The latest retail sales statistics have delivered disappointing results for December 2017. Despite a decrease in purchase quantity compared to the previous month, there was a small 0.4% growth overall in the last three months of 2017. Whilst all other trends are facing downwards, what are the reasons behind this small spike?
Not all that glitters…
Q4, otherwise known as the Golden Quarter for retail, is an important part of the retail calendar. Several events that run up to the Christmas period, including Halloween, Bonfire Night, Black Friday and Cyber Monday, all help to line the pockets of retailers to help see them through the rest of the year.
However, the Golden Quarter 2017 showed a drop in retail health for the first time over the Golden Quarter since 2012. In fact, there was very little growth to report for the rest of 2017. However, there was one area that consistently delivered growth – even showing a small spike of 0.4% to the sales figures. This was in online-only, or “pureplay”, retailing.
All work and pureplay?
Online fashion retailers, Boohoo and ASOS, have been reporting stellar growth. ASOS reported £1.8bn in sales at the end of 2017, with profit up 145% to £80 million. Boohoo reported similar success, with revenue up 51% to £294.6 million, equating to a pre-tax profit of £30.9 million.
Why is it that pureplay retailers are getting the upper hand over the high street when it comes to profits? There could be a number of factors. For example, online retailers do not have the higher overheads that a physical store presents, such as business rates, POS systems, signage and shelf labelling. Not only does this offer instant cost savings to pureplayers, but they are also in a position to adapt more flexibly to an alternative strategy.
Online vs offline
Online retailers can also adopt different pricing models more quickly, using software to link up with competitors for real-time comparisons. Not only could this help retailers to avoid constantly reducing prices unnecessarily, it can also give them an edge to help customers save time shopping around.
However, there are still major benefits to a physical, bricks-and-mortar store. They present a showroom for customers to look at a product in detail. If they choose to buy it they can take it off the shelf and bring it home instantly. Returns can also be processed much more quickly as well as any exchanges. The physical store just relies on footfall and it can be a major downfall in helping to generate profits – as has been demonstrated by the most recent retail sales.
What can we learn from the pureplay model and is it time to change the way we retail? Essentially, retailers on and offline need to ensure that they are focused on their market and make sure they are regularly reviewing their business plans. There is room for both online and offline and each are used for different purposes; one offers convenience and the other offers a chance to try before you buy. Adapting and changing to suit their customer’s needs is key to any retailer’s strategy.
If you would like any further advice relating to your business plan, or any other aspect of setting up shop, contact the Retail and Wholesale team at Wilkins Kennedy for more information.