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Five key planning areas for retail businesses trading through Christmas

The Golden Quarter of retail should now be in full swing and is normally the key trading period for all retailers. But what are the prospects for retailers facing the prospect of continued lockdown and what should they do to prepare for the season ahead?

The Golden Quarter runs from October through to Christmas and includes the increasingly important Black Friday discount event which falls on 27 November 2020 this year. Last year Black Friday was worth £2.9 billion in sales and ranks equally in importance with the Cyber Monday event. In the early summer, with lockdown easing many were banking on a favourable Christmas trading period to rescue struggling brands.

However, this is looking to be a tougher environment than last Christmas, which was already tough enough due to Brexit uncertainty and a general election. Consumer sentiment was increasingly confident in September but has plummeted against the backdrop of a second wave and furlough ending.

It will be those retailers that have:

  • a strong brand identity
  • an online-only presence or a truly omni-channel business
  • focused on cash management and controlled expenses
  • flexible and tested logistics and supply lines

and who know their consumers, who will thrive through this period.

Know your consumer

Consumer confidence rebounded in the summer, but with furlough ending and the media dominated by news of job losses, many consumers will be looking for value for money. However, that need not mean a flight to the bargain basement, but rather a reliance on trusted brands. It can also mean an appreciation of local brands where the consumer feels part of the community and there is a sense of loyalty to the retailer and the products it stocks.

Retailers will have to continue to put their customers safety first, making sure that they continue to apply national and local safety measures to ensure they remain compliant and don’t prejudice their reputations.

In the pandemic, consumers have sought sanctuary in their homes, and those brands focused on home-based activity, cooking, home entertainment and home decorations have thrived.

Fashion and clothing retailers have suffered. With offices closed and many social events cancelled, there is little need to spend on new clothes. With this way of working now becoming entrenched, suits are out. However, people still need to feel business-like on video calls and the temptation to dress up even with a quieter Christmas should give some cheer to fashion retailers.

For food retailers, the need to plan for smaller gatherings is also key, with potentially more restrictions on family and wider gatherings over the Christmas period. Retailers and food suppliers should move to being able to scale-down and up as needed.

The key trend over the year is the switch online. With strong growth for many retailers – putting pressure on costs, logistics and entire business models – and further growth of those who already have strong multi-channel or pureplay businesses.

This does not mean that power rests with large retailers, however, as smaller retailers can adapt to the new environment by accessing a number of channels

Our top five Christmas planning areas to take now include:

1. Channel forecasting

  • Modelling the ability to switch to online and the level of technical and operational readiness. This can also involve accessing platforms such as eBay and Amazon as well as building an online presence from scratch
  • Looking at staffing levels and how they are utilised to adapt to the new way of shopping
  • Preparing and driving profitability for both home delivery and ‘click and collect’
  • With local lockdowns increasingly likely, retailers need to ensure they adapt their strategy to meet changes in circumstances. This will mean that smaller and medium-sized retailers will have to adapt to online stores or at least home delivery
  • Food and beverage retailers adopting a subscription model which will allow for direct-to-consumer delivery for beer, wine and other speciality beverages
  • Adapting stores to cope with social distancing, ensuring that the shopping experience retains and builds on the consumer experience
  • Don’t be afraid of opening pop-up stores to ensure a physical presence and also allow for ‘click and collect’ sales

2. Supply chain and inventory management

  • Risk assess sourcing of product to ensure you can meet demand
  • Forecasting returns and related processes including quarantining stock and dealing with return logistics
  • Modelling the likely state of the market, channel impact and demand trajectory
  • Assessing competitor positions, weaknesses to leverage and insight into plans for post-pandemic recovery
  • Scenario planning the likely customer demand projections – base, worst and planning demand by channel segment and customer group
  • Gap analysis between current trajectory and scenarios
  • Maximising multi-channel stock flows

3. Product and pricing

  • Modelling potential conversion as consumers ‘hunt’ in shopping expeditions
  • Review and planning of promotions – Above and Below the Line – including the control and processes around vouchers and other promotions
  • Planning for stock clearance, timing of sales and other promotions
  • Price policy review and price guarantees in the light of what competitors are doing
  • Black Friday pricing and promotion policy as well as stock and operational planning based on lockdown online trading volumes

4. Customer and marketing

  • Understand how your consumers’ attitudes and media consumption has changed and divert marketing spend to win market share during Christmas trading
  • Ensure marketing spend is focused; rebalancing consumer touchpoints so that the consumer continues to be aware of your brand and the touchpoints remain positive
  • Refocusing brand messaging through all marketing channels to improve return on investment
  • Planning media and cash flow, renegotiating to allow flexibility
  • Customer relationship management (CRM) strategic plans to appropriately maximise use of customer base

5. Finance and cash planning are key

  • Profitability and cash flow planning remain key. Budgeting for the cost of rent and ancillary store costs and manage personnel, based on revised business multi-channel model and shift online
  • Cash management and working capital planning, based on Christmas sales and discounting
  • Capital and operational planning to ensure the ability to deliver operational plans and optimise channel shift

Christmas will be very different from those most retailers normally understand of this key trading period. However, a poor trading period can be avoided through proactivity and a conscious decision to embrace change. Now is the time to act to ensure survival, and maximise opportunities to grow market share.

Would you like to know more?

You can find more insights on the retail industry on our Retail hub here.

And if you would like to discuss your specific circumstances, please get in touch with your usual Blick Rothenberg contact or one of the contacts on this page.