What retail might look like in 2020, what this means for retail and consumer brands and how to succeed in this changing environment
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Last year was another tough year in the retail sector, but not unexpected. This year may be just as challenging but, as ever, there are opportunities in the sector for those retailers and consumer brands that get it right in the year ahead. However, once more, the route to growth looks like it will be taking from competitors.
This year, while economic growth remains subdued and the risk of continued volatility remains, we expect the outlook to improve across the year and consumers are more confident than they have been for five years. However, though the consumer may start to be less cautious, we believe they will be more considered in their purchasing and retailers need to give them a reason to spend. Retailers will also need to work harder to understand who their customers are, what and how they want to buy.
2019 might not have been as bad as many predicted.
We saw positives, such as record Black Friday sales and improving consumer sentiment, but this was balanced against record net store closures, high profile administrations and flat Christmas trading at best.
This year, the economic outlook for the UK is uncertain given Brexit, with most economists forecasting little or no growth.
When consumer spending is tight, retailers need to give consumers a reason to spend with them, by offering better value (not just lowest price), offering something new (or different) and greater accessibility (via better curation of ranges, customer communication or credit options). To differentiate themselves in a tough, flat market, retailers need to concentrate on some very specific elements.
We saw those retailers that invested in their propositions succeed over the Golden Quarter last year. And we expect this to be the case in 2020.
Against many economic forecasts, consumers across the UK are showing a significant improvement on sentiment, predicting that they will be financially better off in the next 12 months.
With this improvement in sentiment comes a change in spending priorities. Grocery will remain the top spending priority for most, but many of us expect to economise by reducing waste or shopping around. Meanwhile, other categories where we’ve been cutting back over the last few years are growing in importance. And we’re seeing the start of a shift towards sustainability and ethical consumerism. Brands need to think about how they are communicating what they are doing in this area and embrace emerging trends in innovation.
The traits of the “cautious” consumer seen in 2019 - such as spending carefully, avoiding frivolous purchases and putting off less urgent bigger ticket investments - will not go away but can retailers appeal to the more “considered” consumer?
To achieve growth, retailers will need to invest. Given the cost of these investments, retailers need to ensure their back-of-house is in order, by eliminating “bad costs” and sweating assets harder.
“Investing in propositions isn’t cheap and will often need retailers to address some more difficult issues to access cost efficiencies, but retailers that meet these challenges have every chance of success in 2020.”
“It is more important than ever to know your customer and give them a reason to spend with you and take more share of wallet, stomach and closet! Whether that’s through newness, embracing emerging trends or providing great access. You can do this through the 5Cs: making it easier for the shopper to spend through seamless channels and convenience, curation, credit and effective communication.”