We’ve had a flurry of retailers announce their trading results from the Christmas period, and for me the debate is whether online sales performed better than physical stores – or whether in fact it doesn’t really matter in this omnichannel, connected world. It is clear with more channels available to consumers that retailers have real challenges to keep pace with customer expectations.
Jigsaw is reporting a 10% sales growth over the Christmas period, largely attributed to their no-discount policy leading up to Christmas. However, what struck me in the press release was the fact that they can’t provide strict like-for-like sales figures due to implementing a new e-commerce system, which uses its store estate as a virtual warehouse. Sounds intriguing. Their CEO Peter Ruis said the warehouse was the 'living embodiment of omnichannel' and that as a result there was no accurate way of truly describing comparable year-on-year sales. In my opinion it is probably the right approach: the lines are so blurred between online and physical, and shoppers’ habits are changing as technology changes.
It is an interesting leap forward for a brand not to make any distinction between online and bricks-and-mortar sales. From a customer perspective, just because I start something online does not necessarily mean I will transact online. Consumers want choice and want to be served experiences. This is why having an omnichannel strategy that works effortlessly for customers will be critical to the success for retail brands over the next year.
Schuh is a good example of a brand doing it well. They offer real-time stock information which allows customers to collect in their local store (they prompt by knowing your location) within an hour of placing an order if the stock is available. The entire site is pretty seamless to use, with easy faceted navigation throughout, links to social media, product reviews, help via messaging or video, and a simple store locator.
The fact is, more and more consumers start thinking about buying online, but go into a store to purchase – meaning the high street is far from dead (read our white paper on how technology has created a new future for high street retailers). However, that decision is very much influenced by the initial online experience with the brand, so everything has to work effortlessly otherwise the consumer will hop straight to a competitor’s site. For example, take the millennial demographic (sadly, which I don’t fall into), 72% of millennials research and shop their options online before going to the store to make a purchase.
Surprisingly, after a fairly horrid time over the past few years, both M&S and Tesco have won back shoppers after the 2016 Christmas trading period. Both brands’ CEOs were handed jobs that could be perceived as somewhat of a poisoned chalice: restoring the reputation of a heritage brand and restoring sales rapidly, whilst trying to compete with brands not constrained by legacy challenges. Both brands have had their problems with M&S closing stores and Tesco reporting its worse ever annual loss of £6.4billion in 2015.
Both M&S and Tesco didn’t really adapt to changing shopping habits. For a considerable amount of time Tesco invested in out-of-town large stores, where typically customers would visit weekly for one big shop. But increasingly consumers have started to favour convenience stores by shopping more frequently and in small volumes. Since Dave Lewis joined as CEO, Tesco has been on a massive transformation to attempt to get their house in order. Thousands of jobs have been cut, loss-making stores have closed and they have implemented seven waves of price cuts to entice shoppers back. They were rewarded with a 0.7% rise in like-for-like sales over the festive season.
At the same time, M&S – whilst they have modernised their ancient supply chain and improved their online offering (although not without massive challenges and teething problems) – has struggled with sales for its clothing lines. Despite fairly positive fashion write-ups from journalists over the past few years, it has not translated into sales for M&S. They have failed to reconnect with the brand’s middle-aged customer base and alienated female shoppers. Nevertheless, at long last their clothing department has reported a sales boost; for the first time in 7 years, sales in Clothing & Home rose by 2.3%.
There are going to be big operational challenges for retailers this year as they try to keep up with growing customer expectations and demands. Logistically can they keep pace with demand for fast delivery? The outcome of Brexit is still unclear, but economists predict costs will rise on the high street. I believe the retailers who will succeed in 2017 will be those who are neurotic about understanding consumers, as well as offering consistent brand experiences across all touchpoints – from online to physical environments – whilst ensuring they offer that all-important personalised customer service.