In the first of a new series examining the unique challenges and opportunities presented to marketers in specific economic sectors, How-Do examines what's going on in the world of the retail marketer. This first report has been prepared with the support of Brilliant Media.
While the economic downturn has left many high-street chains floundering, savvier retail marketers are bucking the trend and finding new ways of engaging with customers. How-Do checks out the changing marketplace.
The year so far has been torrid for many retailers. Despite a blip in January when trading in the sector increased as shoppers took advantage of big price cuts, the vast majority have struggled to counter falling sales and lack of consumer confidence.
A report by business adviser PricewaterhouseCoopers in April revealed the true scale of the gloom. There were 705 retail administrations in the first quarter of 2009, a 60 per cent increase on the same period last year, with businesses collapsing at a rate of seven per working day. Although new figures from the Office of National Statistics have hinted at an upturn in fortunes, it’s clear that 2009 will be survival of the fittest as the sector is forced to rethink its priorities and reassess customer needs.
But despite the dismal outlook, the recession has presented opportunities in certain sectors.
Brands that are able to drive marketing efforts based on price are not only staying alive – they are thriving. Strong results from retailers in the food and discount sectors suggest the crisis hasn’t hit the essentials and there is a part of the market where people cannot be damaged. Those on benefits, students, children, tend to have the same amount of disposable income as ever, while the middle-market is also trading down as it is forced to become cash-conscious.
Whilst the opportunities are there, retailers need to ensure that they are working to clearly defined and measurable objectives. Chris Broadbent, managing director of Brilliant Media’s Manchester office observes,that: ''We handle over £80m of retail business - online, offline, above and below the line - the only thing that matters is the bottom line!
"In the current climate, return on investment is everything. The timescale of measuring success becomes shorter by the week, and the media agency plays a pivotal role in defining and delivering the business objectives of any retailer or e-tailer.''
“Demographics are becoming more difficult to map, especially in these tough times,” says Helen Dolce of marketing resource consultancy Marketing Scout. “The likes of Aldi are blurring the lines now; where initially people might have put them into a value retailer category, now people are being more savvy about how and where they buy. It’s almost the smart choice to shop about and spend less.”
The result has meant that discount chains like Aldi, Poundland and Netto are embarking on aggressive store acquisition policies to boost market share and capitalise on a customer base that is willing to pledge new allegances to untried discount retailers.
Matt Hatton, director at Brilliant Media’s Manchester office believes that those who capture market share at this time will benefit in the long-term, “It’s not just about price point. If you sell a brand at a discount people still want that brand and will want it when the recession’s over, so as long as you work to keep them, you should keep them.”
Lee Gomarsall, marketing manager at discount footwear retailer Wynsors World of Shoes, based in Bacup, Lancashire, believes that stores which flaunt their low-cost credentials have the most to gain. “We are proud to be a discount retailer. Since January we’ve been doing very well. Being known as a value for money brand when people are trying to save money really works for us.”
And Gomarsall says that now the chain has succeeded in getting more customers through the door, it is aiming to keep them once the recession is over. Changes to its point-of-sale display, like organising stock by style instead of by size, gives a more upmarket feel and should encourage the fashion-conscious to return once people have more disposable income in their pockets. After all, customers who engage with a brand during a downturn will still engage with it once the recession is over.
“We were very much part of the pile-it-high, sell-it-cheap part of the market and we used to think you could put the shoes out and they would sell themselves, but now it’s about how you merchandise the stock, how it looks, the branding and the styling,” he says.
It’s a similar story for online and catalogue company Littlewoods Shop Direct whose HQ is still in Liverpool. As well as serving up new advertising campaigns to present an affordable fashion face, the retailer has taken the low-cost offer a step further by supplying credit finance to its customers.
Anthony Taylor, who was until recently head of corporate communications at the company, believes such customer service is essential for chains that want to retain new customers. “It’s not good enough to simply sell cheap clothes,” he says. “A lot of catalogue retailers have the ability to supply finance, so as well as a lower price point there are different ways to supply people with better ways to pay. It has meant that sales have been doing very well at Shop Direct.”
And it’s not just discount retailers that are profiting – mid-market and high-end retailers are also getting in on the act. While recognising the need to keep flagship stores free of too many discounted lines, in order to maintain brand positioning and aspiration factor, such retailers are using out-of-town designer outlet villages to sell goods to the cash-conscious consumer.
But while it has become chic to be cheap as brands have become increasingly reliant on price-driven promotions to generate standout and win customers, smart retailers are using the internet to target new customer bases as consumers use the web to shop around. And it’s an area where sales are still increasing.
Online sales of groceries at Tesco, Asda, Sainsbury’s and Ocado surged 35 per cent to £2.9bn in the year to March 2009 according to market research analyst TNS, while online fashion retailer Asos reported sales up 104 per cent to £165m for the year to 31 March 2009. Even brands such as Woolworths and Zavvi, which failed on the high street, are set to be transformed by an online relaunch.
Glossop-based BooHoo.com is one retailer hoping to take advantage of consumer willingness to shop online. The website sells the latest women’s fashion and girls clothes and is owned by a group of companies that have supplied retailers to the likes of Primark.
The company’s marketing manager Steve Webster says although only a start-up it has achieved success in a relatively short period of time through a strategy of driving online traffic via offline media. Rather than relying on search engine optimisation and pay per click advertising, BooHoo uses traditional forms of advertising to drive awareness of its website. It then uses online to drive purchase through tactical offers.
“The bulk of BooHoo’s marketing success has come from offline activity – a lot of PR, press, advertisements, product placements and all branded as BooHoo.com,” he says. “That then drives a lot of organic traffic to the site.”
Whilst BooHoo’s success illustrates the importance of utilising tried and tested methods of generating interest, one of the main gains that online has over more traditional forms is the ability to target marketing efforts and better understand customer demographics. Whitlow says that BooHoo is following Asos’s lead and sending out highly-relevant emails to customers that actually want them.
He says: “We are hammering email communication at the moment. But like a lot of retailers those emails are specifically tailored to what people are buying. So we can send out 20 emails, but each one would go to a different part of our database. The beauty of online is that you can target them according to behaviour shown up in the data that you can capture.”
Such email targeting is essential in today’s market place to drive traffic to a site. It’s also hugely important for marketers who are being charged with delivering ever more accountability for their limited marketing budgets. By linking purchases with customer data from loyalty cardholders, brands are increasingly able to determine who is buying their product, how effective campaigns are, and monitor purchasing behaviour without the need for time-intensive shopper samples.
And retailers that successfully combine this targeted online presence with offline activities perhaps have the most to gain. In many cases, consumers are using the internet to browse and shop around for the best price before going in store to buy, while for bulkier items, the opposite is true. Continued adoption of modern technologies will further this process, allowing conventional retail to further benefit from on-line activity. Matt Hatton comments “You’ll be able to put a product search into your phone and as you are walking down the High Street you will be able to see that somebody has that product available near you at a reasonable price.”
However, as online retailers are not limited by geography, and with the number of new sites increasing day-by-day, getting the website design and content right is vital. With a competitor’s site just a few clicks away, retailers could be losing business they don’t even know about. Paul Rouke, an e-commerce expert at website e-commerce consultancy PRWD, says that search engines like Google enable users to access websites on any page, be it the product or category page, and not the traditional front door of the site.
“The days of the home page are gone, every page is a home page,” he says. “The problem for retailers is how do they make every page like a home page and get across their messages and make the shopping experience easy and simple. Retailers need to be giving readers trust assurances, delivery costs and your USPs at these different entry points.”
Keeping up-to-date on the latest Web 2.0 trends, like blogs and social media is also important to increase consumer engagement with the brand. Marketers at the Shop Direct-owned Woolworths have already started to do this ahead of its relaunch, aligning the marketing strategy with online community sites like Twitter and Facebook.
Rouke points to Virgin Wines as one business that has used social media to its advantage. “We did some work for the company a couple of years ago as it wanted to better engage with its customers,” he says. “They wanted to create a community feel and tried doing videos of where the winemakers were from and so on. But the most effective device was to allow customers to review and rate individual wines.”
But retailers also have to be aware that employing such social media tactics leaves then open to negative feedback, while no product reviews could equally drive customers away. Rouke says: “There are a lot of retailers where 90 per cent of their products have no reviews. If you are going to do reviews you have to be confident that you’re going to have the interaction with visitors and you’re going to start to get at least one two three reviews otherwise it just doesn’t work.” Interestingly, Rouke also observed that products that have one negative review sell better than a similar product with no reviews.
While the internet has made the job of a marketer more complex, if done right it has the power to deliver more accountability and better margins in a declining market. And all retail marketers agree that strong planning and measurement of activity is key.
The web analytics blogger Avinash Kaushik has a 10-90 rule – if you’re going to spend money on analytics, the study of website visitor behaviour, spend 10 per cent on software and 90 per cent on people looking at the analytics and telling you what it means. This is all very well, however in an industry that is driven by yesterday’s trading results and tomorrow’s figures, Matt Hatton says: “The results of studying two years’ analytics could be well worth it, but two years is a long time to build the knowledge up and the finance director or venture capitalist will be sat there saying ‘we might not even be here in two years time’.”
Clearly – and particularly in today’s fast-changing marketplace - all retail marketers have to strike the balance between what’s delivering results right now and evaluating how applicable these approaches will be once the economy picks up.
Matt Hatton concludes ''The market constantly evolves and retailers are at the forefront of that - we need to use all of the new technologies to maximise accountability, but it is a matter of balance; the traditional media routes will still play an important part for years to come, retailers need to attack on all fronts in their quest for customers.''
In the meantime the end of the year will show us who is left in the race across this new landscape of discount and internet shopping, but how the race is run may well have changed again by then.
How-Do would like to thank Brilliant Media for hosting the discussion.
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