Blog Post - Iain Devine, Oct 25 2016

Retailers’ half year results: Ever-changing consumers

Retailers’ half year results: Ever-changing consumers
RETAILERS’ HALF YEAR RESULTS POINT TO EVER-CHANGING CONSUMERS

As retail companies passed the financial half-way point of the year, vendors reflected, both forwards and backwards, on how they could improve. Clothing brands experienced a dip in sales with the likes of Next, H&M and Marks and Spencer losing value across European stock exchanges. Meanwhile, the notoriously competitive grocery sector saw profitable returns: Morrisons and Tesco (two of the ‘big four’) saw an especially good half year. Tesco’s operating profits rose 38%, a positive recovery following a few tumultuous years. The retailer appears to be winning back shoppers’ confidence thanks to new and exclusive fresh food brands, which saw 80% of customers make repeat purchases.

It may come as a surprise that such a closely-knit sector experienced completely opposite results. Shares in luxury retailer Burberry for example tumbled by 7.5% amid poor wholesale unit results. Falling global consumer demand diminished the positive sales of the firm (which had experienced a boost due to tourism) following the Brexit vote.

It’s often the case with the retail industry that few dominate, many do reasonably well and others, like BHS, suffer damning results that lead to closure. We believe there is one simple principle: retailers that continue to innovate and change their offering to fit consumers’ unpredictable desires will succeed.

Morrisons has been prominent in the UK for some time now – 117 years to be exact – and recently updated its slogan and logo to promote a modern image. A fruitless change maybe, but its recent deal with online market leader Amazon definitely is not. Working with Amazon not only shows forward-thinking but highlights part of the reason for Morrison’s most positive half year performance in four years. The grocer’s ‘back to basics’ approach and revamped online strategy saw hundreds of Amazon lockers rolled out across the UK. The introduction of Amazon Fresh, and with it, same-day deliveries, added another layer that consumers will undoubtedly reap the benefits of.

Amazon rules the online market because it provides unmatchable delivery services and feeds the consumers crave for immediacy. Morrisons was not only buoyed by the deal but saw an instant monetary impact – the half year results were released months after the announcement of the deal. This only goes to show the impact and importance the consumer holds. Optimising the customer journey should therefore be a vital component of any retailers’ strategy.

Asos’ recent full year results across all markets highlight the success retailers can reap by meeting the consumer’s needs. The digital fashion retailer posted pre-tax profits of £63.7 million, with CEO Nick Beighton highlighting Asos’ “unwavering focus on delivering [a] great customer experience.” Retail results can go up and down – and interpreting them can be a bit of a dark art! But ultimately, one thing is clear. Retailers must be ever-prepared to change in line with consumers’ needs because the consumer will forever be the most important stakeholder and most indecisive customer.