Retail 2017, Retail Week’s flagship report with Manhattan Associates, gives invaluable insight into how the sector’s leaders are feeling, thinking and investing in the year ahead

After a tumultuous 12 months that brought Brexit, Trump and an unprecedented plunge in the pound, Retail 2017 – Retail Week’s flagship report in association with Manhattan Associates – is more hotly anticipated than ever.

#Retail2017

Visit Retail-week.com/Retail2017 to download the Retail 2017 report and find out how the sector’s leaders are approaching the year ahead.

Retail 2017 report, challenges and opportunities

Retail 2017 report, challenges and opportunities

2017’s challenges and opportunities, according to retail’s top bosses

The candid views shared by 25 chief executives of the UK’s largest retailers give valuable insight into how business leaders are feeling and reacting in these turbulent times.

Many may expect retailers to batten down the hatches given the air of uncertainty in the UK; however, Retail 2017 shows that they are still focused on growth.

When asked what balance they are seeking between reducing cost and driving growth to increase profitability, 50% say they are erring towards driving growth, compared with 40% in 2015.

Growth sectors

But where do they see this growth coming from?

The categories identified most often by the retailers as offering the best growth prospects for 2017 are home improvement and homewares, electricals and electronics, and discounters.

In electronics and technology, innovation will continue to drive consumer demand, say retail bosses from various sectors.

“Technology continues to be something that customers are excited by, and if the technology companies keep coming up with new products, I think that’s an interesting part of the market to be in,” says the chief executive of a footwear retailer.

Consumers “always find money for technology”, the chief executive of a discount retailer adds.

“There’s lots of new technology coming through. People still haven’t caught up”

Homewares chain CEO

The chief executive of a homewares chain believes electronics sales may be boosted by consumers “catching up” with technology after holding back during the recession.

“There’s lots of new technology coming through. People still haven’t caught up,” he says.

According to the chief executive of an electronics retailer, an area likely to see “strong growth” in 2017 is the smart home market, including CCTV, security, lighting and heating.

Spending on home improvement in general, including “big-ticket” purchases, is expected to grow according to a number of the retail chiefs.

“I expect people might be investing in their homes a bit,” says the chief executive of a footwear chain. “That has been a trend so far this year, as people can’t afford to move but still want to make sure they’re living somewhere nice.”

A grim bloodbath

Retail 2017 report, retail sales forecast

Retail 2017 report, retail sales forecast

Retail sales forecast for 2017, from Retail Week’s Retail 2017 report

Food – described by one non-food chief executive as a “grim bloodbath” – and fashion are singled out by several retailers as the most challenging categories, owing to continued intense competition and inflationary pressures.

However, one retailer believes sportswear will be a bright spot in the clothing market, while beauty products are also singled out as offering growth potential in the coming year.

The clothing sector “continues to be quite tough”, says the chief executive of a footwear retailer. “It’s over-shopped. Clothes and food are the toughest areas to be in.”

In addition to continued intense competition in fashion, several retailers express concern that unpredictable weather patterns are disrupting seasonal buying patterns for clothing.

“Customers are now so used to buying when they need it as opposed to buying in advance that the weather has a greater impact now than it has done before”

Department store director

“In a digital world where you can get what you need when you want it, the weather will not cause postponement of decisions, it will cause customers to not buy,” says a fashion chain chief.

“So, you can lose a whole autumn season with unseasonable weather.”

A footwear chief executive adds: “Customers are much more inclined to wait until they need something.”

This view is further echoed by a director of a department store operator. “Customers are now so used to buying when they need it as opposed to buying in advance that the weather has a greater impact now than it has done before.”

Approach over channels

As in previous years, the retail channels identified as offering the best prospects for growth are ecommerce and mobile.

However, some 50% of the retailer responses concerning growth prospects define the opportunities for best progress in 2017 not in terms of products or retail channels but in approach.

Such observations cover a diverse range of areas from the shopping experience and service to supply chain efficiency and omnichannel integration.

This is a continuation from 2015 when investment in multichannel was voted the most important business priority for the coming year.

“From a growth point of view, it’s about increasing options rather than increasing rates of sale”

Fashion chain CEO

Expanding product options and adding new ranges are seen as key routes to growth by the chief executive of one fashion chain. “From a growth point of view, it’s about increasing options rather than increasing rates of sale.”

Another fashion retailer believes speed is of the essence. “Those fashion retailers who have a fast supply chain will be the winners.”

Meanwhile, another fashion chief executive stresses innovation.

“You could argue that fashion retail will be one of the most challenged, particularly around currency rates, but if you are innovative, if you are able to stand aside and you’ve got enough financial clout, you will probably do well.”

For the chief executive of another multiple retailer, “service is the differentiator”, and retailers that “put service first” will see growth.

Investment priorities

In Retail 2015 it was clear that mobile was by far the focus, with 67% of bosses citing it as the top omnichannel priority.

However, for 2017 it is apparent that retailers are spreading their investment across the board with mobile now in among a plethora of other key considerations including ecommerce, international, in-store technology, systems, price, reducing the cost base, customer service and experience, and products.

This year, retail bosses are generally less prepared to nominate three areas of the business they would be giving top priority, often stating that all or nearly all are priorities.

“International will be a priority in terms of future growth for the business”

Retail chief

However, where retailers do rank investment areas in order, mobile still emerges as a key focus alongside ecommerce.

Customer service and the shopping experience are also mentioned as important priorities by several retailers, underlining the critical importance of the shopping experience as retail competes with leisure for consumers’ money and time.

Some 56% of the retail chiefs say international expansion will become more important during the coming 12 months, a huge increase from 2015 when just 4% of retailers named it as a top business priority for the year ahead.

“International will be a priority in terms of future growth for the business,” says one retail chief.

“We don’t know yet how the effects of Brexit will play out, but we’ll find a model that works in an appropriate way for us.”

This is just a snapshot of some of the in-depth insight shared by retail chief executives in Retail 2017. The report covers:

  • The state of the nation
  • Becoming omnichannel
  • Communicating with the omni-customer
  • Personalising the in-store experience
  • Refining the supply chain
  • The Brexit effect

Visit Retail-week.com/Retail2017 to download the Retail 2017 report and find out how the sector’s leaders are approaching the year ahead.