Boxwood’s Christmas Trading Report reveals the 2014 Christmas trading period proved to be even more challenging than usual for many retailers. An unseasonably mild autumn together with the chaotic scenes we saw on Black Friday and Cyber Monday left many retailers perplexed on how to effectively manage the holiday trading period. In particular, Christmas 2014 saw supply chains come under severe strain as record numbers of consumers moved online in search of best price and convenience. Nonetheless, there were some notable successes across the trading period for those who managed to plan adequately and, more importantly, execute their plans effectively.
There were three features which defined the 2014 Christmas trading period:
1. Black Friday
Christmas started early for retailers in 2014 – with the emergence of Black Friday as one of the, if not the most important trading day of the year – and lasted all the way through to Boxing Day.
- Argos sales were up 45%, with 13.5m visitors across its digital channels
- House of Fraser online sales rose 125% on the previous year
- John Lewis enjoyed the biggest week for sales in the retailer’s 150 year history
However, Marks & Spencer was not able to cope with increased volumes and a hiccup in the supply chain resulted in delivery problems, extending delivery times beyond the original five days to 10 days. This made consumers hesitant to place Christmas orders with the retailer and the sales across general merchandise for the period were down 5.8%, placing severe pressure on CEO Marc Bolland.
The after-effect of Black Friday was an abnormal trading curve all the way to Christmas with the event forcing retailers to re-think their pricing strategies and promotion tactics during the invaluable festive period. At the end of the Christmas period:
- Despite some heavy discounting, the likes of House of Fraser ended the period with little profit growth despite an increase in sales
- Argos may be considering whether their promotional activity was strong enough in the light of a 0.1% like-for-like increase
- Ultimately it was Next, steering conspicuously clear of heavy discounting, who came out of the period as one of the clear winners and the darling of the City with Christmas sales up 2.9%
2. Rise of click and collect
John Lewis nicknamed Christmas 2014 as the ‘logistics Christmas’, as most of its online customers wanted to use click & collect (36% of sales where placed online of which 56% where fulfilled through click & collect). This was helped by the ability to utilise the Waitrose store network. This saw it come out on top of the Department store sector with sales increase of 7.4% for 2014 as a whole and 4.8% increase in like for like sales over the Christmas period.
3. Polarisation was more obvious than ever
While the top and bottom players in the market are doing relatively well, the middle is getting squeezed. It is becoming abundantly clear that those players with a clear value proposition and, in the case of the German discounters and retailers such as Primark, the focus on value had an extremely positive impact on their 2014 performances. Aldi and Lidl lead the grocer’s sector with 22.6% and 15.5% growth in sales respectively for 2014.
Interestingly, all three of these organisations are single- channel players that have not entered the omni-channel race for the bottom, instead focusing on enhancing their positioning of delivering good quality. In the case of Aldi and Lidl, increasingly premium quality for the most competitive prices.
At the other end of the spectrum, John Lewis and sister brand Waitrose yet again delivered a bumper trading period, up 6.8% for the year and 2.8% for Christmas sales. Clearly price remains an important driver, but there are other important factors that drive success. One of these is trust, a trusted brand is one that has a clear proposition, understands its customers and places them at the centre of everything it does and fulfils the promises it makes.
So what does this mean for those stuck in the middle? Firstly, being absolutely clear of what your value proposition is to the customers you are trying to serve. Secondly, being absolutely ruthless in executing this in the most cost-effective way. This may sound awfully simple but it is not – trying to be everything to everybody is no longer a good method for success.