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Aftermath of a shock: How should UK retailers prepare for April 2017?

Tuesday, 31 January 2017 00:00

Author: Anastasia Laska, Vice President of Marketing EMEA at Revionics

In July 2016 the GfK consumer confidence index dropped to minus 12i , which is the lowest in the last three post-recession years. The drop reflected the emotional reaction to the Brexit vote as the UK embarked on what appeared to be an unknown and - potentially dangerous - future.

Holiday sales were surprisingly good, supported by a substantial influx of disposable income into households, with food and clothing sales doing particularly well.

In a 17th of January speech, UK Prime Minister Theresa May tried to bring more clarity to that future, but according to majority of opinion leaders in economic and political sphere, she communicated a broad vision, but not a plan how to get to that vision.

"The pressures on retail activity are likely to increase during 2017," CBI economist Ben Jones said in an interview with the Financial Times. "With higher inflation beginning to weigh on households purchasing power, consumption patterns are likely to shift, creating winners and losers across the retail landscape."ii

While this might bring certain upside to discount and mass-market convenience retailers, the "big boxes" as well as fashion and electronic industries are likely to be hit especially hard. Those food retailers who heavily rely on export products (the average share of export product in the food area was 40% a year ago), will have to regroup their purchasing strategies.

UK retail in 2017 will be influenced by a unique combination of extremely powerful and very unpredictable political, economic and financial factors. Is there anything that a retailer can do still in the remaining months before the new rules of the game are announced and take effect?

As I noted in a Brexit-themed blog a few months ago, retailers must not only streamline buying and logistics but also price strategically.

The Path Forward

In a challenging environment with pressure on both costs and prices, retailers need to aggressively leverage every available tool to ensure that they price strategically to gain customer loyalty, remain competitive – and meet business margin and profit imperatives.

Fortunately there is a two-pronged approach to do just that. Today’s technology solutions enable retailers to enact their pricing strategies in real time. Retailers of all stripes, from traditional brick-and-mortar retailers to pure-play online retail customers, leverage price, promotion, markdown and competitive insight capabilities to get up-to-the-minute insights into market shifts – and deliver real-time response to changing competitive and consumer behaviors, which will be especially critical in UK in 2017, with so many variables unknown.

Second, analytics combine the art and science of science and data intelligence to help retailers to be not only faster, but also smarter about how they execute on prices and promotions. The ability to act quickly in the marketplace is only as valuable as the strategy and insights driving the actions, and we have seen an increasing demand for analytics to help retailers be more strategic and results-focused in pricing and promotional activities.

This means analytics to identify key price image drivers – the products that are most responsible for shaping customer price perception. We use analytics to help retailers craft pricing strategies focused on which products and categories should be margin producers versus those that are more effective at driving traffic or establishing customer price perception. In a market which will certainly see a significant shift of consumption patterns, this capability becomes truly invaluable.

Data science and technology provide retailers certain hedging from very large surprises, and at the same time free up significant human time and resources to focus on leveraging their business knowledge and insights. The result: retailers gain the ability to steer and shape customer interactions with agility, driving better customer engagement and improved profitability.

i - “Brexit causes dramatic 11-point drop in UK consumer confidence,” GfK Consumer Barometer on Behalf of the European Commission, 29, July 2016.
ii - “UK Retail Sector Beats Expectations Again – CBI,” by Katie Martin, Financial Times, 20 December 2016


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