We all know the run-up to Christmas marks a busy time for many retailers, and arguably Black Friday has extended the Christmas trading period and added to that burden – especially when it comes to managing margins.
But with some retailers generating as much as 80% of their annual profit in the all-important golden quarter alone, it does beg some serious questions around how important this year’s performance will be.
Putting this in perspective, you don’t have to look far to stumble across evidence of the retail industry’s current struggles. The latest BRC-KPMG retail sales monitor figures revealed that like-for-like sales were down 0.2% in September, while they were up by just 0.2% the month before.
Mirroring this, the latest KPMG/Ipsos Retail Think Tank (RTT) health index revealed that the third quarter of 2018 marked the 10th consecutive quarter of flat or negative health, as we head woefully close to the lows witnessed during the double-dip recession.
In light of the rather gloomy performance, business Darwinism has continued to play out, as the bout of store closures and retail administrations will attest to. On the reverse though, winners are also emerging as a reminder of the importance of business agility, as well as the significance of remaining relevant in these testing times.
So what will the next few months hold in store for the industry and is there a way to get it right?
Getting it right
Demand will undoubtedly remain choppy, as consumer confidence continues to waver in the face of economic and geopolitical uncertainty. Meanwhile, retailers’ margins will remain squeezed by costs that only seem to rise.
All the while, further pressure from consumers – who have become accustomed to a diet of discounts – will add to the challenges in the run-up to Christmas.
The key will undoubtedly be to get on the right side of all of these aspects, and doing so months before the Christmas period. It will also require a relentless focus on cost while managing margin, stimulating footfall with great products, as well as increasing your understanding of the customer.
“When it comes to getting it right in the golden quarter, a focused proposition is usually a key commonality among those that tend to do well”
We know that not all retailers or categories of retail are equally exposed to these headwinds though, and by the same token certain retailers will perform better than others in the next few months. It is non-food retail – especially apparel and those selling bigger-ticket items – that may struggle the most.
For apparel, seasonal clothing has rarely married up to the ‘fine’ British weather, and the surge in online outlets as well as overcapacity on the high street, hasn’t helped matters either.
Meanwhile, for bigger-ticket items – like the latest tech or furniture – the economic backdrop and ongoing Brexit negotiations haven’t made it easy to convince shoppers to make the all-important purchase.
When it comes to getting it right in the golden quarter, a focused proposition is usually a key commonality among those that tend to do well. After all, at a busy time like Christmas, shoppers like to know where to go and for what, so retailers need to keep that front of mind.
As mentioned earlier, retailers have often lured consumers in with tantalising discounts, with Black Friday having driven this tactic harder and earlier than ever before. But while tills might be ringing, retailers simply can’t afford to buy demand in this way any more.
“Sales must translate into profit, and with margins significantly squeezed at the moment, the focus must be on the right products, with the right levels of availability at the right price”
Sales must translate into profit, and with margins significantly squeezed at the moment, the focus must be on the right products, with the right levels of availability at the right price.
As has been the case for a number of years now, businesses that have truly mastered the art of offering a seamless experience across different channels are usually the best placed to thrive in this environment.
An underperformance on the high street can be partially offset by growth online. Moreover, with a greater number of customer touchpoints, these brands well and truly remain on the radar of consumers, which is important in the busy months ahead.
Aside from the ongoing structural changes, the next few months will undoubtedly mark a crucial time for retailers.
As Brexit negotiations continue to unfold, retailers will hope that they can move on from merely contingency-planning at their expense.
It’s inevitable that there will be winners and losers, as has always been the case, but the next few months will certainly sort the new generation from the old.