically tell the story. Over a three-month period, in-store like-for-like sales of general merchandise slumped a chilling 4.4%. At the same time, online sales of such goods climbed 6.2%.
“Price transparency, the value positioning of ecommerce pureplays and the shift towards a life lived digitally have winded bricks and mortar”
Food price inflation partly fuelled a rise in grocery sales at the expense of non-food, but consumers are increasingly shopping online for general merchandise.
Price transparency, the value positioning of many ecommerce pureplays and the general shift towards a life lived digitally are among the factors to have winded bricks and mortar – evident in the fact that clothing and shoes did well online despite travails on the high street.
The expectation of ‘seamless shopping’ has become the norm for consumers and that is changing the economics of stores day by day.
While shops are at the heart of click-and-collect services, therefore continuing to play a pivotal role in retail, the changing dynamics of how people buy brings perhaps unprecedented challenges to the traditional store model.
In some instances, stores are almost becoming primarily distribution points, but are burdened by the high costs of premium locations, as well as the staffing levels and expertise essential to maintain service standards.
Some retailers, such as Aldi, B&M and Primark, have been strong retail performers in recent years, despite not selling online. They are surely the exceptions that prove the rule.
But their success is not just because they may run better shops than rivals. It is because they have a clear, simple sense of purpose from which all else flows. If they ran websites – and, ultimately, surely they will? – that clarity of mission would no doubt be just as evident.
Of the retailers that have updated on Christmas so far, the winners have frequently been those that have continued to focus on their fundamental appeal.
Joules, which delivered a 19% sales rise, has stayed true to its quintessentially British heritage and design aesthetic.
Morrisons chief executive David Potts, who unveiled a 2.8% rise in like-for-likes, attributed success to the fact that “more customers found more things they wanted to buy at competitive prices”.
It’s hard to think of a better summing up of the retail disciplines that made Morrisons what it is.
He hasn’t entirely stuck to the traditional knitting though – deals such as a wholesale tie-up with Amazon are allowing him to make Morrisons’ promise good in new, contemporary ways.
“Of the retailers that have updated on Christmas, the winners have frequently been those that have focused on their fundamental appeal”
Among the losers, such a sense of purpose was less apparent. Debenhams for instance, which has warned on profits, is admittedly at the start of its planned transformation, but it was disappointing that it couldn’t hold its nerve on discounting.
That was same old, same old Debs and will make it harder still to wean shoppers off the expectation of price cuts and reforge itself as a ‘social shopping’ destination.
The economic mechanics of reinventing stores so that they play a profitable part in a seamless shopping environment is hard enough. But without a clear sense of consumer purpose, it will only be harder.
However, as the BRC numbers showed, the reinvention and repurposing of the store will only become more urgent.