Tesco posted dismal results this week, with profits down 51.5% in the year to February; their worst slump ever. With gloomy headlines breaking across the national press, EDITD co-founder, Geoff Watts, spoke to Bloomberg about how retailers can best arm themselves for battle in a tricky economy (it’s worth a watch, here). We outline the six key challenges retailers today are facing.
1. Having an appealing & relevant assortment
With competition so high and consumer spend wavering, having the correct assortment is a major concern for retailers. Ensuring they’ve picked up on the right trends at the right time is just one part of the story. A retailer’s core line is where the bulk of their return lies, and therefore needs the most care given. Throw in factors like Europe’s extended winter and you need some pretty savvy buyers to ensure the right products are in store and online.
2. Getting the pricing right
Consumers are more price-aware than ever, checking pricing with competitors whilst both shopping on and offline. Get the launch pricing wrong on a product line and retailers risk the entire line ending up in the sale category. The dominance of fast fashion value retailers like Primark and H&M has really cranked up the competition for apparel retailers, who now need full visibility of the market’s pricing to pitch their place within it. E-tail aids this, with online promotions at competitors being trackable (through our software, of course!) and immediate actioning achievable.
3. Having control of stock levels
Having an accurate gauge of demand is critical for retail planners and merchandisers, who ensure the right number of products are in the right stores. Being overly cautious and buying too little can seriously damage a retailer’s sales; a classic example is M&S’s meek knitwear buying in 2012, which they admit contributed to their abismal sales. Of course, weather conditions are harder to plan around, which is why merchandisers and planners need to work alongside savvy visual merchandisers, being resourceful to optimise consumer spend.
4. Understanding the consumer
Thanks to the internet and rise of smart phones, consumer spending habits have changed, they now demand a omni-channel approach which many established retailers have been slow to react to, Tesco included. Consumer’s fashion awareness has also ramped up, as the walls shrouding the industry in mystique have fallen with the digital age. Being able to listen to and react upon consumer interest and sentiment is a major pain point for large retailers.
5. Understanding new markets
With globalisation and troubled local economies, many retailers have pushed for overseas expansion. But panic growth leads to mistakes, as Tesco have now discovered with their attempts to break into the American market. Thorough research and understanding of foreign markets is critical for any retailer with expansion plans – to know the local competition, pricing and consumer.
6. Battling rent increases
Although rental pricing across many UK locations remained static in 2012, recent years have been taxing for retailers, and London still sees prices climbing. Being the ideal destination for a flagship, retailers can near-bankrupt themselves to fulfil the vanity of a Regent Street location. Many are jumping ship and realising that their online presence can be their flagship, generating their largest sales. However, this comes with its own learning curves; offering the consumer an experience similar to a physical store is a challenge facing any e-commerce retailer.
We’ll continue to investigate and reveal case studies of retailers getting it right, and those getting it wrong, as retail steps up to contemporary challenges.
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