M&S offering slots to shop
3 November 2020
Forwarded this email? Why not subscribe today?
M&S - Book and Shop launches nationwide
With the new normal well and truly in place and a 2nd lockdown for the UK just days away, I can scarcely believe we are where we are.
But we are, and for all the 'they won't lock us down again, they can't afford to', the government have done so and from Thursday until the 2nd December, non-essential retail, hair salons and all manner of other industries are forced to close under a government-mandated shutdown. Yet, the full costs are not being reimbursed by the government and there are percentages flying around that do not add up to 100%.
The challenge is, of course, this is expensive to cover.
We all understand this but the lockdown in March was hard enough for retail, Easter was missed by and large and other elements, like the Summer holiday, was largely forgotten given quarantine, isolation and all kinds of other considerations. Indeed, there was perhaps a stronger Summer trade than usual given that customers stayed at home (and had done since March).
Despite an uptick in trade for Summer, there isn't enough capacity in online and limited capacity in stores with social distancing to catch up those missed sales. Alongside this, the markdown (IE full-price sales) are significantly down in Easter, Summer markdown was also a challenge and Halloween was a total non-event too.
The problem is around markdown, of course, the event itself was shifted with gatherings banned (even before lockdown) and social distancing limiting anything else meaningful. The only real avenue for customers to express themselves was in kids costumes, house decorations and pumpkins, but even then, it wasn't quite the same.
The adjustment in the event will likely have seen some retailers hold stock over for 2021, which impacts working capital. Given buying trips take place year on year, IE for 2019 the buyers go to the far east before Halloween even takes place to buy for the next year.
With the lockdown in November directly impacting Christmas trade, making a mockery of the campaign to 'shop early to help out', it will be an incredibly difficult period for all retailers, the high street and particularly independents shops who have been hammered by lockdown, falling trade, and even when things reopened, footfall has been nowhere near where it would have been either.
Even for larger retailers, permitted to sell their wares (unlike in Wales) across all categories. Lockdown is not ideal, the trade pattern will be uneven and costs will need to be incurred to serve the customer and for Tesco, they reported back in April/May that their number would touch £900m if there was another lockdown, their rates rebate was only around £550m. Morrisons reported a similar gap of course.
The challenge for smaller retailers is that their rates rebate/grant was actually given back in March, where things were very new and the world was a very different place. We assumed we'd exit lockdown and broadly have a working test/trace package alongside other initiatives that would mean the virus would be under some control and keep us in line and on some sort of path to near glory.
However, we lost control straight away in truth and not wanting to rewrite history, the absence of a measure indicating how many tests are returned in 24 hours is akin to lumping all your store waste into one big number and not splitting out how many products were not reduced at all, before expiring. There's no focus on improvements and thus, the lack of a number for 24-hour turnaround means we don't actually know how well we are doing.
Eat out to help out was lauded as a solution that was creative and innovative, which is fair enough, but the initiative didn't really aid the effort to reduce the spread of the virus and a number of workers in bars and eateries, busier due to eat out, then dispatched themselves around the country to university and seemingly, spread the virus there too.
The closure of hospitality venues has an impact on stores too of course, with in-store cafe's now forced to close and offer takeaway only. The challenge with supermarket cafes is that whilst many offer takeaway (and did pre-pandemic, actually), the cafe doesn't always lend itself to takeaway and the facility itself is within a store and it's just not 'top of mind' for takeaway customers.
So the challenge there is around wastage and more cost incurred by retailers, how to redeploy the product effectively? Plus the supply chain implications for all related to hospitality.
Looking ahead to Christmas, retailers have learnt a lot about the lockdown, social distancing in stores and how to manage customer flow. In March/April it was easier with the weather better and customers happier to queue, however, with the Winter amongst us and cold weather, people are not as keen to queue and it could impact trade.
It's also harder to understand how this will impact customers, what will their decision making be like, given queues outside stores?
Will customers go to another retailer that may be quieter? Will they switch their store based on how safe they feel? For discounters, it looks to be a difficult period ahead as their smaller store footprint means that they're unable to fit as many customers in the store at once.
Aldi will hope for their key lines in Frozen Foods drive traffic despite lockdown and restrictions on customer traffic.
Another challenge for markdown with Christmas and lockdown, although perhaps not as much for larger retailers is that Christmas decorations will be put up even earlier this year, one assumes, given the absence of anything else to do. For Tesco, their larger stores will likely perform better this year, given the destination nature of the format.
However, for store reopening on the 2nd December, potentially, they're opening up with a sale in early December for Christmas decorations given the relatively late period. For buying and markdown, it represents a huge challenge because assume a 'buy' of decorations at a £3 selling price, of course, some budget is given over to markdown.
But potentially automatically selling at £2, due to a mandated lockdown in November? Changes the picture entirely and shows once again that there are so many costs hidden within the mix and wider considerations for standalone stores, like Asda Living, for example, alongside the raft of 'non-essential' stores that are now plagued with the worst of all worlds.
For M&S, this situation remains difficult as their resurgent food division continues to perform well, but their mix, like other retailers is skewed towards food. Additionally, their city centre stores are also hammered by lower footfall and food-to-go sales are also sharply down, given the stop/start nature of the 'return to work'.
Although why they're unable to open their full-line stores in lockdown, give they have food within the environment is unclear, especially when B&M (for example) open and have a similar split in terms of food and non-food / clothing seems unclear. In some cases, it's near pointless as the locations will be like ghost towns, especially those in city centres.
So for M&S; their bold approach in tech with new IT, Ocado and ongoing development for their wider e-commerce efforts means that they've relaunched Sparks, their loyalty scheme in-store and this has now been deployed to great effect for booking slots for customers to shop in-store.
Given Christmas trade is likely to be uneven and feature queues outside stores in the spirit of social distancing, offering slots for shopping so customers don't have to queue. Using the loyalty card system is smart, especially given the fact that loyalty is rapidly going digital and offering extra services for loyalty customers (Clubcard prices for example), this latest innovation is impressive.
However, it's a double-edged sword. It's likely to pick up traction with loyalists and also, younger customers who may want to jump the queue. It's also a risk with their older customer base too, however, it's a necessary evil given the situation we are in. In addition, the interesting thing is that food ordering also dovetails with this, so how that comes together in-store (IE slot with your customer order?) will be interesting to see.
It's a brave new world we are in, booking slots for a store visit I'm a fan of (especially having spent a disproportionate amount of time in queues) however it means that it's semi announced which means in all likelihood, I'll have to use a pseudonym name to use the service(!)
What else is to come via other retailers ahead of Christmas? Wait in your car and come forward when called? 24-hour shopping in a number of retailers who may not have offered it previously? All interesting as we aim to see how retail adapts and copes, again.
Sadly, there will be some collateral damage on the way, which is unfortunate, especially given the mandated closure at the busiest time of the year and then, reopening with a margin hit. Grim times.
Forwarded this email? Why not subscribe today?
From the Grocery Insight newsletter archive, first sent to subscribers on 3 November 2020. Steve now writes at read.groceryinsight.com. See also the blog archive and briefings.