RETAIL RAMBLINGS & REFLECTIONS - AUTUMN 2020
In this regular feature, we take a look at what’s happening in retail, in stores and online, as well as key developments in retail tech.
THE SHAPE OF THE RECOVERY – INTRODUCING THE POLO MINT!
Whilst the economic situation remains fragile, the Office of National Statistics' (ONS) latest retail sales data showed total sales volumes in August increased for the fourth consecutive month: 4% above February’s (pre-pandemic) levels.
As the chart shows, non-store retailing is performing particularly strongly, with food stores, other non-food retailing and household goods holding up. Whilst the other sectors have shown a slower rate of growth since lockdown, they continue to recover.
Table 2 shows the growth rates for the amount spent online (MOM and YOY), in addition to the proportion of online sales. Whilst online sales value fell slightly (-2.5%) in August compared to July, online spending still represents 28.1% of all retail sales and was 46.8% higher than February’s pre-pandemic levels.
The full ONS “Retail Sales, Great Britain: August 2020” release can be seen here.
Consumers’ confidence in returning to physical stores remains low, albeit improving slowly. Springboard reported retail footfall improved again in August and in the past week has risen again by 2.4% (wow) despite the new “rule of 6” and regional lockdown restrictions. Most notably, this increase was driven by high streets as seen in the table below.
It's no surprise that retail parks are faring better than other formats. Footfall continues to be weakest in big cities, given their reliance on tourists (particularly London) and professionals working in the centres, plus rising unemployment. Never-the-less, that smaller, suburban retail stores are outperforming larger city stores is unprecedented which could be why we’d never heard of a polo mint in this context before.
Despite ongoing concerns about the future of the high street, it’s worthy to note physical stores with multichannel offerings have in fact driven much of the growth in online sales. Research from both IMRG (shown here) and GlobalData’s Multichannel Retail & Covid-19 report supports this.
In August, the Bank of England Governor said the economy is bouncing back faster than expected as businesses re-open and shoppers get spending. That said, big risks remain including a second wave of infections, a looming jobs crisis and EU trade agreements post-Brexit. The recovery remains fragile.
RETAILER NEWS & TECH DEVELOPMENTS
Whilst online retail remains buoyant, penetration levels have fallen slightly with the reopening of physical stores, as consumers return to the shops. The boom in e-commerce presents a new challenge for retailers - how to stand out and get the right products seen by the right customers.
We’ve seen a notable rise in retailers embracing digital solutions and driving tech transformations in the race to adapt and thrive in a Covid-world. Here’s how some retailers are diversifying and innovating their multi-channel operations.
Technology is being used to manage queues and capacity in-store to allay customers' fears and concerns about crowded spaces . Examples include Sainsbury's, Asda and John Lewis all testing virtual queuing systems enabling customers to wait remotely for their turn to shop using a smartphone app. Aldi has implemented traffic light systems, including trialling the addition of audio prompts (in conjunction with the RNIB), and Lidl launched an online chatbot via WhatsApp to help customers avoid queues and find quieter shopping times.
Click, Collect, Deliver & Return
Asda is trialling a returns scheme for its George fashion line, enabling customers to return unwanted items to their grocery delivery driver.
Waitrose is rolling out drive-through collection for online grocery orders. As well as collecting groceries, customers will be able to return items, including John Lewis goods without having to leave their vehicle.
The Original Factory Shop is piloting a home delivery service for customers who spend a minimum of £15 across its gardening, outdoor, toys, homeware and electrical ranges.
John Lewis has extended its click & collect partnership with Coop to 900 locations across the UK.
Marks & Spencer is trialling a click and contactless collection offering in a partnership with Doddle, including a drive-up collection service.
Lidl is trialling a click and collect system at a select number of stores in Poland, as well as its own payment system, Lidl Pay. If successful, it will roll out the initiative to other countries. In May, its parent company launched its own cloud computing service for third party retailers.
Aldi is expanding its online capabilities with the further rollout of its fledgling click and collect offering and a delivery service trial with Deliveroo.
Marks & Spencer has tripled its Mobile Pay Go network from 100 to 310 stores, enabling customers to purchase groceries without visiting a till.
Aldi is developing its own cashier-less Amazon Go rival and is on the hunt for automatic product recognition technologies. Amazon Go stores automatically track items put into baskets, charging shoppers’ Amazon accounts without the need to queue or physically pay.
Virtual Shopping Services
The John Lewis Partnership Group continues to boost its tech services by adding to its range of virtual interactive experiences. This includes a virtual Christmas shop allowing customers to take a 3D tour of their flagship store and purchase items, virtual personal shopping via zoom (adding to the free virtual styling appointments launched during lockdown, covering fashion and interiors, which have seen over 3,500 bookings completed since mid-April), and cookery schools for children during holidays.
In a sign of the increasing importance of customer data and fierce battle for market share, the big grocery retailers have been busy launching new, or updated, loyalty programmes and campaigns.
Marks & Spencer has overhauled its Sparks programme, relaunching it as entirely digital with an updated M&S App. The app has been downloaded more than 1m times since its July launch. In addition to the usual personalised offers and charitable donations, Sparks members are now being enticed with little “thank you’s” (think Percy Pigs and a free croissant). Rewards include treating a Sparks customer every week, in every store, to their shopping and giving away thousands of pounds to spend in store or online. We’re looking forward to experiencing first-hand the joy of a shopper receiving one of their give-aways soon!
Lidl formally launched its digital loyalty and rewards programme in the UK this month with a new rewards app “Lidl Plus”. It offers discount coupons, scratch cards, digital receipt and tracking, store information, leaflets, and partner offers.
Tesco Clubcard launched its campaign to unleash “the power to lower prices", encouraging customers to use their Clubcard to receive exclusive deals and unlock lower prices.
The John Lewis Partnership Group has announced it intends to merge their John Lewis and Waitrose loyalty programmes in the future. Currently there are 7m MyWaitrose and 2.6m MyJohnLewis members.
According to Retail Gazette's "Is subscription-based retail the future of shopping", there’s been an increase in subscription services sign-ups with 2 in 5 consumers signing up since lockdown. Topcashback, the cashback website, reports at least 57% of Brits now have a subscription service.
Entertainment, food boxes, chocolate, health and beauty subscriptions are well established in this space. What’s new however is Pret a Manger launching the first monthly subscription service for out-of-home drinks in the UK.
As fashion gaming gains traction among brands seeking new ways to engage millennials and Gen Z'ers, Primark has launched Primark Legends, a mobile gaming app where gamers assume the role of a shop assistant in a busy digital shop. Described as a fun, fast-paced shop assistant simulator, the app invites gamers to help customers find their perfect outfits, tidy shelves and fill the shop with new stock.
Marks & Spencer officially launched its grocery online with Ocado on September 1 as Waitrose goes it alone. Whilst the lockdown has put Waitrose’s online business in a better place, this is a significant change in the online grocery battle and the media machine is in full swing! Marks & Spencer has since announced it is ending its online delivery partnership with Deliveroo.
HOW IS THE HIGH STREET CHANGING?
As many retailers continue to reduce store estates and others have pivoted to online only, there’s increasing evidence the transformation of our high streets is accelerating. High streets are expected to be regenerated with a more diverse range of enterprises and uses, sitting alongside retail, with a focus on locality, accessibility, convenience and community including:
mixed-use retail, leisure and community hubs
pop up stores
The availability of premises in the heart of a high street creates opportunities for new entrants, as well as existing retailers. After all, stores remain vitally important for omni-channel retail and we’ve seen some pure-play DTC brands venture onto the high street in recent times. We also know from our data that when retailers open physical stores, e-commerce demand in that locality increases too. Here’s some recent news of changes already afoot.
Having confirmed 8 store closures, John Lewis is considering converting vacant department stores into mixed-use affordable housing. It is looking at private residential renting as it seeks to put unused shop space “to good social use”. It has also filed planning permission to switch up to 3 floors of its landmark Oxford Street store into office space for rent.
Amazon is reportedly in talks to buy JC Penney and Sears department stores across the US and convert them into fulfilment centres. Large areas of discounted floor space, in populated areas with convenient parking enhances fulfilment capabilities as part of an omni-channel strategy. This side of the pond, Amazon is reportedly launching Amazon Go grocery stores on UK high streets by the end of 2020. It has plans to open 10, with talks about a further 20, understood to be situated near transport hubs. Plus, there's talk of opening its other physical store franchises, including Amazon Bookstore and 4-Star brands, in vacant stores across UK shopping centres.
Frasers Group is to open a new sports and lifestyle complex in Leicester, housing Flannels, Sports Direct, Evans and Game. Is this the new department store?
Poundland is piloting an online delivery service as part of a major transformation plan as it adapts to the new landscape. It has closed one of its 3 stores in Cannock to convert it into a dark store and plans to launch a new eCommerce platform in 2021.
Westfield London has received planning approval to redevelop the House of Fraser site into flexible office and retail space. This move is part of a wider strategy to provide more mixed-use experiences. Harrods is currently using the old Debenhams store there as a temporary outlet.
Major redevelopment plans have been revealed for Debenhams’ landmark art deco building on Market Street in Manchester. These include carving up the ground floor into smaller retail units, developing the basement to house shopping, dining and leisure facilities and converting large parts of the rest of the building to offices, including a new four storey rooftop extension. The planning application is due to be submitted in September. The building is currently under let to Debenhams until 2039 and it’s not known if they will remain in the building under the plans.
Tricky news for Fulfilment by Amazon (FBA) sellers. As a result of the UK leaving the EU’s single market and customs union, FBA sellers who currently only use UK fulfilment centres will be forced to switch to EU-based fulfilment centres or lose access to its EU marketplace from 1st January 2021. Amazon has currently opted to separate EU and UK sales — culminating in the loss of access to the European Fulfilment Network and an end to Pan-European FBA inventory transfers between the UK and EU.
PayPal has expanded its “buy now, pay later” solutions with a new instalment credit option in the US, in a challenge to market leaders Klarna, Laybuy and Afterpay. ‘Pay in 4’ will be freely available to all merchants who accept PayPal and allows shoppers to pay for purchases of between $30 and $600 over a 6-week period. Pay in 4 will be included in the price merchants already pay, meaning, unlike other BNPL schemes, they won’t have to pay any extra to offer the service.
Shopify appears to be competing against Amazon by launching its own warehouse and delivery network that lets shop owners deliver their products quickly to customers. With more than 1m merchants across 175 countries, it has become Canada's most valuable public company.
BigCommerce debuted on the Nasdaq in July and plans to use the proceeds of the sale to further invest in its platform and tech whilst pursuing global expansion. The Company has around 60,000 online stores across 120 countries, with about 25% of global stores being outside the US.
In the latest push to establish itself as a retail platform, Instagram launched its new Instagram Shop feature in the US, allowing users to checkout and purchase items from inside “Explore” for the first time.
Similarly, Facebook is launching a “Shop” tab within its main app, alongside a range of other e-commerce features. Currently being tested in the US, the functionality enables users to browse and purchase goods in-app and is separate from Facebook’s Marketplace platform.