Andrew Fowkes, head of retail centre of excellence, SAS UK & Ireland, highlights the retail winners and losers of 2015
While 2015 has been an unpredictable and often difficult year for many UK retailers, their customers have certainly prospered. The Christmas season, in particular, has seen increased discounts for the fifth year in a row. This follows a period when changing weather patterns and price deflation have already offset predicted sales, both in-store and online. So who were the winners and losers of 2015, and why?
Supermarket price wars continue
Supermarkets represent a pertinent microcosm of the many highs and lows retailers have faced this year. Sales have been on the decline for the likes of Asda, Tesco and Morrisons, with Asda losing 16.2% of its market share in the last three months of 2015. Yet, the likes of Sainsbury’s, Aldi and Lidl managed to improve sales and increase market share in the same period. It’s true that Aldi and Lidl managed this through increasing discounts, which many of the major supermarkets are unable to keep up with, but Sainsbury’s cited strong trade results in more premium products; a feat mirrored by Waitrose.
The difference here comes with knowing what the customer wants. The successful supermarket chains have a clear identity, customers have a particular affinity to these brands, and they know what they’re getting when they buy from these stores. These are the winners.
To compete, other brands must find their place in this market by working out what their customer actually wants. The supermarket war is about loyalty and knowledge, as much as it is price. Using insights from real-time analysis can lead to better decisions on a number of otherwise unforeseeable factors. Knowing what your customers want can provide lots of useful insights for purchasing managers to decide which products to stock and at which store location, and most importantly, factoring in visibility over cost of sales and ensuring a focus on remaining profitable.
Online vs in-store reaches its peak
Online retailers have continued to reap the rewards of the shift to digital this year. Britain has been labelled the online shopping capital of Europe, following the latest spending figures released by Eurostat. Indeed, online sales in the UK are set to reach £52.25bn this year. The demise of in-store shopping on Black Friday coupled with one of the warmest winter periods on record makes it clear that customers have taken their shopping habits online in a bet to find the products they need at a cheaper price. Indeed, customer footfall across the UK dropped by four per cent for the week to 20 December compared to the same time last year. This shift in spending habits signal the ongoing effects of online discounts in changing the rhythm of Christmas retailing.
Nevertheless, while shoppers flocked online to grab a bargain during peak times, several retailers actually buckled under the pressure of increased traffic. This could have been prevented had retailers used data analytics to get a more accurate picture of impending demand.
Using insight from the vast amount of data that retailers have at their disposal could have helped them to understand and respond to the disrupted landscape and changing expectations in a far more effective way. For example, adjusting price levels or promotions to keep demand at a more manageable level. Not only that, if retailers have a clearer understanding as to how and when customers interact with their website, they can improve outbound campaigns to target profitable customer segments when there is less online traffic.
Customers have the last laugh
Customers have enjoyed increased purchasing power for close to two years now, with Deloitte reporting that average discounts went as low as 41.8% during the Christmas season of 2015. Their spending habits are becoming increasingly more difficult to predict, so retailers need to be doing everything in their power to get ahead of the game.
Price wars are extremely difficult to forecast and cater for when squeezed into a shorter timeframe. If retailers don’t attract enough customers they lose out; if they can’t deliver on what they promise they lose out. Only by having insights into current and previous shopping behaviour, stock performance and competitive discount ratios, will retailers improve customer loyalty and prosper.
So at the end of the day, customers were the biggest winner of 2015.