Introduction: Seasonal events have long been used by retailers as an opportunity to boost sales. Indeed, Paul Martin, UK Head of Retail at KPMG, pointed to the substantial growth in UK retail over the past decade - from £286bn in 2006 to £360bn in 2016 – and suggested that events-based retail “…surely plays a part in this growth story”.
That said, Paul Martin and the wider KPMG/Ipsos Retail Think Tank (RTT) also acknowledged the decline in annual retail growth in more recent years – from 1.6% in 2015 to 1.2% in 2016.
Reflecting upon this decline, the RTT members (who met on 11 April 2017) questioned whether retailers were perhaps struggling to exploit seasonal events fully or if they could plan for them better.
Why might events-based retail be losing traction and what can retailers do?
Today’s retail landscape is filled with a myriad of events, ranging from the more traditional and religious – like Easter, Valentine’s Day or Halloween – to more ‘manufactured’ newcomers, like Black Friday, China Singles Day or Amazon Prime Day. Of course, some of these mark public holidays – which increase leisure time and boost sales – whilst others rely solely on promotional or themed activity. Either way, the list of retail events today is seemingly endless.
Dr Tim Denison, Director of Retail Intelligence at Ipsos Retail Performance, suggested that whilst at one time these events represented a convenient yearly hook for retailers to run themed promotions, boost sales and increase footfall, today their impact has become less marked. He added: “…store and online promotions are now two-a-penny, events have become too staged and seasonal goods seem to be sold for longer and longer periods”.
The wider RTT members mirrored these thoughts, with Paul Martin adding that “…these events used to be highly anticipated by retailers and consumers alike, [but] in today’s always-on world, this magic has started to fade away”.
According to Mike Watkins, Head of Retailer and Business Insight at Nielsen UK, today’s consumer has become accustomed to promotions. Indeed he pointed to Nielsen’s research that illustrated that: ”savvy shopping is now the norm and saving money on everyday essentials is no longer just a coping strategy for when prices rise or incomes fall, but a planned way to pay for indulgences and incremental spend for celebrations”.
This heavy and prolonged discounting by retailers – now a by-product of changes in consumer behaviour – has also endangered a retailer’s ability to charge full price. Looking at Black Friday, which only arrived in the UK in 2014, big questions remain around whether these events cannibalise everyday trading and full price sales. As a means to regain traction in events-based retail, advance planning and the duration of events were common themes among the RTT members. Tim Denison suggested that: “…limiting the time window in which calendar events merchandise is sold is one way to re-inject interest and bring back the special nature and impact of promotions”. He pointed to supermarkets wasting no time in replacing Christmas confectionary with Easter eggs, as a prime example of how extended promotion dampens the special nature of seasonal items. Conversely, planning too far in advance raised its own issues too. Martin Hayward, Founder of Hayward Strategy and Futures, said: “The challenge for many retailers is that their promotional activity is scheduled months in advance and centrally controlled, giving little leeway for local spontaneous activity and therefore creating a rather dull and very predictable event calendar”.
Indeed, it was innovation, imagination and an emotional connection with customers that many RTT members flagged as the main avenue for reinvigorating growth from retail events. In order for events-based retail to be successful, the key is promotional “saliency” and “resonance” with shoppers and their lives. Personalisation and regionalisation are both means of achieving more engagement among customers. Stepping away from the rigid and predictable events calendar, Martin Hayward suggested that: “…there is ample opportunity to be more imaginative around the creation of other smaller events to create excitement, news and footfall at an otherwise quiet time of the year”. Similarly, other RTT members suggested that retailers should look beyond simply marking pagan or religious festivals by crafting celebratory promotions around more regional events.
Continuing with the personalisation and regionalisation, Jonathan De Mello, Head of Retail Consultancy at Harper Dennis Hobbs, suggested: “…retailers that do not have a considerable physical presence should strongly consider pop-ups in order to capitalise on this increased demand [created by holiday periods]”.
In a similar vein, James Sawley, Head of Retail & Leisure at HSBC, said that retailers who were most successful at capitalising on seasonal events were those: “…whose supply chains allowed them to test and repeat orders to stay on top of changing trends, and those who use data science to personalise products and offers”.
The RTT members stressed that online retail must not be overlooked when considering how best to gain traction. Martin Newman, Chairman of Practicology, suggested that having a single view of inventory would allow retailers to react more quickly to sudden changes in customer demand – whether it be the weather, a football team’s performance in a major competition, or a surprise promotion by a key competitor.
What, if anything, can retailers learn from this year’s late Easter?
Putting events-based retail further under the microscope, the RTT members chose to look at what retailers could learn from this year’s Easter, starting first and foremost with the impact of its timing.
Whilst some events occur on the same day each year, the timing of Easter is dependent upon the lunar cycle and as such its date changes each year - occurring anytime between 22 March and 25 April. In fact, this year’s Easter was relatively late, occurring on Sunday 16 April.
With such a potential shift in Easter’s date, it clearly has the potential to cause a headache for retailers planning promotions or marketing. However, it also has the ability to distort retail performance, and this marked a major concern for the RTT members.
When the RTT members met, they reviewed the BRC-KPMG Retail Sales Monitor for the month of March 2017. It revealed that retail sales in the UK had decreased by 1% on a like-for-like (LFL) basis. The figures also revealed that over the three-months to March 2017, non-food retail sales in the UK declined by 1.1% LFL and 0.8% - the slowest 3-month total average growth since May 2011. Meanwhile, April retail performance marked a boost of 5.6% LFL – illustrating the size of the distortion caused by the movement of Easter.
The RTT members were in agreement that this illustrated the weaknesses in focusing on like-for-like analysis. Nick Bubb, Retail Consultant, added: “it is never helpful when Easter falls in calendar Q1 one year and calendar Q2 the next year”. Meanwhile, Martin Newman suggested that the “…[retail] industry remains obsessed with like-for-like sales figures”, adding that some retailers go as far as planning events at the same time each year in order to feed this metric.
Further illustrating the impact of this distortion Jonathan De Mello said that: “whilst many like to focus on Easter sales comparables, these…are nearly always distorted by the timing of the Easter weekend, [and] given Easter is solidly in April this year, some retailers may well report lower sales [as a result]”. James Sawley, raised the same issue and urged retailers to communicate with stakeholders effectively and perhaps even rethink how such like-for-like reporting is presented.
As a potential means to overcome this distortion, Nick Bubb, Retail Consultant, suggested that retailers may find it more beneficial to compare their Easter trading figures to a year in which the event occurred on the same day – or 2006 in this year’s case. However, he also flagged that this wouldn’t account for the significant structural changes in retail over the past decade. Meanwhile, James Sawley, suggested that from a banker’s perspective: “…lenders tend to overlook short-term spending patterns and focus more on the underlying trends”.
The RTT members stressed that the weak retail performance in the first quarter of 2017 could not solely be attributed to the later occurrence of Easter. James Knightley, Senior UK Economist at ING, pointed to the underlying economic issues, including the sharp rise in inflation – reflected in higher food and fuel prices – as well as weakened wage growth, squeezing consumer spending further.
Crucially, the members discussed the importance of exercising caution when interpreting like-for-like retail performance and stressed that retailers must not overlook the broader retail environment, by focussing too heavily on the timing of a seasonal event and its impact. Referring to the UK’s current weaker retail activity, James Knightley added: “This may well be partly Easter related, but it is very hard to disaggregate it from underlying economic issues”.
Pulling the broader economic and political landscape further into focus, Nick Bubb pointed to the simila discontinuity that occurred during the financial crisis of 2008/09, when Easter Sunday fell on 23 March in 2008 and 12 April in 2009. He said: “this made the underlying trading trends hard to read, although the direction of travel then was painfully obvious”. He went on to add that much of the focus now is on how the UK post-Brexit economy is faring, but those reading retail performance figures need to be mindful of both the level of significance placed upon them and the level of distortion they may contain.
Distortion aside, the RTT members also highlighted the benefits of this year’s relatively late Easter and what retailers might be able to learn from it. Maureen Hinton at GlobalData suggested that: “with Easter falling in mid-April this year, it is far more likely to be at least sunny, if not warm, encouraging [consumers] to spend on the home and garden”. So for some categories, it could mark an opportunity.
Jonathan De Mello flagged that: “…careful forward planning is key in advance of any popular holiday”, however the RTT members also pointed to the importance of remaining responsive to external factors, including the weather.
Indeed, whether early or late, the members broadly agreed that the success of Easter sales would be driven by a retailer’s agility and ability to remain relevant to its customers. James Sawley added that: “…seasonal variances in consumer taste, fashion trends and of course, the weather, can often mean a hit or a miss for retailer’s fortunes and can make or break their year”.
Whilst retail growth has lost traction in recent years, the RTT members agreed that events-based retail would continue to play a vital role in achieving growth. Maureen Hinton, suggested that: “As time has progressed and the retail sector in the UK has matured, events and occasion have become ever more essential to encourage consumers to spend that bit extra retailers need to drive growth”.
Many of the members highlighted that this was particularly poignant when considering the variety of strong economic headwinds facing the retail sector more broadly.
Successful events-based retail will be driven primarily by: a retailer’s agility and ability to react to the external environment; the flexibility of its supply chain, and of course it’s relevance and resonance with customers. Moreover, the latter could be enhanced by regionalisation and personalisation, as well as a more innovative approach to events that seeks to create a better emotional connection with today’s consumers.
Summarising the sense of opportunity, Martin Hayward concluded that: “Against a backdrop of home delivery, self-scanning and on-line interactions there is a huge opportunity for retailers to make more of this fundamental need to share and engage amongst consumers, to create some fun and interest.”
Notes to Editors:
Members of the RTT are:
• Nick Bubb – Retail Consultant
• Dr. Tim Denison – Ipsos Retail Performance
• Jonathan De Mello - Harper Dennis Hobbs
• Martin Hayward – Hayward Strategy and Futures
• Maureen Hinton – GlobalData
• James Knightley – ING
• Paul Martin – KPMG
• Martin Newman – Practicology
• James Sawley - HSBC
• Mike Watkins – Nielsen UK
The intellectual property within the RTT is jointly owned by KPMG (www.kpmg.co.uk) and Ipsos Retail Performance.
First mentions of the Retail Think Tank should be as follows: the KPMG/Ipsos Retail Think Tank. The abbreviations Retail Think Tank and RTT are acceptable thereafter.
The RTT was founded by KPMG and Ipsos Retail Performance (formerly Synovate) in February 2006. It now meets quarterly to provide authoritative ‘thought leadership’ on matters affecting the retail industry. All outputs are consensual and arrived at by simple majority vote and moderated discussion. Quotes are individually credited. The Retail Think Tank has been created because it is widely accepted that there are so many mixed messages from different data sources that it is difficult to establish with any certainty the true health and status of the sector. The aim of the RTT is to provide the authoritative, credible and most trusted window on what is really happening in retail and to develop thought leadership on the key areas influencing the future of retailing in the UK. Its executive members have been rigorously selected from non-aligned disciplines to highlight issues, propose solutions, learn from the past, signpost the road ahead and put retail into its rightful context within the British social/economic matrix.
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