2017: Lessons from the festive shopping basket

25th Jan 2017

With the exception of ASDA, it looks like 2016 ended on a high note for most grocery retailers in the UK.

Bear in mind that 2015’s finish was pretty dismal, so the year on year benchmark wasn’t that high to start with. That said, in 2015 a few retailers were in the midst of implementing overhauls which, like the turning of a giant shipping vessel, takes time to come to fruition. Tesco and Morrisons are two prime examples of retailers which are now on-course.

What did Tesco and Morrisons do to garner such positive results? No, it wasn’t a magic bullet - they focused on the basics. We just cannot underestimate the importance of getting the basics right. As Morrison’s CEO David Potts says of their Christmas trading, “we stocked more of what our customers wanted to buy, more tills were open more often, and product availability improved as over half of sales went through our new ordering system.” Doesn’t sound like rocket science, does it? Availability, range, service and price are the four things at the heart of the shopping experience that people seek from their grocery retailer. Consistent delivery on these four pillars is enabling Tesco and Morrisons to build up the trust of their shoppers, who then return time and again.

At the discounting end of the grocery spectrum, Lidl and Aldi have shown that they know how to bring in shoppers looking for indulgences during the festive period. In particular, Lidl hit upon a winner with its Social Price Drop campaign. The Twitter-based activity helped drive Lidl’s December sales up by 10%. This demonstrated the power of direct consumer engagement, combined with the lure of luxury foodstuffs priced at a steal during a contextually-relevant time.

On the back of such positivity comes the uncertainty of what 2017 brings, with Brexit top of mind for retailers, brands and consumers. While we know Tesco successfully (and publicly) fended off price rises for Marmite last year, there’s only a limited amount of time left on those currency hedges that producers and retailers put in place and price rises will be inevitable. Combined with the squeeze on disposable income that the weaker pound brings, tuned-in shoppers are likely to already be bracing themselves for higher prices and mentally preparing to cut back where necessary.

So what can brands and retailers do to prepare themselves for this?

Get your omnichannel experience in order. Omnichannel seems to be the buzzword of the retailers, but it’s not surprising to see why. More than ever, retailers are recognising that the shopper journey is a non-linear, multiple-touchpoint process. Shoppers are dictating how they want to shop and retailers who respond by offering flexibility are the ones who win. The changing shopper behaviour is clear - you only need to look at how John Lewis’ mobile device sales shot up by 80% over the Christmas trading period. Its click and collect orders picked up via Waitrose stores also grew by 18%. Shoppers will still want the best shopping experience for their hard-earned cash and this omnichannel shopping behaviour isn’t going away.

Demonstrate why you’re worth it. Shoppers will need better reasons to justify their purchasing and a clear point of difference could help distinguish you from the rest of the pack. Think back to the behaviour of shoppers during the recession of 2008-2009. Small treats that might have been easy to cut out, like chocolate, alcohol or lipstick, actually did surprisingly well. Such indulgences became a little coping mechanism in an environment of deprivation.  What emotional benefit could you offer to a shopper, beyond function?

Can you win the at-home occasions? With lower disposable income driven by lower spending power, we’re likely to see consumers altering their behaviour to adjust. Socialising out gets replaced with more nights in and entertaining at home. Desire for a good experience doesn’t lessen though, so entertaining at home gives brands the opportunity to trade shoppers up to a more premium range. Can your brand take advantage of this?

2017 is proving itself to be a year of change, and the retail sector will not be exempt. It would be impossible to predict next year’s winners and losers, but retailers will do well to place the customer at the centre of their universe to be in the race.  

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