It is customary in December to reflect on the year just gone. To identify key trends that will help reduce risks and shape opportunities ahead. In the shopper marketing world, this has been no easy task! The last 12 months have been one of the most extraordinary and turbulent in memory. If the impossible could happen, invariably it has!
The decision to Brexit has put increasing pressure on supply costs and margins. The ability to change and stay competitive has never been more essential for retail survival. In 2016 we said goodbye to famous high street brands like BHS, Staples, American Apparel, Austin Reed and My Local, many of whom turned over the ‘closed’ sign for good. The growing levels of shopper uncertainty suggests even more challenge ahead for those stores unwilling or unable to adapt.
With significant market change comes opportunity and in the ascendancy were the discounters. The combination of simple ranges, great value products and excellent quality continues to resonate with British shoppers. Aldi maintained geographic expansion and opened around 80 new stores in a land grab for market share. The launch of aldi.co.uk created yet another channel to compete as it moved a host of Specialbuys online for the first time. Not to be outdone, Lidl took advantage of the glut of vacant retail sites to open even more stores.
The rise of the discounters forced the Big 4 grocers to rethink strategy in the face of heavy sales decline. The immediate knee jerk drive towards everyday low pricing means promotional activity dipped across all of them, with far fewer ‘extra value’ and ‘BOGOF’ promotions around.
Tesco rationalised ranges, reset prices and invested heavily in the quality of its stores and own label brands. Sainsbury’s took out its purse and went on the acquisition trail, buying the Argos empire for a whopping £1.4 billion in April. We expect Sainsbury’s to open Habitat home concessions in larger stores and to push a much wider range of non-food products through ever more convenient channels in the year ahead.
Of more concern is ASDA, struggling to regain its value positioning and differentiate. Shoppers remain confused and sales are still dropping heavily. Project Renewal is going to take some time yet to stabilise things. Morrisons also slashed thousands of prices and in a more radical move embraced the opportunity online through ‘one hour’ home deliveries with Amazon Prime. The news it will relaunch the trusted Safeway brand also seems like a bold decision.
With massive store footprints, reinvigorating any of the Big 4 grocers will take a huge investment and many years, but it is great to see them exploring a raft of innovative new services and channels to meet changing shopper needs.
So what lies ahead in 2017? I sense a mood shift. Inflationary pressures are building and price increases will become inevitable. The only question is when and by how much? Lowest price cannot, and should not, be the only battle ground for brands and retailers looking to attract shoppers.
I predict greater differentiation through more brand and retailer collaboration to create unique shopping experiences. The return of customer service excellence, added value and on-pack promotional activity. Whilst the unstoppable advances in mobile technology will continue to open new channels, with AR and VR delivering more engaging in-store and online shopping.
2017 will be a year full of opportunity. A great year to be in shopper marketing!
Managing Partner, Brass Shopper