First up, what is the report?
Essentially, the Retail Week Money Makers report takes a look at the retail sector and assesses whether it’s achieving growth.
The top line findings show that, of the 180 businesses reviewed for the study, only a third reported growth. This equates to just 60.
Of the 180 businesses reviewed for the study, only a third reported growth
The release of the document is particularly timely, given that John Lewis Partnership also announced that its profits dropped by 99% in the first six months of the year.
With these facts in mind, it’s never been more important for retailers to take stock (if you’ll pardon the pun).
Why did so few brands report growth this year?
If it hasn’t been loud and clear from the recent news headlines, it’s been a tough year for retailers, especially on the high street. The way people shop and how they shop is changing. For instance, The Telegraph recently reported that more pensioners than ever before are now shopping online, rather than in store.
The Report also points to squeezed margins. This has been caused by increased wage costs, business rates, and rents, alongside the need to invest in tech – both in store and online.
Retail Week also suggests that uncertainty surrounding Brexit negotiations could also be a factor influencing the trend.
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Enough doom and gloom; which brands did report growth?
Unsurprisingly, Apple was out in front. They were followed by Lush, MatchesFashion.com, Waterstones, and Harrods to make up the top five.
Why is that?
Well, there are potentially lots of reasons. Retail Week has highlighted several of these, which we will summarise below.
A strong USP
If nothing else, the top five have a clear definition of what it is that they do and strong branding as a result. To recap, Apple is focused on tech; Lush on ethical beauty; MatchesFashion.com on high-end fashion; Waterstones on bookselling; and Harrods is, well… Harrods.
Each of these retailers also has a distinct brand, so they – and their values – are instantly recognisable to consumers.
Effective stock management
Admittedly not all of the top five do have control over their supply chain, but Lush does. Not only does it sell beauty products, but manufactures them too, so it can manage the costs of raw materials and a production.
Stock management is of vital importance. The report points to Apple’s centralised stock system, which covers both bricks and mortar and web locations, so it can allocate product to the places that need it most.
Retail Week also highlights the McColls and Morrisons link-up, which has resulted in a wholesale relationship. Morrisons delivers goods to McColls stores, so there are no warehousing costs for the convenience store chain, optimising margins.
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For years, supermarkets have been selling products under their own brands. From cheap-and-cheerful value ranges to high-end luxury lines, all supermarkets have got in on the act, in order to maintain more of the profit margins.
But it’s not just grocery stores getting in on the act. Following on from the news that John Lewis Partnership profits dropping, it has announced that there will be a focus on increasing the number of own-brand products sales by 50%, where it can take control of the supply chain and margins.
While it might not sound like a big deal on the face of it, order fulfillment has an impact on a retailer’s bottom line. Thanks to the likes of ASOS and Amazon, the Great British public has come to expect rapid, free delivery.
However, providing free delivery within a tight time frame can easily eat into a business’s profit margins.
The Money Makers report points to Tesco for its handling of click-and-collect services as an example of how to take control. The supermarket charges a fee for C&C orders under £40, to mitigate the staff costs of packing an order.
It’s vital for retailers to consider at which point it becomes cost-effective to offer free or discounted delivery, without losing loyalty.
Impressive customer experience
By creating an outstanding experience online and in store, brands can generate loyalty and word-of-mouth recommendations.
Retail Week points to Apple’s use of tablets in the store to find customer details and search inventory. Even brands outside of the top 10, like M&S, make use of technology to check stock levels and order products on the shop floor. There is obviously a price tag associated with this technology, but can it can be viewed as an investment in the customer experience.
The report also reflects on Waterstones’s launch of Café W, replacing Costa Coffee, giving customers a place to enjoy their purchases and owning that whole shopping experience under its own brand.
The property ladder
The cost of bricks, mortar and employees can be a big outlay. Therefore it doesn’t always pay to increase your number of locations.
Apple has 39 outlets in the UK, which has remained unchanged since 2014/15, according to Retail Week. Instead, it has invested in existing stores, to ensure it provides the best experience and Apple stores are a destination to be visited and explored.
When it comes to pure-play ecommerce brands, Retail Week points to pop-up stores as a way to get the name of the organisation out there, without committing to a permanent home.
Retail Week cites the example of Burberry selling online via Farfetch to reach new customers, while Aldi is working with Tmall to break into China.
Building strategic partnerships with other organisations can give retailers access to new audiences and markets, even if they’re not prepared to set up localised websites – or attract customers who may not have considered buying from them.
Tailored to local audiences
Of course, when it comes to international brands, it pays to have localised experiences for different markets.
Not only will there be certain cultural differences when it comes to marketing, but some products may sell well in one market, but not others. Being agile and able to respond to these market trends can enable brands to optimise their businesses.
Segmentation and personalisation
Following on from localised stores, the report highlights that brands focused on providing personalised marketing experiences were more successful.
Making sure that marketing messages reach the right people at the right time might sound obvious, but knowing your customers and what they actually want is vital. Offers and promotions must align with customer needs and lifestyles.
Some brands have even set up social media accounts for each region. This allows them to tailor content to market needs. Instagram and Snapchat are key to this trend for ASOS.
Content, such as articles and videos, are great for increasing traffic, encouraging return purchases and ongoing loyalty.
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