Many retailers have seen well above normal demand since April and most are planning for record online sales during this year’s peak season. Whilst previous years' experience may seem less relevant given the ongoing pandemic, much can be learnt from consumers’ behaviours and retailers’ capabilities during the last 6 months.
As retailers prepare for Q4, we’ve taken a look at some of the latest data and what to consider to optimise this year’s peak trading season.
WHERE ARE WE NOW?
Whilst the recovery remains fragile, ONS reported total retail sales volumes in August increased for the 4th consecutive month, resulting in a 4% increase compared to February’s pre-pandemic levels. Read more about this data in our blog “Retail Ramblings and Reflections – Autumn”.
Footfall data shows consumers’ confidence in returning to physical stores remains low, albeit improving slowly. Despite ongoing concerns about the future of the high street, it’s worthy to note physical stores with multichannel offerings have driven much of the growth in online sales, and the most recent footfall increases have also been driven by the high street.
It is evident some retailers, across all sectors, are thriving more than others, and the physical store has a big role to play as a driver of online sales and providing a more convenient shopping experience.
HOW ARE CONSUMER BEHAVIOURS CHANGING?
The way we live, work and shop, as well as what we value, has changed considerably for many. We’re seeing a greater focus on more mindful consumption, cost consciousness, shopping local, safety considerations, sustainability, brand values and transparency, all of which are contributing to a changing retail landscape.
Digital engagement is increasing
The dramatic rise in online shopping shows no sign of abating as consumers opt for this safe and convenient option. We’ve also seen a new group of customers shopping online for the first time who are expected to continue to do so. Consumers have increased their use of various digitally enabled services and intend to continue to do so according to Accenture’s Covid-19 Consumer Pulse Research – Wave 7.
Shocks to customer loyalty
There was a shock to customer loyalty during the initial wave of Covid-19 caused by store closures and supply-chain disruptions. Consumers changed their behaviour with many trying a different brand or retailer to meet their needs.
McKinsey’s Covid-19 Consumer Pulse Survey, conducted globally in June, found over 60% of consumers had changed their shopping behaviour. The top 3 reasons for this in the UK were value, availability and convenience.
Financial security is a concern
Financial security remains a prime concern and people’s ability to spend money on themselves and gifts may impact peak sales. On the other hand, people who haven’t lost their jobs, or had their income reduced through furlough, may have extra money to spend.
Returns rates may be reducing as a result of more considered purchases
Whilst many retailers don’t disclose returns rates, estimates suggest over 30% of all online products are returned in the UK. Notably, Next and Asos have both reported significantly lower return rates this year, driven by more considered purchases due to lockdown restrictions and better selling categories with lower returns rates. Next, reported a returns rate of 23% year to date versus 42% in 2019. Astonishing.
Stay at home measures continue to influence our purchases
As long as restrictions on social gatherings and options for going out remain in place, the home continues to be the main focus for many. These categories are expected to continue to do well, including those operating in the off-price and budget range.
Homewares
Electrical and tech
Leisure and sportswear
Arts, crafts, toys, games (plus others related to hobbies and interests taken up during lockdown)
Health, beauty and wellness (particularly self-care and easy maintenance items)
Subscription services
Gifts.
Marketplaces
InternetRetailing recently reported on research from Adobe. It found more than half of UK shoppers regularly shopping online (nearly 70%), are doing so via marketplaces with Amazon being 4x more popular than retailer sites and apps. The inference being, even with more time on their hands and restrictions to shopping in-store, consumers were drawn to the broad product ranges, robust delivery infrastructure and limited steps between logging-on and checking-out that characterise marketplaces.
In summary, all of this presents continued opportunities for retailers to retain customers and acquire new ones by creating an omni-channel experience which offers a range of services supporting seamless paths to purchase and delivery across multiple channels.
Irrespective of product, the consumer expects choice, convenience (including safety), simplicity and speed. Giving them the product they want, on time, with a choice of delivery and payment options plus easy returns is a strategy for success. A retailer’s ability to adapt and execute well on this can be the difference between conversion and abandonment, and make or break a loyal customer.
WHAT DOES THIS MEAN FOR PEAK?
This year’s peak is going to be unlike any other, with local lockdowns and tightening of restrictions, economic uncertainties, the unwinding of the furlough scheme, and concerns about the second wave and another national lockdown.
For sure, far more shopping is expected to take place online, with perhaps an increasing role of stores for collection and returns. In the case of holiday gifting, there's likely to be an increased reliance on delivery direct to the recipient. This may be the safer, and in the event of fuller lockdowns, locally, regionally, or nationally, the only option.
Retailers who manage store and online traffic well and optimise their omni-channel capabilities for browsing, product research and selection, points of purchase, payment options, delivery choices, virtual consultations and personal shopping, easy returns and aftercare, are likely to perform better.
TIPS ON OPTIMISING THE PEAK OPPORTUNITY
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Wishing you a very happy, and successful, peak season!