Christmas will test UK retailers' ‘Click & Collect’ services in face of ‘Return & Run’ for unwanted gifts
Monday 1 December will present a bargain hunting spree while overall festive spending will be flat compared to 2013
Christmas 2014 will create a pressing need for appropriate forecasting by all retailers as consumers making initial purchasing decisions online will want to collect at a local store – and with the traditional Christmas heightened shopping patterns, it is going to really test the 'Click & Collect' models for all major UK retailers.
This pattern will continue post-Christmas. As soon as the excitement of unpacking gifts from under the Christmas tree turns to returning unwanted gifts, there will be a demand to take undesired presents back to a local store. Consumers are opting to avoid the perceived difficulties associated with returns to online retailers – over half of consumers intend to use 'Click & Collect' services this Christmas and almost three in four say online purchases should be allowed to be returned in store. This pattern could become known as 'Return & Run' where they simply return unwanted items, or even 'Drop & Shop' where shoppers decide to choose something else while they're in the store.
These insights emerged in a report by leading retail analysts Conlumino and SAS, the global leader in business analytics software and services. The report, "Christmas 2014: Adapting to Evolving Consumer Shopping Habits" shows that Christmas 2014 is likely to be a 'lucky dip' for retailers as they battle uncertain consumer spending, promotion fatigue, multi-channel fulfilment, and the good old British weather.
The total spend for Christmas 2014 is forecast to be similar to 2013, with varying degrees of consumer optimism around spending. Overall, 30 per cent of all consumers claimed they feel worse off than last year. The two groups with most festive optimism are Londoners and the 18-24 year old age group, who expect to spend more than in 2013.
Retailers out of step with consumer plans
This year will see the biggest demand for multi-channel fulfilment experience. As the purchase options continue to diversify, more and more consumers expect to shop via different channels at any given time. The onus is on the retailer to ensure stock inventory is managed properly across multiple locations – and that staff is ready to respond, whether it's for home delivery or collect in store.
To complicate matters further, while 67 per cent of retailers said shoppers usually wait until the last two weeks to shop, only 41 per cent of consumers think this is the case. Worse still, 60 per cent of retailers plan for shoppers to do a bulk shop on the last weekend before Christmas, but only 28 per cent of consumers are prepared for this. The disconnect between the retailer and consumer is startling and can significantly impact stock level and demand at the last hurdle before Christmas Day.
According to the survey, 44 per cent of retailers said they still rely on gut feel for forecasting demand, and that nearly half (47 per cent) rely on manual calculations. Nearly half (47 per cent) of retailers said they promote the same goods every year. These out-dated approaches lead to risky, unplanned price wars to win customers back and can expose the business to long term harm. For example, there have been cases recently where retailers have introduced aggressive price cuts as early as November but ended up issuing profit warnings just a few months later. Retailers therefore need an up-to-date picture of what their customers want and the ability to adapt the service offering according to these preferences.
Young optimists, middle-age downcast
With youth unemployment experiencing its largest fall in 2014 since records began, it is unsurprising that that 18-24 year olds feel better off and plan to spend more than last year. Countering the optimism of the young, 45-54 year olds report the biggest dip in personal finances, and the outlook for spending among middle-aged consumers (35-54 year olds) is quite negative. The forecast for spending is negative for both men and women, with female consumers more noticeably downbeat than men.
However, many retailers still lack a true understanding of how the audience segments react to different promotional offers and adapt their shopping behaviour accordingly. Data analytics offers unbiased insight that allows retailers to better understand each of its customers, and deliver more targeted, personalised marketing campaigns.
Bargain hunters should put Monday, 1 December in their diary – it's going to be big with 16 per cent of all consumers expected to go shopping that day. However, despite more than half of consumers still showing an appetite for bargain hunting, over two thirds (68 per cent) of consumers feel Christmas discounting has lost its impact as retailers do more and more discounting and promotions throughout the year. Furthermore, a third of consumers (33 per cent) are becoming increasingly resentful buying gifts before Christmas and seeing them heavily discounted in the sales.
Weather - a retailer's problem
Over the last few years, adverse weather has had a significant impact on Christmas. Half of retailers report a high to medium influence of poor weather conditions on sales figures, yet only 16 per cent of consumers believe it has an impact. The difference being that consumers expect their purchases to arrive no matter what happens. And if they don't arrive they turn to social media and customer service to complain. With consumers leaving purchases later and later, retailers need to be able to respond faster than ever before but over a third (36 per cent) say they find it hard to adapt to unexpected deviations in forecast demand, and 18 per cent say they are not able to respond quickly to Christmas demand.
Maureen Hinton, Global Research Director, Conlumino, said: "Retailers are facing major changes in how consumers shop at Christmas. They require more options for purchase and fulfilment, and more personalised offers to break through the inbox deluge all consumers experience at this time of year. Retailers need to get more sophisticated in their forecasting, demand planning, and customer experience in order to meet the changing requirements, otherwise 2015 will be a long year for many retailers.
"So while we see game consoles, books, DVDs, clothes and chocolate as firm favourites this year, any change in demand or outside events such as weather, need to be planned so retailers can respond rapidly with personalised promotions and offers to attract and keep customers. It will be interesting to see what innovations retailers have in 2014, because they will need it to keep the sales flowing."
Andrew Fowkes, Head of Retail Centre of Excellence, SAS UK & Ireland, said: "The retail landscape has never been more complex with variations by region, gender, age, spending power, product, external factors and fulfilment models. Despite recognising the new retail world, many are still relying on gut feel, past experience, and static models. To compete, retailers need to compete in the now, by harnessing their data and external sources – such as weather forecasts – to better model and predict consumer demand in order to meet the needs of the customer.
"Consumers live in a society now driven by immediacy, and retailers have no option but to get in sync. So whether it is the known unknowns, or the unknown unknowns, big data analytics provides retailers with the ability to predict the possible and meet consumer demand."
You can download the full report and the infographic here.
SAS is the leader in analytics. Through innovative analytics, business intelligence and data management software and services, SAS helps customers at more than 83,000 sites make better decisions faster. Since 1976, SAS has been giving customers around the world THE POWER TO KNOW®.
Conlumino is a retail research agency and consulting firm. Its work focuses on all aspects of retailing and consumer behaviour, which is delivered through bespoke reports, projects and presentations and its leading edge Intelligence Centre platform. Conlumino works with many of the world’s leading retailers, property firms and those in the financial sector to help them maximise success through developing a thorough understanding of the sector and its likely future performance.
Findings in the report are drawn from two separate surveys: one surveying UK retailers and another surveying UK consumers. These surveys were designed to ask both retailers and consumers a comprehensive range of questions on anticipated demand this Christmas, as well as more specific topics such as fulfilment of Christmas orders, forecasting of Christmas demand, and how pricing and promotions impact demand in the run-up to Christmas. In total, Conlumino interviewed a representative sample of 1,000 UK consumers, and a cross-sample of 155 UK retailers.