Retail change just gets faster

It was a merry Christmas for the grocers but early figures suggest that other retailers found the festive period more of a struggle. And the story of what happened highlights the supply chain changes facing retailers in the UK in the year ahead.

Shoppers spent £1 billion more than last year on groceries in the 12 weeks to 31st December, Kantar Worldpanel has revealed. That’s a 3.8 per cent increase in value – however much of that was accounted for by rising prices, which were up by 3.7 per cent year on year.

However, the performance of the grocery sector contrasts with what is happening elsewhere in the retail market, and the suggestion is that higher food prices hit spending in other areas.

The British Retail Consortium found that in the three months to December non-food retail was down 1.9 per cent on the year before on a like-for-like basis. The online penetration rate increased from 23 per in December 2016 to 24.1 per cent in December 2017.

Of the retailers that have reported so far, both Debenhams and Next have reported declines in store sales, though these were partially offset by growth in online sales.

Overall, Debenhams’ like-for-like sales in the 17 weeks to 30th December were down 1.3 per cent on last year. Debenhams said it responded to competitor discounting by managing inventory tightly through tactical promotional activity while flowing stock more efficiently.

Full price sales at Next were up 1.5 per cent in the 54 days to 24th December driven by strong online growth, the retailer said in a trading statement. While full price store sales were down 6.1 per cent for the period, online sales were up by 13.6 per cent.

The next few days will see trading updates from Sainsbury’s, Superdry, John Lewis, Waitrose, Marks & Spencer, and Tesco, which are expected to confirm these trends.

The growth in online is hardly news. However, figures from the Institute of Customer Service suggest that 20 million shoppers experienced delays with deliveries during the Christmas period.

And the ICS calculates that this translates into a potential loss of £3.9 billion for UK retailers as customers are less likely to shop with retailers that fail to deliver on time.

Of course, the peak sales period is followed by a peak in returns and this year more than £25 billion worth of online orders are set to be returned in the month to the middle of January, according to LCP Consulting.

What is apparent from all this is that those retailers that have been slowest to align their supply chains to the shift to online sales are finding life toughest and will need to move faster to keep up. Expect to see the pace of change pick up over the coming year.