Retail 2020: The Ghost of Christmas Future
It’s the most wonderful time of the year. The Golden Quarter. It’s the much-anticipated moment when the curtain goes up on the grand finale of the year’s retail event planning with big budget TV ads on air, elaborate shop windows displays and the ensuing footfall stampede.
Christmas 2020 won’t be like that.
With consumer confidence hitting its lowest point since 2013, 3.9% unemployment* (3m to April), 8.4m on furlough schemes (at April) - discretionary spend for many consumers will be tightly squeezed. Only a year ago consumers were managing the uncertainty of Brexit and Christmas 2019 was looking decidedly ‘tough’; this year, those retailers who have survived the initial COVID crisis have the spectre of a second wave of pandemic to consider on top of existing woes.
Retailers who will be in a good position to weather the storm of the pandemic are the those who have a strong brand, a robust pureplay or truly multichannel business, have focused on management of cash flow and expenses and have responded to logistics challenges; but what should retailers be considering in terms of planning this Christmas?
It’s important to start with the consumer.
There has been a small bounce in confidence as lockdown restrictions lift, with retail sales -5.9% in May and +3.4% in June (v -19.1% in April**) however, when furlough schemes end in October we can expect many families’ discretionary spend to be reduced once again and unemployment figures to rise.
During the crisis consumers have tried to create a world inside their homes to replace ‘the outside’, baking bread, keeping fit, cutting their own hair and replacing or reducing everyday activities and related spend. Eating and drinking in the home has been a key change - with restaurants and bars closed, workers and children eating three meals a day at home and many nervous to order takeaway has meant grocery spend has increased as well as shifted online.
In a period of such uncertainty, it’s also natural that many have retrenched to the safety of trusted brands, which coupled with a heightened sense of community, safety and communal responsibility has driven savvier brands to demonstrate their empathy and social responsibility through their communications and messaging.
Finally, necessity has driven habit-forming behaviour to shop online, with strong growth for many retailers – putting pressure on costs, logistics and entire business models – and further growth of those who already have strong multi-channel or pureplay businesses (and Amazon).
So, this Christmas retailers planning ahead will need to consider many areas to survive and gain share.
Top five Christmas planning areas and actions to take now include:
- Channel forecasting
- Scenario modelling channel switch to online and level of tech / operational readiness
- Operational forecasting to right-size store colleague workforce adapting to ‘new’ shopping
- Preparing and driving profitability for growth of both home delivery and click and collect
- Adapting physical retail to maximise sales during social distancing and forecasting impact on footfall, penetration, ATV and conversion
- Supply Chain and Inventory Management
- Risk assessment of sourcing
- SKU management and category review to focus on profitable volume growth and efficiency
- Forecasting returns and related processes, including stock quarantining and reverse logistics
- ‘Second Wave’ scenario planning for DC manning and deliveries
- Modelling the likely state of the market, channel impact and demand trajectory
- Assessing competitor positions, weaknesses to leverage and insight into plans for post-COVID recovery
- Ranging and scenario planning likely customer demand projections – base, worst and planning demand by channel segment and customer group
- Gap analysis between current trajectory and scenarios
- Maximising multi-channel inventory
- Product and Pricing
- Modelling potential AOV declines and increase in conversion as consumers ‘hunt’ in shopping expeditions
- Review and planning of promotions – Above and Below the Line - Central control and processes around vouchers and affiliates
- Scenario planning for stock clearance
- Price policy review and price guarantees; competitor monitoring
- Black Friday pricing and promotion policy as well as stock and operational planning based on lockdown online trading volumes
- Customer and Marketing
- Gaining current insight to understand how consumers attitudes and media consumption has changed and redeploying spend to win share during Christmas trading
- Right-sizing budgets and making ‘smart’ cuts; rebalancing consumer touchpoints
- Refocusing brand messaging and creative through paid, earned and owned channels to improve salience and ROI
- Planning media and cash flow, renegotiating to allow flexibility
- CRM strategic plans to appropriately maximise use of customer base
- Finance… and Cash
- Profitability and scenario planning including store estate review and headcount rightsizing, based on revised business multi-channel model and shift online
- Cash management and working capital planning, scenario planning based on Christmas sell-through and discounting
- Capex and Opex planning to ensure governance and milestone planning to deliver operational plans and optimise channel shift
In ‘A Christmas Carol’ the phantom “slowly, gravely, silently approaches”; the lockdown period has stealthily brought more Christmas woes without many retailers having time to consider the key challenges they’ll face this year.
Dicken’s Ghost of Christmas Future is avoided through pro-activity and a conscious decision to lead decisive change. For retailers, now is the time to act to change the fate of Christmas 2020, ensure their survival, and maximise opportunities to grow their share.
Source
*ONS
** BRC
