Retail firms’ festive figures

At this important time of the year for the retail sector, there is one key area to watch carefully.

The essential question we need to consider is: who is at the forefront of the latest trends in the retail market and who has lost their focus?

Retailers under pressure

For the last five years UK consumers have seen their spending power gradually squeezed, as taxes and inflation have risen at a robust rate while income has failed to keep pace. These factors combined have clearly had a negative effect on the retail market, and firms have had to revise their previous strategies as times have changed. It is now more common to see high-street shops bringing out the sale signs at the beginning of December rather than waiting until January. Retailers eager to maintain market share have been prepared to slash prices in an effort to entice shoppers.

The squeeze has hit retail firms from all angles: shoppers have become more savvy and frugal as their cash has diminished; the market place has become tighter as retailers seek to outdo each other, and profit margins have dried up as underlying commodity prices have increased manufacturing costs.

Adapting to a changing market

So what identifies those companies better placed to outperform their counterparts? The short answer is their online presence. Those firms that have invested in building a user-friendly online platform for their customers are in a far better place to take advantage of the obvious shift in consumer shopping habits. A quick sweep of my colleagues on the desk revealed that everyone had done their December shopping for Christmas gifts online (apart from one last-minute purchase made at an airport, partially in an effort to kill time).

As well as the standard ways to purchase and book delivery of goods online, there are now ‘click and collect’ facilities used by an increasing number of shoppers. In the last quarter of 2013 Argos signed an agreement with eBay that will allow some purchases made on the online auction site to be collected at an Argos branch. John Lewis has again had an impressive Christmas sales run, and a major driving force has been online sales – and specifically the ’click and collect‘ sales that enabled shoppers to pick up their purchases from a store. This part of the company’s sales strategy grew by a staggering 60% from the previous year.

Supermarkets follow the trend

This boom in online sales is not only being driven by non-perishables. A number of food retailers are offering both delivery and collection options for purchases made on produce, as well as white goods. The big question for 2014 in this sector is whether Morrisons and Ocado can make their marriage work and catch up on the lead of the other big four.

Next week will be a telling one, as Sainsbury's, Tesco and Marks and Spencer all post figures and footfall is not the deciding factor it used to be.

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