Adrian and I recently attended BDO's retail update for 2015. BDO give us an angle on the market that we don't very often get, which we believe is really useful to inform our thinking and make sure we really know what we're talking about in terms of wider trends affecting retail and therefore, our clients and their strategies.
It showed a real mixed picture of what's going on in the market, which is good information for retailers and ecommerce managers/directors to be aware of.
A few specific trends stood out to me:
- Cheaper alternatives: 37.9% of people are looking for cheaper alternatives, especially for commodity or frequently purchased goods.
- Thinking about buying: 72.2% are thinking much more about their purchasing and agonising for longer.
- Trading up for quality: for less often purchased goods, 55.3% of people are willing to pay more for quality based on something that will last longer.
- Consumer confidence: this is still quite low and real wages are not increasing. Fuel is the only difference driving some discretionary spending.
Previously 250 stores would cover around 50% of the population. Now, it will cover 70% of the population. This is because people are gravitating more and more to large retail areas like Westfield and the Trafford Centre. This is driven by a desire to have an enjoyable shopping experience including key areas like lots of stores in one place, good food available and decent parking. This means great high streets are also thriving. It does mean though that secondary high streets in smaller towns continue to be decimated in retail terms and are turning much more to hospitality and social businesses.
Business rates will be reviewed in 2015 as will the general election - much could happen here, but it's very likely that costs will rise for prime real estate, increasing overheads. There's also murmurings of trying to levy some kind of business rates to online businesses, as Amazon gets away with a lot in comparison!
Finally, 'click & collect' continues to thrive, with 56% of all John Lewis online orders being 'click & collect'. More importantly, 25% of people then bought more when they visited the store to collect their order. We're still social animals that do like to visit stores; we just love the certainty of getting what we want as well. There is an increasingly 'social' role of a retail store.
There is a fulfilment arms race. Everyone is trying to get faster, more flexible and more useful for the consumer.
Single accurate view of stock is very important to allow fulfilment across the organisation to increase sell-through, where before it will have been blocked by a lack of visibility.
Online penetration continues to grow, but many will be surprised at its overall low percentage.
It's going to be a tumultuous year in retail. Not much is going to change on a macro scale to give consumers more spending power and they will continue to be expecting more from their retailers in terms of utility-based needs like delivery and nice environments. It comes back to the old maxim - if you concentrate on being a good retailer, you'll get ecommerce right. To sign off - here's some category forecasts for the next year and also a link to the full report.