The Retailer Winter edition_2020

retail disruption and innovation

Fortune favours the optimistic, brave and creative

LINDA ELLETT PARTNER AND UK HEAD OF CONSUMER MARKETS KPMG

THE STRUGGLES OF CONSUMER-FACING BUSINESSES ARE WELL DOCUMENTED, BUT DOES FOCUSING ON THOSE MEAN WE OVERLOOK THE MORE PROMISING OPPORTUNITIES? You don’t have to look far to be made aware of the challenges facing all consumer businesses, with retailers certainly no exception. Much of the dreary conversation has been dominated by major legacy players running out of puff or undergoing radical change; retail sales being woefully low or in decline, or consumer spend and attention being redirected to other areas, especially amidst the uncertain geopolitical and macroeconomic climate. For many, the finger has primarily been pointed at Brexit, and while it does undoubtedly present an array of challenges in itself, we cannot forget that disruptive technologies and rising customer expectations have drastically altered the consumer landscape more broadly. Putting Brexit and contingency planning aside, efforts must really be directed at controlling the controllable as well as harnessing the power of positivity. We need to be thinking about where success – not failure – can be found. After all, fortune favours the optimistic, brave and creative. It’s a New Year – a new decade even – so it is high time to shake off the shackles of a tough patch and look at our industry with a fresh pair of eyes. Rather than being weighed down by pessimism, problems need to be turned on their head and considered opportunities to improve and thrive. Doing so might require a drastic overall or revisiting your business's core proposition, but such is the pace of change within consumer markets anyway. No one gets anywhere by standing still. The recent BRC-KPMG Retail Sales Monitor revealed that 2019 was the worst year for retail sales growth since records began. Head in hands, we often forget that there are always winners and losers in every scenario. Some categories or sub-sectors or retail – especially those within health and wellness or even the discount grocers – have been bucking the overall downward trend. So there’s clearly more room for optimism than we might initially think or see at first glance. We can’t lose sight of the fact that the food and drinks industry alone is the largest industry group in the UK, accounting for approximately £230bn of consumer spend per year. If looking at retail more broadly, it accounts for more than a whopping £360bn.

Adding to the more positive stance, our recent economic projections suggested that consumer spending would continue to grow in 2020, deal or no-deal. What’s more, the KPMG/Ipsos Retail Think Tank’s predictions for the year ahead outlined that retail growth of at least 1% was likely. This, they said, would mainly be driven by the recent conclusive General Election result and subsequent dampening of political uncertainty. Consumer industries like retail may present one of the most sizable opportunities in the UK, but that doesn’t mean that players won’t have to fight for their slice of the action. To that effect, the noise we are witnessing currently is reflective of the oversaturation in retail, which is evidently correcting itself by way of business Darwinism – survival of the fittest. And it is consumers and their choices that dictate which businesses win – they choose what’s relevant to them. There was once a time when ‘growth’ was measured naively by the roll-out of new stores, but those days are over. Today’s retailers need to adapt to the new climate and modern-day consumer. They also need to be adaptive enough to compete with eager and more malleable newcomers who offer customers a better proposition. Disruption needs to be leveraged, not feared, and it should prompt further innovation so businesses can continually look to surprise and delight their customers both now and in the future. Rather than merely winning favour with the masses, as was once the traditional approach, today’s retailers are also required to develop a closer relationship with each of their customers, thinking carefully about customer experience and loyalty. More emphasis is also being placed on how retailers and consumer businesses are doing actual ‘good’ in the world, as customers increasingly call upon brands to better define their environmental and societal credentials. In fact, our recent research found that over two-thirds of Brits say they care more about the environmental impact of their consumption compared to five years ago. And shoppers aren’t put off by potentially increased costs either, with consumers saying they’d pay an average of 8.5% more for a product to ensure it is in fact environmentally-friendly. Of course each of these new drivers may themselves present further challenges to mull over, but they also offer the opportunity to reposition a business that’s become stale. Importantly, they offer the opportunity to remain relevant in the eyes of the all-important consumer, as well as an avenue of potential growth.

“Consumer industries like retail may present one of the most sizable opportunities in the UK, but that doesn’t mean that players won’t have to fight for their slice of the action”

60 | winter 2020 | the retailer