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ANALYSIS: Why was H1 2019 online growth the lowest recorded?

A boost in June wasn’t enough to save online retail in the first half of 2019, with records showing that sales slumped to their lowest ever growth rate of just +5.4% Year-on-Year (YOY), according to the latest IMRG Capgemini eRetail Sales Index.

The Index tracks the online sales performance of over 200 retailers with a combined annual spend of £28bnComparatively, the same time period in 2018 saw results of +16.9% YoY, with consumer spending buoyed by events like the Royal wedding, World Cup and the Spring heatwave.

This slowdown in growth was also broadly reflected across the sectors, with all but three recording reduced but still positive increases. Health & beauty (+13.0%), home & garden (+9.3%), and clothing (+7.3%) saw the strongest growth, with clothing in particular having a substantially better Q2 (+11.2% YoY growth) than Q1 (+2.6% YoY), due to the hot weather and retailers starting their summer sales early. 

Looked at individually, one of the largest YoY declines in growth was seen in garden (-34.4%), although this reflected a fall from a particularly high growth rate in H1 last year thanks to the standout weather from April onwards.

Elsewhere, the sectors which fared worst were electricals (-22.7%), gifts (-22.8%) and lingerie (-8.9%), all of which have experienced a continuous decline in sales over the past six months.

Bhavesh Unadkat, Principal Consultant in Retail Customer Engagement at Capgemini, said: “The year started with a lot of gloom in the retail sector following the drop off in performance in H2 2018 and consumer confidence also fell to all-time lows. During the first half, consumer confidence settled in negative territory, on average 5.5points below 2018 and growth was lowest recorded 5.4%, a third of last year.

“In addition to this, consumers are cutting back on non-essential according to a Barclaycard survey, and sectors such as electricals are taking a hit online (-23%).

“If this year continues to mirror performance of last year, we can hope for a stronger second half.  However, with Brexit happening just before peak period and still uncertainty around what it will bring, we cannot know whether the index will recover or growth under 10% will be the new norm, at least for this year.  Caution and volatility within the market remain for the foreseeable.”

Andy Mulcahy, Strategy and Insight Director at IMRG, said: “In this country we have a tendency to regard online retail and physical retail (high streets) as being completely separate; an idea that has been feed over the past few years by the consistent growth in online even as the high street struggled. What we are now seeing is that they are not separate at all, but in fact deeply interconnected – hence growth in the first half of 2019 was the lowest yet recorded.

“With so much media coverage of well-known retailers announcing profit warnings and store closures, customer confidence in shopping with them is low. This forces them into heavy discounting to drive sales and their competitors get dragged into it too. It has now become so widespread that shoppers are used to the wide availability of discounts and many retailers – whether online-only or with a store portfolio – seem a bit stuck in it even before we reach the Black Friday peak.

“That said, from an online sales growth perspective it is the multichannel retailers (+5.2% for Jan-Jun 2019) who are currently experiencing lower growth than the online-only retailers (+7.4%). It may be that the old perception of getting better value online still persists, and that shoppers associate high street retailers with the highest chance of falling into administration, so they are having to work even harder than their online-only competitors to build sales.”

Revealed: The High Street shops Brits want to see

The perfect high street is home to a Post Office, green grocer, butcher – and boozer.

Britain’s traditional main shopping thorough-fares are facing stiff competition from the boom in online shopping and the emergence of huge out-of-town malls.

But the majority of us still have a perception of what the High Street should be able to provide, with a decent bakery, a good DIY shop, and independent clothes outlet all making the list.

An energy provider, restaurant and barber were also hailed as a must, along with a supermarket and shoe shop.

However, just eight per cent of the 2,000 adults polled currently do the bulk of their shopping locally, preferring to drive or use public transport to top up at larger shops and supermarkets.

And while eight in 10 do make the effort to use their local High Street, many think it lacks the outlets they require to get everything they need from one trip.

Three quarters said they were worried about the decline of their high street, and 32 per cent said the retail outlets which are left, such as betting shops and beauticians, aren’t
what is needed.

Researchers also delved into the reasons why the local high street is being neglected by so many – and found one in three avoid it amid a worry goods are generally ‘more expensive’.

Bill Bullen, CEO of smart energy provider Utilita, which carried out the research to celebrate the opening of its second hub in Southampton, said: “As this study shows, there is a real desire for the high street to remain a fruitful and central part of any town or city; Brits like the idea of having one place where they can access all their products and services.

“However, not enough people are shopping on the high street and this means many businesses are finding it unsustainable and are therefore closing down.

“If people want to see their local shopping area do well, they’ll need to invest a little more time and money in the businesses currently there.”

The OnePoll.com study also found other shops adults are keen to see locally include record shops, vegan shops, and jewellers.

Furthermore the average adult visits their local shopping area twice a week, but spends just £23 in total in the process.

One in three aren’t impressed with the shops, while expensive parking puts off three in 10 shoppers.

Limited choice is a factor for four in 10 and busy Brits often find it more convenient to shop online.

However, given the opportunity, shoppers would prefer to buy something from a ‘real person’ than via the internet, and four in five love to converse with shop workers when purchasing something in-store.

Bullen added: “Our high streets are important economic hubs, the small and micro businesses – thousands of which we supply – on them forming the backbone of the UK economy.

“But they are more than this; they are the beating heart of communities across the nation.

“It’s why we want to support high streets by launching a national roll-out of Utilita energy hubs following a successful trial venture in Gosport, Hants, in 2018.

“Our Southampton hub launched just days ago, and similar stores will open in Edinburgh, Derby and Bradford – to name but a few – over the months to come.

“This will have long-term benefit for us and the communities we serve, in addition to giving customers the face-to-face service they crave as Utilita brings energy back to the nation’s high streets – in every sense.”

SHOPS BRITS WANT ON THE HIGH STREET
1. Greengrocers
2. Independent clothes shops
3. Baker
4. Butchers
5. Handyman / DIY
6. Record shop
7. Shoe shop
8. Chain clothes shops
9. Post Office
10. Luxury clothes shops
11. Newsagents
12. Gluten free / Vegan shops
13. Restaurants
14. Pubs
15. Energy / utility providers
16. Supermarket
17. Jewellers
18. Coffee shops
19. Barbers
20. Charity shops

Summer festivals to drive £1.2bn spend at UK retail

Festival goers will spend over £1.2bn this summer in the UK on food, clothes and merchandise, with adults averaging £67 per day and retailers reaping rewards from ‘pop up’ experimentation.

That’s according to a study commissioned by Barclaycard to mark its partnership with Live Nation and AEG at eight music festivals across the UK.

The credit card giant polled 2,000 adults and found that 36 percent plan to attend at least one festival in 2019.

Food is the biggest daily spend, averaging at £46, with Thai (16 percent) and fish curry (15 percent) preferred to the traditional burger and beer. 

An adventurous six percent will try insects onsite, while eight in every 10 festival goers will purchase something unique which can’t be bought elsewhere. 

Four in 10 even prefer to shop at live entertainment events than online, or on the high street – with a third considering these event better places to uncover new trends.

And just under half of those polled prefer the unusual product offering laid out on stalls, and 41 per cent feel more connected to the products they buy at a live event.

Making memories is also increasingly important to Brits when deciding how to spend their money, with many keen to take away something extra from their festival experience.

Four in ten (41 per cent) also said they feel more connected to the products they buy at a live event, over those made on the high street or online.

200 merchants were also polled by Barclaycard, with results indicating that festivals are seen as fertile ground to trial new products and ideas, with half testing products which they’ll then later roll out online or in store.

With the festival industry currently worth over £2.46bn and 36 per cent of Brits planning to attend a festival this summer, Barclaycard says live events pose an increasingly lucrative opportunity for new and established brands.

Daniel Mathieson, head of sponsorship at Barclaycard, said: “Pop-up commerce is thriving across the UK festival scene, as brands compete to provide the ultimate fan experience.

”With more ways to engage audiences alongside demand for a deeper connection to the products they try and buy, festivals are becoming a fertile ground for all kinds of businesses to grow.

“In recent years we’ve also seen festivals start to offer dedicated event spaces to brands while providing activations on-site has also become increasingly popular.

”As festival spending looks set to rise, my advice to UK businesses is to explore the sales and marketing opportunities the UK live entertainment scene presents, or risk losing out to more savvy competitors.”

Image by Free-Photos from Pixabay

Online retail ‘must try harder’ to avoid basic mistakes

Online retailers could be making more in revenues if they applied simple measures, such as appropriate product imagery.

That’s according to research carried out on 1,213 UK adults by agency MarketingSignals, which found a staggering 61 percent of those polled were put off purchasing from a website by insufficient or poor product imagery, followed by 57 percent that found product descriptions inadequate.

The survey also found that more than half (52 percent) of these businesses are failing potential customers with their lack of customer service, while 47 percent have overly intrusive discount pop ups on the home page, which can potentially detract users from making a purchase.

43 percent of those polled were put off by websites that has an over complicated checkout process, while 41 percent would be deterred by an e-commerce business which has little or no social media presence.

A third (34 percent) of those questioned said that a lack of delivery options would deter them from from making an online purchase, whilst a website that wasn’t optimised for mobile devices would put off 27 percent of respondents.

16 percent said they’d be put off from making a purchase if they couldn’t see company information or an ‘about us’ page. Completing the top ten reasons which deter users from making a purchase was customers who prefer to use alternative payment methods, with over one in ten (11 percent) saying that they’d seek to make their purchase elsewhere if a website did not accept the PayPal or Apple Pay.

Gareth Hoyle, managing director at marketingsignals.com, said: “It’s clear from the research that many potential customers are being put off from making a purchase from websites they are not familiar with, which makes it so much more important for e-commerce businesses to make the checkout process as simple as possible in order for them to complete their transaction smoothly.

“In this social media age, it’s perhaps unsurprising that 41 percent of Brits would be put off from making a purchase from a website that is unfamiliar to them and doesn’t have a visible social media presence.

“Internet savvy consumers are always keen to spot a bargain, though can be put off by over complicated or seemingly untrustworthy websites when attempting to make a purchase, instead opting to buy from a site they already know and trust. So what this research demonstrates is that it’s clear that there are simple steps e-commerce businesses can take in order to improve conversion rates from first time visitors to their site.”

The top ten reasons that deter customers from making an e-commerce purchase:

  1. Insufficient or poor quality product imagery – 61 percent
  2. Inadequate product descriptions – 57 percent
  3. Lack of customer service – 52 percent
  4. Distracting/Intrusive pop ups – 47 percent
  5. Over complicated check-out process – 43 percent
  6. Little or no social media presence – 41 percent
  7. Lack of delivery options – 34 percent
  8. Desktop-only site design – 27 percent
  9. Insufficient or lack of company information – 16 percent
  10. Not accepting alternative payment methods including PayPal and Apple Pay – 11 percent

Image by StockSnapfrom Pixabay

UK’s most resilient town centres revealed

Cambridge as been ranked as the UK’s most resilient retail location outside of London, followed by Bristol and Guildford.

The data has been published as part of FM provider Cushman & Wakefield’s annual UK Town Centres – What’s Next? report, which analyses the performance of 250 town centres since the start of the financial crisis.

The data is based on 24 economic, demographic and retail property metrics, and highlights the evolving role of the UK’s town centres. 

In 2019, the report has found a clear correlation between ‘shopper mission’ and town centre vitality.

For example, as consumers become more mobile and less reliant on physical retail shops, expectations are changing. Cushman & Wakefield says these missions generally fall into one of three categories: 

  • large destination, or experience orientated visits, 
  • purpose shopping that is focused on specific purchases, and 
  • community-based convenience trips. 

The report asserts that retail locations that do not align with at least one of these key missions will need to repurpose to remain relevant.

In the 2019 rankings, Bristol’s has leaped forward, rising from 9th to 2nd to sit behind Cambridge, which kept the top spot it claimed in 2018. The Top is rounded out by Guildford, Exeter and Oxford, respectively.

“The towns within our top 10 are navigating the fast pace of change best and offering visitors a variety of reasons to keep coming back,” said Amy Gibson, Retail Analyst at Cushman & Wakefield.

Image by Steven Iodice from Pixabay

Latest BRC data paints grim picture for the High Street

Retail has shown its biggest sales decline on record covering the four weeks from April 28th – May 25th, 2019.

Sales decreased by three percent compared to the same period last year, which had then increased by 2.8 percent from 2017, making it the steepest like-for-like decline since December 2008.

Over the three-months to May, Non-Food retail sales in the UK decreased by 1.1 percent both on a like-for-like and on a total basis. This is below the 12-month total average decrease of 0.4% percent, while food sales increased by 0.8 per cent on a like-for-like basis and 1.9 percent on a total basis.

All records exclude Easter distortions, caused by Easter falling in different months in subsequent years.

Discussing the findings, Helen Dickinson, chief executive, British retail Consortium, said: “With the biggest decline in retail sales on record, the risk of further job losses and store closures will only increase. While May 2018 offered almost unbroken sunshine, topped off by the run up to the World Cup and the marriage of Meghan and Harry, May 2019 delivered political and economic uncertainty. Food sales dropped for the first time since June 2016, with further declines in clothing, footwear and outdoor goods.

“With retail conditions the toughest they have been for a decade, politicians must act to support the successful reinvention of our high streets and local communities. Business rates remain a barrier, preventing many retailers from investing in their physical space. We have a broken tax system, which sees retailers paying vast sums of money regardless of whether they make a penny at the till, and yet the Government is failing to act. The legislation is falling behind the technological revolution.”

“April may have provided retailers with some light reprieve thanks to Easter, but May’s staggering fall of 3% like-for-like is a stark reminder of the industry’s ongoing issues, which for many require urgent attention, said Paul Martin, head of retail, KPMG.

“We are of course comparing this month’s growth against a stellar May in 2018, but even the 3-month average – which softens the monthly volatility – demonstrates that achieving growth in retail remains a real struggle.

“The bank holiday weekends have given rise to the added interest in furniture and homewares, as shoppers set about making home improvements. However, the weather did little to convince fashion-minded shoppers to refresh their seasonal wardrobes.

“The extremely low growth online is real cause for concern, especially with almost a third of all non-food sales today being made online. This trend has continued to manifest itself over the last year and requires real focus from the retail community.”

Image by Pexels from Pixabay

Retail brands ‘failing to deliver on in-store sustainability’

Retail brands are failing to address sustainability throughout the product lifecycle, despite 85% claiming that it is important, and 86% ranking it as an important factor to customers when making a purchase decision

That’s the result of a survey of 200 retail professionals by undertaken by international retail installation specialist 100% Group, which says that while sustainability-conscious brands place high importance on the raw materials used to create retail displays and packaging, they neglect the end-of-life outcome.

When it comes to in-store retail displays, the research (conducted by market research company Sapio) found that 61% of retail brands said that their displays are sustainable.

Yet while brands find that sustainability programmes come at a cost, incurring an average increase of 18%, the decision appears to pay off, producing an average 23% increase in sales from making displays more sustainable. 

The research suggests that the future of retail is green; 22% of retailers said they already have sustainability initiatives in place and a further 43% are planning to introduce them within a year. 

Retail display (72%), and packaging (61%) are the two areas where sustainability is taken into account most, but only 41% address it at product end-of-life, suggesting that brands and retailers are missing a circular sustainability policy.

This, says 100% Group, means that retail displays at best end up being recycled, while many are simply thrown away when they reach the end of their life rather than being re-used or redeployed to extend their lifecycle. 

Dan Williams, Founder and Managing Director of 100% Group said: “There appears to be a significant disconnect between the brands that claim to be sustainable and those that apply this in a full circle capacity. While it’s positive to see brands making sustainable choices on the products, packaging and displays themselves, it’s important to consider end-of-life arrangements upfront to ensure materials can be properly redeployed instead of sent straight to landfill.” 

Of the 69% of retail brands that say that their brand has an environmental sustainability policy, over half use recycling targets to manage it, while others focus on material reduction targets (45%) and energy consumption (41%).

Although brands appear to be making conscious efforts to improve sustainable practices, 100% Group says the figures suggest that green regulations don’t go far enough, with only 23% of respondents using these as guidelines to set targets.  

Unsurprisingly, brands believe that packaging is the most important area to demonstrate commitment to sustainability (67%) with branding and marketing falling at the bottom of the list.

Retail employment down as market structure evolves

Structural changes in retail triggered by the advent of online sales and other technologies has seen year-on-year total employment drop 2.4 per cent in Q1 2019, a higher reduction than the one in Q4 2018, at 2.2 per cent.

ONS data via the British Retail Consortium (BRC) has also revealed a decline in employment of 2.1 percent in Q4 2018 and 2.9 per cent in Q3 2018.

However, the UK economy as a whole has witnessed the highest record of employment since ONS data records began, a contrast to the downward trend.

17 per cent of retailers indicated plans to reduce staff in the coming quarter, above the comparable figure of 13 per cent last year, and 67 per cent seek to keep their staff numbers unchanged (down from 75% last year).

Store growth was steady at 2.3 per cent in Q1 2019, the same rate of change as in Q4 2018. Positive store growth found in the BRC sample is in contrast to the ONS figures showing that the number of local units is in decline in the UK. This is due to the expansion of smaller format stores by several retailers in the sample.

In Q1 2019, total hours were down 2.7 per cent year-on-year, similar to the reduction of 2.8 per cent of Q4 2018. The majority of survey participants reduced labour requirements compared to last year, with some increasing stores and also hours and employment.

Discussing the ONS results, Helen Dickinson OBE, chief executive, British Retail Consortium, said: “Yet again, the number of retail jobs fell during the first quarter of this year, with a 2.4% per cnet year on year fall in employees; this would be equivalent to losing 74,400 people across the retail industry. While the number of stores rose, this was mainly driven by an increase in small format stores, with many larger stores closing — resulting in a net job loss. And more jobs are likely to disappear unless there is a shift in Government policies. 

“Retail is undergoing a period of unprecedented change in response to new technologies and changing consumer behaviour. The investment required to successfully navigate this transformation is being held back by the rising cost of public policy. Over three million people rely directly on the retail sector for jobs, with many more working throughout the supply chain. Yet spiralling business costs pose a grave threat to these jobs – as recent administrations, CVAs, and store closures show.”

Discounting drives online purchasing decisions

Two thirds of Britons have made an online shopping decision based purely on a discount that was available, with 80% of 18-31 year olds admitting to the practice.

A study, by global affiliate network Awin, has found that found that 66% of Britons have used a price comparison site in the past six months, whilst 59% have used an online voucher code in the same time frame, with a further 66% admitting to using any form of affiliate service to make an online purchase.

What’s more, almost half of consumers (47%) see the importance of bloggers and specialist websites to help inform their online purchases.

The survey polled 2,250 people over the age of 18.

The report found that more than half of online shoppers have interacted with an affiliate service in the past six months, and the findings were echoed by the results of the survey, which found that as many as 66% of Britons have used an affiliate service in the past six months, predominantly though the use of online voucher codes or price comparison sites, used by 59% and 66% respectively.

Online voucher codes were most popular amongst 18-31 year olds, with 67% using one in the past six months, whilst price comparison sites were most popular for 32-45 year olds, with 75% visiting one in the last half a year.

In terms of the savings made by consumers through an affiliate channel, 90% of those that have used an online voucher code said that they saved money in the process, whilst 88% of those that used a price comparison site admitted to the same.

The importance attached to affiliate sites was also looked at, and it was found that 85% of respondents answered that price comparison sites were ‘somewhat important’, ‘very important’ and ‘extremely important’, whilst 81% answered the same in reference to online discount code sites.

Almost half of respondents (47%) said that they saw the importance of bloggers and specialist websites when buying online, and 52% answered the same in relation to cashback sites.

Consumer online shopping habits were also explored, with it being found that 67% of all respondents had impulsively purchased a product online based on the fact that it was discounted. 18-31 year olds were found to be the most impulsive, with 80% admitting they have made last minute purchasing decisions based on markdowns alone.

It was found that 72% of consumers first use a search engine to begin their online shopping journey, particularly older shoppers, with 80% of 46-59 year olds admitting to this. Conversely, 30% of 18-31 year olds would look on social media to begin with, compared to 10% of all participants. Consumers were found to be more likely to visit a comparison site first (9%) than they were to visit Amazon (8%).

Online voucher codes were most likely to be used when purchasing fashion products online, with one third (33%) saying they were ‘extremely likely’ to use one when buying clothes, whilst comparison sites were most likely used for travel, with 77% revealing they were ‘extremely likely’ to utilise them when booking a holiday.

The report found that 60% of airline sales on desktops are driven by price comparison sites, and users will visit an average of 38 different websites before committing to an online travel purchase.

Commenting on the findings of the study, Kevin Edwards, Group Client Strategy Director at Awin, said: “Whilst consumers might not even realise it, affiliate channels are often a core part of purchasing products online, and are a much more user-friendly way of advertising a product. Whilst those of us in the industry are already aware of its widespread manifestation, this survey shows how important affiliate channels are for online shopping and ecommerce.”

London the top choice for luxury retailers

London was ranked the number one location for luxury retailers last year, with more store openings than Paris, Tokyo and Singapore.

According to data from Savills, London accounted for 9.6% of all luxury store openings worldwide, with 33 luxury retailers opening their doors in 2018, up 38% on 2017.

Luxury fashion brands accounted for 45% of store openings – although this was down on 2017 as specialist accessory brands, focused on bags, footwear and eyewear, increased their share from 20% to 24%.

Specialist jewellery and watch brands also continued to account for a sizeable number of store openings, at 24%.

Globally, the research found that luxury brands opened 16% fewer new stores in 2018 compared with 2017, suggesting brands are focussing on core, strategic and often underrepresented markets. 

Bangkok was a close second to London, with 6.7% share of store openings, with the opening of the ICONSIAM mall a direct reason. Dubai and Hong Kong shared the third position, with Dubai, Paris and New York all making the top ten.

“In spite of the headwinds facing UK retail, the London luxury market is looking not only resilient but is also offering attractive opportunities for those brands who want to enter the market, as well as those looking to improve their physical presence with more high profile, experiential spaces,” said Marie Hickey, retail research director at Savills.  

“With a 38% increase in luxury store openings last year, the city became the most active destination globally for high end brands, up from joint fourth in 2017.”

Anthony Selwyn, head of London and international retail at Savills, said: “Last year we saw the big luxury brands retrench to the core cities and we expect these global destinations to remain the key focus for luxury brands wanting to expand or improve their physical profile in 2019. 

“For the UK market, it’s great to see London leading the way, and with the core cities predicted to be the main areas of interest for brands this year, the future looks positive the capital.”