Boxwood highlights grocery, fashion and department store winners and losers in 2013

Boxwood: retail winners and losers

Boxwood: retail winners and losers

Boxwood, the management consultancy, has launched a piece of research detailing the winners and losers from the recent trading period. The paper, produced by the Boxwood Insights team, uses the Q4 trading figures to shine a light on who will be the winners in the battle for customer share in the next year.

Paul Martin, director, Boxwood Insights, said: “Now the final full year figures have been submitted we have analysed what went so wrong for some, and yet so right for others in the final quarter of the year. The concentrated nature of the Christmas trading period makes it a very useful illustration of emerging trends in retail, and as 2013 confirmed, it’s a sector that is changing rapidly. This snapshot of the 2013 Christmas period highlights three key trends that will be key to successful retail strategies in the medium term.”

Is the price right? It has never been easier for customers to compare prices, and this has lead to a systematic downward pressure on margins that is not going to ease anytime soon, said Boxwood. Aldi’s remarkable sales growth, up 37% on Christmas 2012, is a good illustration of the importance of price – and perceived value – to consumers, claim researchers. The introduction of high quality products at affordable prices was a key driver of growth cutting the cost of Christmas and not the celebrations.

At the other end of the scale, Boxwood said pricing was a major factor in Debenhams’ disappointing performance over the Christmas period where sales overall remained flat, in line with 2012. CEO Michael Sharp commented that the need to remain competitive in a highly promotional market had had “a major impact on both sales and profitability”.

Increasing focus on price consciousness means retail businesses will have to get used to lower margins over the long term, said researchers. To remain competitive, they will need to ensure their business model is fit for the market they operate in and drive all unnecessary costs out of the business.

Quick and Easy – consumers expect to be able to interact with their chosen retailer anytime and anywhere. The Christmas figures proved that there are big rewards for those that get it right, Boxwood found.

Asos CEO Nick Robertson credited its like-on-like growth of almost 40% to “significant improvements in our customer proposition, including better delivery options, additional payment methods and a new premier service in key international markets”.

John Lewis managing director, Andy Street, pointed to a “genuine omni-channel Christmas”, which saw record in-branch sales as well as a significant increase in online sales.

In contrast, Morrisons identified its lack of convenience stores and online presence as major contributors to its disappointing performance (down 5.6% on last Christmas). However, having a presence across all channels is not enough in itself, the key is connecting the dots to provide customers with a consistent experience, however they choose to shop.

Brand value and knowing your customer – companies with a well-differentiated brand proposition and an excellent understanding of their customers such as Next fared well over the Christmas period. Next’s clear value proposition – good quality products at competitive prices delivered in a consistent manner  – helped drive a 12% increase in like-for-like sales, said Boxwood. CEO Simon Wolfson also credited increasing shopper confidence in ordering online as a contributing factor.

Brands with a less targeted proposition like M&S, Debenhams and Tesco, in contrast, registered disappointed performances. In trying to be most things to most people, they struggled to convince customers to choose them over their competitors.

In conclusion, the 2013 Christmas trading period showed the retail sector is continuing to undergo rapid and fundamental change – and that succeeding in retail is more complex and more difficult than ever, said Boxwood.

  • Consumers are now used to ‘austerity’ pricing and a structural change is occurring in the sector which will result in lower margins over the long term
  • Consumers expect ‘anytime, anywhere’ convenience and a plethora of buying options have made purchasing decisions increasingly complex
  • Customers want the best price, but they also want convenience. They want the ability to purchase online, but they also want to touch and feel the product. They want quality, but they may not be prepared to pay as much of a premium for it as they used to

Matt Clark, director, consumer sector at Boxwood, said: “To succeed, businesses will need to ensure that their business model can deliver sustainable returns while remaining relevant to their customers. They will need to offer customers a consistent and convenient experience right across the customer journey. And they will need to make sure they and their customers clearly understand what their brand stands for. If it sounds difficult, it is. But as Christmas 2013 showed, it is not impossible – and there are significant opportunities for those who can adapt best to the challenge.”

To view the full report, click here: When the dust settles_Boxwood_Point of view_Final-1