Andrew Westbrook, RSM’s head of retail, looks ahead to what 2018 has in store for the sector.
The resurgence of bricks and mortar
We predict that an engaging store presence is going to continue to drive sales both in store and online. The all-important age category of 20-35 year olds are stereotyped for being glued to their smartphones, but the reality is different. Millennials make most of their purchases offline – with the youngest of this age group, those aged 20-23 most likely to make a purchase in a store. We expect to see the continuation of the trend of online retailers opening select physical stores, such as Boden opening its new flagship store on the Kings Road.
Shopping as an experience
Destination shopping is a trend which is not going away. Selfridges continues to be a leader in creating innovative experiences with the launch of its accessory corner shop in November 2017. Increasingly we see the merging of store and destination with offerings such as coffee shops and cocktail bars being the new norm. Retailers are going to have to think differently to satisfy consumer demand for a genuinely engaging experience. As one commentator recently opined there are certain retailers offering experiences out there but possibly not as many as lay claim to the term.
The ‘Meghan effect’
We expect that UK retailers will have a significant boost by the Royal Wedding in 2018. With the ‘Meghan effect’ predicted to bring a boost to many UK fashion brands and a swell of tourists, including a sizeable proportion of Americans, to the UK for the occasion. The big fashion retailers in the UK will be paying close attention to what Meghan Markle wears on official engagements in the run up to the wedding to see if they will attain the soon-to-be royal endorsement alongside Joseph and Kurt Geiger.
Discount savvy consumers
Most millennials search for a discount code or coupon before making a purchase. Unsurprisingly this behaviour is more prevalent online with 72 per cent spending on average 3 minutes looking for discounts. Consumers are becoming more ‘discount savvy’, they’re tracking sale periods and holding back on purchasing until a discount/sale is on offer. Brands known for discounting are going to have to employ more sophisticated sales strategies and those who restrict discounting to key sale periods will come under increasing pressure as consumers look for discounts prior to committing to purchasing.
Consumers increasingly want short-cuts when paying online. We predict an increase in native apps as people look for ease of purchasing with the brands they are loyal to. Amazon’s Dash buttons may be gimmicky but are addressing the consumer’s need for instant purchasing and are likely to put further pressure on retailers to innovate. Where payments are not slick there is an increasing risk of people abandoning baskets and ultimately leading to loss of sales and profit.
Reputational risk is a big issue
High profile businesses continue to spend too much time in the press for the wrong reasons. Whether it be newspaper promotions gone wrong, gender pay gap reporting or minimum wage failures managing PR has never had such a high priority. Knowing how quickly social media can influence customers is a recurring theme and retailers need to be ready. Boards will need to rethink their approach, review existing processes carefully and consider investing further in risk and crisis management tools. Embedding best practice and governance to protect brand value will be a major focus over the next twelve months.
We will see the full impact of GDPR (General Data Protection Regulation) in 2018. Significantly smaller mailing lists will make it more difficult to target customers through traditional means, leaving retailers to undertake smaller, more frequent, marketing initiatives and make more effective use of social media and influencers. Retailers are going to have to be increasingly creative to connect with their customers.
A focus on staff retention
We see a focus on staff retention being a key theme amongst retailers in 2018, particularly through creating career ladders, training programs and a fulfilling fun work environment. Staff play a vital role in enhancing the customer experience. A notable encounter can lead to higher spend, brand connection and ultimately profit. In an ultra-competitive market and in a time where recruitment is challenging due to uncertainty surrounding EU nationals working in the UK, a valuable part of the sector’s workforce, retailers must retain the best people to stand out.
Brexit reality becomes clearer
We expect the UK’s relationship with the EU single market and customs union to be under the spotlight throughout 2018. The government will be pushing through regulatory changes to develop the UK’s customs and trade position as a result of Brexit. These changes will build on the principles outlined in the recently published Taxation (Cross Border Trade) Bill which outlines the UK’s vision of its stand alone Customs, Excise and VAT position post Brexit. Retail buyers will need to take note.