Turmoil ahead for Christmas? (18 December 2018)
18 December 2018
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As we emerge bleary eyed from countless store visits and with more to come this week, it's time for a few notes to catch up with what's going on in the sector at large.
In terms of the wider market - sales are slow to come and this has been flagged previously, Halloween seemed a harder event this year where usually it goes extremely well.
Customers have not spent in their droves as usual and it feels almost as bad as that recession hit Christmas where things were very defensive in the main, but retailers had not yet really taken their medicine in terms of lower margins and lower prices.
This year, the offers and range by and large overlap well with last year's activity, there has been a fuel promotion by Morrisons versus last year - generally it runs alongside Black Friday / Fivedays.
However activity in the market has been flat in terms of new news, meaning that retailers presumably think that the spending will come eventually. Thus nerves of steel are needed around markdowns and what / when to cut prices, too late and it risks being cut even further to hasten the sale.
Too early and it's markdown/cash effectively given away. However there's a balance to be struck and no one wants an abundance of Christmas stock heading out of the season.
For Food retailers, the trade is somewhat easier as the footfall will eventually come when the customers break up for work, finish school and the focus on the 'big' shop comes. Therefore a huge opportunity then exists to clear stock through where there is excess nationally perhaps.
However that is too late for areas like Christmas decorations where the discounts were broadly the same in the food retailers as last year, one is aiming for mid month as the absolute real sweet spot. Customers don't tend to put their Christmas decorations up after this time, so you need to time discounts earlier in this area to capitalise on customers putting up trees and the like.
Another area that looks heavy when walking around, to varying degrees are Christmas lights. The challenge is that the days of checking the string of lights to identify the rogue bulb as the whole chain won't work are long gone, LED lights are all the rage and as such, these last far longer which means customers don't need new sets.
Unless you mistakenly cut through them on the outside bushes as they've been left there since Christmas that is......
Anyway - Christmas lights that are battery powered generally sell through nicely as they are adaptable and can be placed outside with no power leads etc needed. The plug in ones perhaps less popular due to their need of power thus restricting where they go in the house / outside.
So these areas remain heavy year on year, Christmas cards are one area this year that look heavier than last. Unclear why, I presume growth is factored in to each category so they always aim to sell a little more, however customers will buy early and also buy on clearance to save for the year after.
It can be a similar story with decorations, it's an easy area to cut back on to save money - Christmas decorations and cards for example - ones bought on clearance are used and decorations, unless desperate can be happily reused with no real additions unless something catches one's eye.
There are two themes of course that contribute to this challenge for retailers; notably food retailers are in scope but the same issues around stock levels for decorations and lights has been noted at Debenhams alongside John Lewis (only 30% off as things stand).
One is the Summer - length, heat, England progression, more nights in the pub alongside a planned holiday away, or more day trips in the UK for families means that the pot is probably lower than customers would like.
Perhaps a new television was purchased for the world cup later stages, certainly BBQ sales were up on Meat, BBQ's themselves and the like plus more evenings out at the pub also harmed finances.
Often in the UK, our Summer is poor so we don't get the sustained periods of weather that dictate lots of Summer clothing is needed, however the heat and the duration meant that customers would have
Henceforth sales in September and October were light and November never got going until Black Friday (which remains a great act of self harm for UK retailers anyway) and it's been a struggle since.
Combine the increased Summer based spending for families who then have to contend with back to school requirements too, and it becomes a very expensive time with not much left over. If anything.
The second element is the phenomena that is Brexit. The ongoing circus has been largely laughable to all but those in the middle of it and the phoney war of negotiations eventually reached broad consensus with a deal which has turned in to another disaster with no confidence votes left, right and centre and now, further 'no deal' preparations.
Whatever your political persuasion, it has been a disaster by and large for the country, certainty and particularly for retailers - especially in the GM / Non Food space.
The talk about 'no deal' even today will add further jitters to an already nervous customer base who will worry about jobs, their future and be intrinsically against putting anything more on unsecured debt like credit cards, especially if they had a hard time in the recession in 2009/2010.
Therefore it makes it harder still to attract customers to spend, hence why the discounters have picked up on Kantar, Asda are performing well but poor old Waitrose continue to tank on a weekly basis on their like for like figures via the John Lewis partnership.
An uncertain time coupled with real uncertainty once again in the press today will do nothing to encourage people to spend. Online retailers are also feeling the heat, ASOS yesterday tanked profits due to unseasonably warmer weather as they put their winter ranges on sale and Superdry are also struggling (offering £25 off £75 from Boxing day to customers pre Christmas)......
It looks set to be a turbulent 2019 and 2018 was always going to be hard yards given Brexit bringing lots of uncertainty anyway but that stronger summer has come at a real cost in Winter.
Today, we venture in to the somewhat murky world of Department stores and specifically, Debenhams. A chain that you probably wouldn't invent today if it didn't exist.
Stores are generally sited in high traffic shopping centres and high streets where rents are high, rates are high but locations like this are necessary. Online is a major challenge for the likes of Debenhams, as it's a huge threat to the business itself, but click/collect provides a valuable footfall driver.
However as if often, service is erratic, manpower is a challenge in stores as the business cuts costs but whilst the longer term outlook remains uncertain - so much of what any retailer does shapes their destiny and we can obsess over the long term future of the high street, digital taxes and generation X.......
But so much of it comes back to the mere basics, talking to customers and being compelling at Christmas to generate further business in the new year, and beyond.
Gifting in general is a major question mark in many retailers now I feel, the 3 for 2 works for Boots but they have had to regenerate the offer quite rapidly. Asda are also in the 3 for 2 space again this year and Tesco were generally half price on a number of items too....
The challenge with any gifting is that the overlap between the likes of Debenhams, and supermarkets like Tesco is to nullify price gaps on comparable items. Sure, you can have a slight price premium if you like, but obscene price differentials will not be tolerated.
£12.50 for the Kellogs retro bowl/saucers/cereal without a 3 for 2 seemingly, although some items were on 3 for 2, cunningly disguised with a tiny gift icon. Make it clear!
Also charge less for the headline price - customers see through it now, especially in times where people are watching spending.
In terms of efficiency and the web, we know online retailing is cheaper and easier to operate = lower prices. However stores have lots of self help available too.
Tactical events and deals such as '1 day pricing' helps sales but can be an operational nightmare. However surely there is a better way than individually labelling every single jar / candle (?)
Inefficient, unclear to customers (what about tomorrow?), what if one doesn't have a label etc? Much work to do here.
Some displays were quite attractive if missing a bit of signage - the aim is still to sell product to customers at Christmas. Some signage in this example would help everyone I think.
Otherwise customers are invited to wade in and have a look, even if it's remotely busy in this area, customers won't bother, especially when the store is in a shopping centre, there are numerous places to go.....
As it happens, these candles were on a 3 for 2 deal as they featured a sticker that denoted the fact on top of the pack.
However it wasn't exclusively across the category, some items were on deal of the day, others were cut in price. Not uniform. Why? Customers like simplicity and the Boots offer, for its faults features everything on the same offer which is easier for customers.
Putting various offers on means customers will go to checkouts, potentially have items not on 3 for 2, think they have, feel as if they've been overcharged, never return again. etc.
Ah the old favourite, this was featured on the Guardian business blog earlier this year and again only yesterday! 4 for £6 on bottles of Ale typically in a retailer, you only get 3 in this set.
Add in a glass and a rack you're unlikely to use ever again.
£18.
No deal either in terms of a 3 for 2, they have changed the product slightly from last years effort but it's still representing poor value. These images were from last week, so there may have been some price action but the reality is, these are too high.
Possibly eroding value confidence for customers who would form a perception on the entire range of products from Debenhams on this one price, thinking they are 'too expensive'. A dangerous game to play.
A few deals about including a 'today only' stunt deal on remote controlled cars which had the middle aged customers excited; again customers had to look at the individual item rather than a wider deal.
There are always hotspots and focus areas for any retailer, especially at Christmas with gifting popular. However that isn't purely gifting sets and little else - it's all about the core lines that can be gifted.
Scarves, hats, gloves, watches and belts alongside socks etc. All key areas and customers familiar with the store will go to the place where belts etc are usually stocked to find their wares.
So for this to be in this state for an early morning visit (c.1030am) wasn't good enough. Hard to shop and entirely unclear from an offer perspective.
I think applying discounts on an item by item basis is near bizarre when you consider the logistics of doing such a task, the manpower wasted effectively when signage, perhaps a ready reckoner and the checkouts automatically deducting the amount would do the job perfectly well.
What is even more unclear and to be honest, baffling to me was the size of the labels that were stuck to a hanging glass decoration.
These would have to be removed by a customer and some can come off relatively easily, whereas others are far more stubborn and leave a residue.
It's difficult to see how this works for the customer, or the store.
Of course, these are basic elements that have been spotted and the fixes won't turn like for likes around on their own. However that's not to say they are not important, or that these fixes are not required. They are, as it all builds traction alongside bigger picture elements like refits and a wider focus on concessions and whatever else.
Put simply, there is no point on a £10m+ refit if the store standards, product standards, pricing and offer communication is as unclear as this.
It remains the case that retail is detail (I do loathe the phrase however) and retail remains a simple business, Debenhams make it far too complicated.
From the Grocery Insight newsletter archive, first sent to subscribers on 18 December 2018. Steve now writes at read.groceryinsight.com. See also the blog archive and briefings.