13 February 2020
Geoff is the Director of Technology at Upp. He contributes posts on the present and future of retail technology.
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The world of commerce is changing at a faster pace than ever, and uncertainty looms over virtually every market. And nowhere is this more keenly felt than the world of retail. Keeping up with the changing face of retail can be supremely challenging, even in the relatively agile online retail space.
The past year has been tough on the retail sector. There have been 57,000 lost retail jobs in 2019 with a staggering 10,000 already in 2020. With the recent collapses of Hawkins Bazaar and Beales, there are a further 1,200 under threat. Even familiar brands are feeling the pinch with chain store closures soaring by almost 80% last year.
A loss of consumer confidence, rising costs, and weakening demand have pushed retailers to pursue a digital-first model. Those who have been slow to adopt and integrate digital strategies now fight for their survival.
Retailers need to be cognizant of a range of sociological, economic and technological factors if they’re to overcome market uncertainty and ensure consistent success.
Whatever you sell and whomever you sell it to, your performance metrics require your constant attention. In an inconstant and ever-shifting landscape, they can be your compass, helping you chart a path to success.
You should keep an eye on Year on Year (YoY) growth — both within your business and among your competitors to get a broader understanding of the health of your industry as a whole. Sites like Google Analytics make it easy to measure YoY performance, provided you have been trading for more than 2 years.
However, it’s important to note that it may not be a true representation of what is currently happening in the market today. Not only should you be keeping an eye on departmental KPIs, but also how they impact the overall profitability of a product. After all, your metrics can be misleading, especially when you take a myopic approach to viewing them. Departmental metrics can tell you one thing. But they can tell you something different when viewed in the context of their impact on overall business performance.
One of the limitations of many retailers’ business models is that they’re currently working in silos, focusing solely on their departmental KPIs. The issue here is that teams will gain little awareness of how their changes can impact the marginal performance of products. However, using the right specialist AI platforms will allow you to gain an overview of your business’ metrics and therefore its overall performance.
Political and economic fluctuations (as we’ll get into later), can have a knock-on effect on your overhead costs — no matter how hard you’re trying to manage them internally. If costs should rise anywhere in your supply chain, you face a difficult choice. Raise your prices and risk alienating your customers, or maintain them and watch your profit margins erode.
However, there are ways in which you can stabilise your overhead costs to achieve balance. With a little internal cost management, you may be able to keep your prices competitive and prevent your repeat customers from jumping ship to your competitors.
Some ways you can do this include:
While taking these actions can help you to tackle rising costs, however, each will have an impact on your business operations. It’s essential to get a holistic view of these changes and convert them into actionable strategic insights. Specialist AI platforms can allow you to do all of this to help increase profitability.
This is huge, especially for fashion retailers. The world of fast fashion may show signs of slowing, but it still moves at a rapid pace in comparison with other industries. Failing to keep up with popular trends can lumber you with shelves full of stock in which consumers have little to no interest.
This is why it’s so important to keep abreast of what’s on the horizon for the market as well as keeping a close eye on which lines and trends are losing traction. That said, cutting prices on ailing product lines haphazardly can create problems. Every tweak you make to your pricing can make a big impact on the product's marginal performance at the SKU level. Leveraging AI-enabled platforms, however, can help retailers not only make agile strategic decisions but also give brands a better holistic understanding of how the efforts of each department can impact the margin of any given product.
Maintain an innovative approach that is at the cutting edge of market trends, while also embracing innovation in your operations and the tools at your disposal.
Neglect the preferences of your consumers at your peril. Remember that the instant you stop giving your customers what they want, you can expect to lose them to a competing business.
When it comes to consumer preferences in ecommerce, convenience, experience, and quality are valued above all. If you use this as your guiding principle, you should be able to weather any storm. But broader market changes can affect consumers’ expectations of everything from your branding to your website’s UX. This is why you should make market research an ongoing part of your operations, ensuring that you’re always bringing value and appeal to your target market.
It would be beneficial for retailers to keep an eye on unemployment levels and the overall health of the economy. Where there’s high unemployment, there’s usually a recession. Just to clarify, not every recession is as extreme as the one we encountered in 2007-2008. Recession is generally part of the natural expansion and contraction of the economy. Nonetheless, even though employment and disposable income have increased at a national level, consumer confidence has decreased. So, it’s up to retailers to help shrewd consumers understand the value in their wares.
As brands struggle to stay ahead of their ever-growing competition, it’s likelier than ever that they’ll go out of business. Brands such as Mothercare, Game, and HMV struggled to keep up with consumer demands and the rise of online shopping. They were unable to control their costs and as a result, these closures resulted in many job losses too.
It’s on retailers to step up their game and work harder to create an online presence for themselves to reach the consumers they need to. It’s vital that they need to understand their consumers’ buying habits. If you aren’t on the same page as your target market, they won’t want to buy from you! You need to not only ensure you understand what they want but also know where they’re buying from.
Make sure you’re on the right channels — there’s no point being in just one place (like your own website) if you can’t get your consumers there, but at the same time, you also shouldn’t spread yourself too thin. Don’t create a presence on too many channels if you can’t maintain them to a high standard.
Knowing what motivates consumers’ buying habits, piggybacking on the recognition of trusted shopping channels and streamlining the online and in-store experience can all help you to earn back buyer confidence. This will help you to minimise costs and increase profitability.
Regardless of your personal stance on Britain’s exit from the European Union, it would be naive to assume that your business will not be affected by such a huge geopolitical schism. The frustrating thing for businesses, whether they voted Leave or Remain, is the constant uncertainty surrounding what the outcome will be.
As in all things, retailers are well served if they hope for the best while planning for the worst. Even if you don’t source your goods from within the EU there’s a good chance that at least some components or raw materials have come from within the trading bloc. Depending on the negotiations that take place over the next year, there could be serious ramifications for retailers, or a continued free trade deal may help maintain the status quo.
There’s no such thing as being too prepared and looking at how Brexit might affect your supply chain and/or sales should be a priority for retailers. Brexit should encourage retailers to reevaluate their business models and see what they can do to reinvent their strategy. This might mean making big changes such as restructuring your whole business model, or tweaking your methods slightly. For example, making sure that you have sufficient inventory to cover any supply chain hiccups (Amazon recommends retaining at least 4 weeks’ worth of stock) and ensure continuity of service for your customers.
Still, UK’s ecommerce economy remains one of the continent’s most robust retail presences. Even the doomsday scenario of a sustained weak pound can actually be advantageous to ecommerce retailers. A weak pound will likely lead to greater appeal in exports and this can only be a good thing for the UK’s online retailers.
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