The Epsilon Abacus 2017 Home Shopping Trends Report by Epsilon Abacus

The 2017 Home Shopping

TRENDS Report A comprehensive review of 2016 home shopping trends

TRENDS

Report

2017 Contents 04-05 Executive Summary 06-07 How This Report Was Compiled 08-09 Home Shopping Overview 10-11 Spending Patterns by Acorn Category 12-13 Clothing Overview 14-15 Clothing: High End & Contemporary 16-17 Clothing: Mature 18-19 Interview: Nick Alderton, Peter Christian 20-21 Clothing: Mid Market 22-23 Food & Wine 24-25 Gardening 26-27 Interview: Vicky Ager, Thompson & Morgan 28-29 Generalist Retail 30-31 Gifts, Gadgets & Entertainment 32-33 Home Interiors & Household Goods 34-35 Interview: James Lowe, House of Bath 36-37 Interview: ChloĂŤ Thomas, eCommerce MasterPlan 38-39 Consumer Indicators â&#x20AC;&#x201C; Step Solutions 40-41 Interview: Rosemary Smith, Opt-4 42-43 Permission Statement Research 44-45 About Epsilon Abacus 46 About Epsilon and Alliance Data 47

Trusted By Us

Executive Summary Welcome to the 2017 Epsilon Abacus Home Shopping Trends Report which is now in its seventh year. In spite of the impact from last yearâ&#x20AC;&#x2122;s referendum result, consumer spending remained strong and this is reflected in the findings. While for some companies the Brexit effect led to a blip, the buoyant end to the year for all sectors saw many making up the lost sales during the last quarter of 2016.

Introduction & Executive Summary Lara Bonney, Managing Director, Epsilon Abacus 2016 saw an overall revenue growth of 12.3% Year on Year,

As always, our thanks go out to the Abacus Alliance members.

which complements the Office of National Statistics (ONS)

It’s only through their trust in us and their willingness to share

data which reported a 15.4% growth. December saw the

their transactional information that we are able to create

highest revenue growth of any month. This could be due to

such unique insights into the multi-channel retail market.

greater consumer confidence at the end of the year as people

We’ve had a record volume of data this year, ensuring that

returned to spending following the referendum.

our research remains reliable and robust.

Whilst inflation remained low in 2016, it began to rise towards

This report is designed to give value back to our

the end of the year, which could have implications for 2017.

contributing members. I hope you continue to find the

This may have contributed to a rise in spending in Q4, as

information useful and the insights help you better

people brought forward spending in anticipation of rising

understand consumer trends in the home shopping market.

prices in 2017.

As always, I welcome any feedback so please feel free to email me at lara.bonney@epsilon.com

The Report continues to include the monthly direct mail volumes provided by Ebiquity. Although just one channel to market, it does offer insight and allows mailing activity and timings to be compared to revenue generated. Reported mailing volumes were marginally up Year-on-Year, according to Ebiquity, by 1.9% in 2016. An overview of the economy and wider UK retail market in 2016 also adds context to the home shopping revenue trends in this report. Again, we are delighted to include Consumer Indicators created by Step

Executive Summary Key Findings:

Solutions.

• Sales in the home shopping market increased by 12.3% YOY

We always like to garner the thoughts of people working for

• Q4 growth rate was highest of year at 16.2% YOY

multi-channel retailers and the industry. This year’s report includes contributions from Nick Alderton (Peter Christian), Vicky Ager (Thompson & Morgan) and James Lowe (House of Bath). Additionally, we have the eCommerce perspective from Chloë Thomas and, in the lead up to the GDPR, Rosemary

• Highest growth in a single month was December at 20.3% YOY • 1.3% growth in Average Order Value, from £59.10 in 2015 to £59.90 in 2016

Smith (Opt-4) provides her advice, based on current guidance. Our thanks go to all of them for their time and willingness to participate. Whilst 2016 was a strong year for home shopping, there is no time for complacency. 2017 brings challenges around preparing for the GDPR, the real impact of the post-Brexit currency slump and the continued political uncertainty surrounding the UK leaving the EU. However, I know the dynamism and resourcefulness of the industry will mean these challenges will be tackled head on and we will do our best to support you again in 2017.

HOW THIS REPORT WAS COMPILED

Over 500 multi-channel retail brands have joined the Abacus Alliance, contributing 500 million transactions and approximately £20 billion spend. The report reflects data provided by members from each of the categories listed opposite:

In order to qualify for this analysis sample, the selected

Mailing volume data for the industry was supplied by Ebiquity

members had to be trading actively throughout the

(www.ebiquity.com) who collect information monthly from

calendar years of 2015 and 2016, and provided an up-to-

their UK panel. This content has been reproduced with their

date transactional information to the end of December

kind permission. Throughout this report we will present

2016. For ease of presentation we have aggregated Abacus

mailing volume trends by macro category and the overall

merchandise categories into six macro categories; Clothing,

home shopping sample. We reconfigured Ebiquity’s mailing

Food and Wine, Gardening, Generalist Retail, Gifts, Gadgets &

volume figures to produce indices to the two-year monthly

Entertainment and Home Interiors & Household Goods. The

average. Please note that only mailing volumes for the

following clothing sub-categories are large enough to allow

Alliance members selected for this year’s Annual Trends

independent analysis and have been presented separately:

Report sample have been included in the mailing trends

High End & Contemporary, Mature and Mid Market. Trends

analysis. The allocation of a member and the related Ebiquity

are presented using indices to the two-year monthly average.

mailing volumes to a specific macro category was conducted

The revenue in each month of 2015/2016 is compared to

by Epsilon Abacus. Mailing trends are not presented for the

the average monthly revenue for the analysis period. This

Food and Wine category due to insufficient coverage.

allows us to examine seasonal trends, as well as year on year growth or decline.

“The revenue in each month of 2015/2016 is compared to the average monthly revenue for the analysis period. This allows us to examine seasonal trends, as well as Year-on-Year growth or decline”

CLOTHING Childrenâ&#x20AC;&#x2122;s: Casual and dress fashion. Contemporary: Quality contemporary clothing and accessories. High End: Upmarket and High End clothing and accessories. Mature: Products aimed at the over-50s selling classic and casual clothing and accessories. Menâ&#x20AC;&#x2122;s: Business suits, dress shirts, ties, cufflinks, scarves, some casual clothing and shoes. Mid Market: Mid-priced clothing and accessories.

FOOD AND WINE Direct food purchases and wine clubs.

GARDENING Garden gates/fencing, tables and chairs, sheds, garden accessories and plants & seeds.

GENERALIST RETAIL Traditional large brand selling all kind of products including clothing, furniture, home interior, appliances, collectibles etc.

GIFTS, GADGETS & ENTERTAINMENT Books & Collectibles: Books and collectible items for the home. Gadgets & Gifts: Sporting gadgets, binoculars, radio, stereo & home theatre equipment, mobile phones & accessories & gift products aimed at all ages. Home Gifts: Decorative homewares and gifts for the home. Music & Entertainment: CDs and DVDs. Sentimental Gifts: Artificial & cut flowers, chocolates and jewellery.

HOME INTERIORS & HOUSEHOLD GOODS Home Interiors: Practical furnishings for the home, from sofas to cookware to shelves and storage. Household Goods: Convenience products for the home, including small home appliances, time saving products, light exercise equipment and small tools.

HOME SHOPPING OVERVIEW

REVENUE AND MAILING VOLUMES, 2015-2016

YOY Change

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

2016 vs 2015 Temperature (°C)

0.9

0.4

-0.2

-1.4

1.7

1.2

0.9

0.8

2.7

-0.2

-3.3

-2.0

26.3

35.0

-8.8

35.3

-45.2

45.3

-26.8

-16.6

46.6

-23.5

-65.0

-136.4

2016 vs 2015 Rainfall (mm)

Sales in the sample covered by the Home Shopping Trends

below the annual average, resulting in overall Q3 growth

Report grew 12.3% year-on-year (YOY) in 2016. This follows

of 10.5%. Q4 was particularly strong (+16.2% YOY), with all

four years of growth, showing the continued strength in

months exhibiting above average growth. December had the

the sector. The growth rate for the home shopping brands

strongest growth (+20.3% YOY) which may have been the

covered by this report is in line with the 15.4% increase in

result of the weather being more in line with the seasonal

non-store retail sales reported by the Office for National

norm. While December 2015 was particularly warm and wet,

Statistics.

2016 was cooler (-2.0°C YOY) and drier (-136.4mm rainfall

The year started with lower growth than in 2015, with sales

YOY).

in January up 5.1% YOY, compared to the 12.6% increase

Average Order Value (AOV) was up 1.3% compared to the

we saw in January 2015. February showed stronger growth

previous year, going from £59.10 in 2015 to £59.90 in 2016. The

(+12.6% YOY) but this slowed somewhat in March (+4.5%

year started with an increase in AOV (+3.6% YOY in January),

YOY) resulting in Q1 growth of 7.1%. Growth picked-up again

predominantly driven by the Gifts, Gadgets & Entertainment

in April and May (+15.0% and +19.4% YOY respectively).

category (AOV +24.3% YOY in January). The AOV growth rate

However, the pace slowed in June (+8.1% YOY) – the

was lower in February, March and April, before declining for four

referendum month - resulting in 14.0% growth in Q2. Q3

months between May and August, the biggest decline being in

began with above average annual growth (+14.8% in July

May (-2.0% YOY). The AOV recovered in October (+3.8% YOY) and

YOY) before slowing in August (+7.1% YOY). There was a

November (+3.4% YOY), but slowed in December (+2.2% YOY).

slight recovery in September (+9.8% YOY), but this was still 8

Mailing volumes were up marginally in 2016 (+1.9% YOY). The

YOY. Q3 saw YOY increases across all three months, with

year started with increased circulation between January and

circulation up 10.3% across the quarter. There was a sharp

May, the biggest increase during this period being February

decline in mailing volumes in Q4 (-10.5% YOY), with volumes

(+11.0%). The first half of the year ended with a decline of

down 16.7% YOY in December.

6.5% in June, resulting in Q2 mailing volume growth of 3.0%

AOV YEAR-ON-YEAR CHANGE, 2015-2016

REVENUE YEAR-ON-YEAR CHANGE, 2015-2016

SPENDING PATTERNS BY ACORN CATEGORY

Acorn, created by CACI, is a geodemographic segmentation of the UK’s population. It segments households, postcodes and neighbourhoods into 6 categories, 18 groups and 62 types. By analysing significant social factors and population behaviour, it provides precise information and an in-depth understanding of the different types of people. For the purposes of this report we have excluded the sixth category, Not Private Households. Below you can find descriptions for each Acorn category.

Affluent Achievers These are some of the most financially successful people in the UK. They live in wealthy, high status rural, semi-rural and suburban areas of the country. Middle aged or older people, the ‘baby-boomer’ generation, predominate with many empty nesters and wealthy retired. Some neighbourhoods contain large numbers of well-off families with school age children, particularly the more suburban locations. Usually confident with new technology and managing their finances, these people are established at the top of the social ladder. They are healthy, wealthy and confident consumers.

Rising Prosperity These are generally younger, well educated, and mostly prosperous people living in our major towns and cities. Most are singles or couples, some yet to start a family, others with younger children. Often these are highly educated younger professionals moving up the career ladder. Most live in converted or modern flats, with a significant proportion of these being recently built executive city flats. Some will live in terraced town houses. While some are buying their home, occasionally through some form of shared equity scheme, others will be renting. These people have a cosmopolitan outlook and enjoy their urban lifestyle. They like to eat out in restaurants, go to the theatre and cinema and make the most of the culture and nightlife of the big city.

Comfortable Communities This category contains much of middle-of-the-road Britain, whether in the suburbs, smaller towns or the countryside. All lifestages are represented in this category. Many areas have mostly stable families and empty nesters, especially in suburban or semi-rural locations. There are also comfortably off pensioners, living in retirement areas around the coast or in the countryside and sometimes younger couples just starting out on their lives together. Generally people own their own home. Most houses are semi-detached or detached, overall of

average value for the region. Incomes overall are average, some will earn more, the younger people a bit less than average. Those better established might have built up a degree of savings or investments. Most people are comfortably off. They may not be very wealthy, but they have few major financial worries.

Financially Stretched This category contains a mix of traditional areas of Britain. Housing is often terraced or semi-detached, a mix of lower value owner occupied housing and homes rented from the council or housing associations, including social housing developments specifically for the elderly. This category also includes student term-time areas. There tends to be fewer traditional married couples than usual and more single parents, single, separated and divorced people than average. These people are less likely than average to use new technology or to shop online or research using the internet, although will use the internet socially. Overall, while many people in this category are just getting by with modest lifestyles a significant minority are experiencing some degree of financial pressure.

Urban Adversity This category contains the most deprived areas of large and small towns and cities across the UK. Household incomes are low, nearly always below the national average. The level of people having difficulties with debt or having been refused credit approaches double the national average. The numbers claiming Jobseeker’s Allowance and other benefits is well above the national average. Levels of qualifications are low and those in work are likely to be employed in semi-skilled or unskilled occupations. The housing is a mix of low rise estates, with terraced and semi-detached houses, and purpose built flats, including high rise blocks. These are the people who are finding life the hardest and experiencing the most difficult social and financial conditions.

As in the previous two years, in 2016 growth was higher in the less-affluent Acorn categories with both Urban Adversity and Financially Stretched showing an increase in spend of over 15% compared to 2015. Traditionally, consumers in these

categories tend to spend more of their annual budget in the pre-Christmas period between July and November, but in 2016 this increased spend started earlier in the year, in April.

SPEND GROWTH BY ACORN CATEGORY, 2015-2016

SPENDING PATTERNS BY ACORN CATEGORY, 2015-2016

Clothing Overview Clothing has been one of the most successful categories in home shopping, with growth for the last six years. This trend continued in 2016, with the category up 10.8% Year-on-Year (YOY), making this the seventh year of continuous growth. This is very similar to the growth rate last year (+10.7% YOY).

Clothing Overview REVENUE AND MAILING VOLUMES, 2015-2016

YOY Change

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

2016 vs 2015 Temperature (°C)

0.9

0.4

-0.2

-1.4

1.7

1.2

0.9

0.8

2.7

-0.2

-3.3

-2.0

26.3

35.0

-8.8

35.3

-45.2

45.3

-26.8

-16.6

46.6

-23.5

-65.0

-136.4

2016 vs 2015 Rainfall (mm)

2016 kicked-off with sales up 5.3% YOY in Q1, led by a very

The Average Order Value (AOV) in the category increased

positive February (+12.3% YOY). There was a decline in March

compared to the previous year, although very marginally

(-3.3% YOY) which was the only month not showing positive

(+0.9% YOY). This is the first time since 2012 that the AOV

growth in the year. Quarterly growth improved in Q2 (+10.8%

has increased in Clothing (-2.7% YOY in 2013, -0.5% in 2014

YOY) with the strongest performance in May (+17.9% YOY).

and -0.1% in 2015). This slight increase in AOV shows that

Compared to the year before, May was warmer (+1.7°C

the growth experienced in the category in 2016 was primarily

mean temperature) and drier (-45.2mm rainfall) so this may

driven by existing customers placing more transactions and/

have contributed to strong early Summer performance.

or more consumers coming into the marketplace.

Growth increased going into Q3, with July +14.8% YOY but dropped below the average growth in August (+5.8% YOY)

Mailing volumes were similar to 2015 (+0.6% YOY). There

and September (+8.1% YOY). September 2015 had seen

were particular declines in June (-20.1% YOY), October

particularly strong growth (+17.2% YOY), but 2016 growth

(-17.1%) and December (-15.5%). The biggest increase was in

was more restrained compared to the previous year.

August (+21.0% YOY). In the following pages we will examine

Q3 was up 9.5% YOY - below the average for the year. Q4 was

trends for the main Clothing sub-categories: High End &

the strongest growing quarter (+15.9% YOY) led by October

Contemporary, Mature and Mid Market.

(+18.0%) and December (+17.9% YOY). December was cooler than the previous year (-2.0°C mean temperature) which may have resulted in more warm clothing being bought.

Clothing

High End & Contemporary The High End & Contemporary Clothing category grew 7.9% YearOn-Year (YOY) in 2016. This follows growth of 13.4% YOY in 2015 and 8.5% YOY in 2014, showing demand in this sector continues to be robust. There was growth across all quarters, with Q4 showing the biggest increase in sales YOY (+13.3%). The lowest growth was in Q1 (+2.3% YOY) which was well below the annual average. This lower growth was caused by a decline in March, (-6.1% YOY) - the biggest decline of the year - the only other one being August (-1.6% YOY). The biggest sales month for the category was November, which showed strong growth (+11.3% YOY). July was the best performing month in terms of overall growth (+16.5% YOY). The Average Order Value (AOV) in the category was marginally lower in 2016 (-0.2%) compared to the previous year. This indicates that revenue growth was driven by a higher number of transactions rather than an increase in spend per order. Mailing volumes declined compared to the previous year (-14.2% YOY). There was a significant increase in circulation between April and June (+134.8% YOY), but this was contrasted by declines in mailing volume in all other months, particularly October and December (-69.5% and -67.4% YOY respectively).

Clothing: High End & Contemporary REVENUE AND MAILING VOLUMES, 2015-2016

YOY Change

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

2016 vs 2015 Temperature (Â°C)

0.9

0.4

-0.2

-1.4

1.7

1.2

0.9

0.8

2.7

-0.2

-3.3

-2.0

2016 vs 2015 Rainfall (mm)

26.3

35.0

-8.8

35.3

-45.2

45.3

-26.8

-16.6

46.6

-23.5

-65.0

-136.4

JULY

SHOWED

HIGH END & CONTEMPORARY CLOTHING GREW BY 7.9% YOY IN 2016

16.5 %YOY

GROWTH

AGE DISTRIBUTION

High End & Contemporary Clothing

INCOME DISTRIBUTION

High End & Contemporary Clothing

UK 15

Clothing Mature The Mature Clothing category grew by 12.0% in 2016, almost double the 2015 rate, which saw sales growth of 6.8% Year-OnYear (YOY). The worst performing quarter was Q3, with growth of 6.6% YOY, whilst the strongest was Q4, which saw growth of 18.8% YOY. This strong growth in the biggest revenue quarter contributed to a larger YOY growth than 2015. The best performing month was May, which saw growth of 26.5%, closely followed by November (+22.7% YOY). The only month which saw a decline was March (-0.7% YOY). The Average Order Value (AOV) in the category was marginally lower than in the 2015 (-1.1% YOY). This indicates that the increased revenue growth was driven by a higher number of transactions rather than an increase in spend per order. Mailing volumes were also marginally lower than in the previous year (-3.6% YOY). There was an increase in mailings between March and June (+26.5% YOY), but a decline in the volume mailed for all other months. The biggest declines were in September (-43.7% YOY) and January (-22.0% YOY).

Clothing: Mature REVENUE AND MAILING VOLUMES, 2015-2016

YOY Change

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

2016 vs 2015 Temperature (Â°C)

0.9

0.4

-0.2

-1.4

1.7

1.2

0.9

0.8

2.7

-0.2

-3.3

-2.0

2016 vs 2015 Rainfall (mm)

26.3

35.0

-8.8

35.3

-45.2

45.3

-26.8

-16.6

46.6

-23.5

-65.0

-136.4

MAY

MATURE CLOTHING GREW BY 12.0% YOY IN 2016

AGE DISTRIBUTION

Mature Clothing

SHOWED

26.5 %YOY

GROWTH INCOME DISTRIBUTION

Mature Clothing

UK 17

Interview with... In 2016, the immediate impact of Brexit, for us, was the drop

During 2016 we took a view to try and to sell more into the

in the value of the pound against the dollar and euro. Like

US, as this is a new market with a lot of potential. We’ve

many clothing businesses, very little is manufactured in the

developed a US website trading in dollars and this year, if we

UK but is purchased abroad, mainly in dollars. As the cost of

can exploit this market reasonably well, it will give us some

goods has risen 10 - 15%, we’re trying to absorb as much of

US dollars to play with, which can only help us.

this as possible, but it will inevitably work its way into our prices this year.

We’ve decided on a soft launch so we can iron out any logistical wrinkles. Once we make sure that all the processes

Up until May and June last year, trading had been going

work properly, we can then start to promote it more strongly.

really well. However, when the referendum campaign kicked into gear, sales went flat and didn’t recover quickly. Then in autumn, the nation seemed to wake up, dust themselves down and say, “Hang about, the world hasn’t fallen off a cliff here, we can carry on a bit.” This meant October, November, December were all up on the prior year. We managed to recover all of the lost momentum and made up the sales we lost and ended the year strongly. The challenges this year are mostly political because Brexit continues to dominate our attention and the austerity policies don’t really encourage sales. As we have a more mature customer base, the continuing low interest rates for savers also impacts on their purchasing ability. In addition, the currency situation continues to remain a significant factor.

“October, November, December were all up on the prior year”

Nick Alderton, Managing Director at Peter Christian

We have a modest US customer base and are concentrating

We’re also introducing bar coding into the warehouse to

on digital first. We’ve been emailing people to drive sales,

improve our order picking accuracy, order packing and stock

we’re introducing SEO and planning some pay-per-click. Once

management. This will hopefully help reduce returns. It costs

we’ve a reasonable understanding of what’s working and we

roughly £15 to handle a return, so reducing a percentage of

know our offer is what the market wants, we plan to launch

returns would have a positive contribution.

a US catalogue. With GDPR on the horizon, we will be running an audit on data During 2017 we’re concentrating on developing the

capture, our permissions, the storage and processing of our

e-commerce side of the business. For example, we’re creating

data, the sharing of it and how we manage everything. We

videos for social media, designed to be both informative and

plan to work out exactly what we’re doing and then try and

reinforce our brand. We’re also exploring recruiting brand

marry them up with the GDPR requirements. I’m reasonably

ambassadors and bloggers and this focus will become an

confident we’ll be compliant by the 2018 date.

increasingly important element of our marketing. Obviously most of our online sales are pushed by our catalogue and off-the-page advertising. But the fact such a large percentage of orders come in online, means we’ve got to develop this area.

“With GDPR on the horizon, we will be running an audit on data capture, our permissions, the storage and processing of our data, the sharing of it and how we manage everything”

Clothing Mid Market

The Mid Market Clothing category grew by 14.8% Year-On-Year (YOY) in 2016. This was a similar rate of growth to the previous year (+12.5% YOY in 2015). The year started with below average growth. Q1 was the worst performing quarter with growth of 7.2% YOY, whilst Q4 was the strongest, growing by 19.8% YOY. There was growth across all months of the year, with the exception of March (-3.0% YOY). October exhibited the strongest YOY growth (+24.9%) followed by May (+23.1% YOY). The Average Order Value (AOV) in the category was marginally higher in 2016 (+2.0% YOY). This indicates that the revenue growth was driven by a higher number of transactions rather than an increase in spend per order. Mailing volumes were marginally higher in 2016 (+2.8% YOY). There were significant increases in mailing volumes in July (+119.4% YOY) and September (+89.4% YOY) while June and December saw the biggest declines (-45.6% YOY and -32.7% YOY respectively).

Clothing: Mid Market REVENUE AND MAILING VOLUMES, 2015-2016

YOY Change

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

2016 vs 2015 Temperature (Â°C)

0.9

0.4

-0.2

-1.4

1.7

1.2

0.9

0.8

2.7

-0.2

-3.3

-2.0

2016 vs 2015 Rainfall (mm)

26.3

35.0

-8.8

35.3

-45.2

45.3

-26.8

-16.6

46.6

-23.5

-65.0

-136.4

OCTOBER

SHOWED

24.9

MID MARKET CLOTHING GREW BY 14.8% YOY IN 2016

%YOY

GROWTH

AGE DISTRIBUTION

Mid Market Clothing

INCOME DISTRIBUTION

Mid Market Clothing

UK 21

Food & Wine The Food & Wine category had a very strong 2016 with sales up 23.4% Year-On-Year (YOY). As a category, it is heavily weighted towards the end of the year, due to increased demand during the pre-Christmas period. While there was growth across all months, not surprisingly, December, the biggest revenue month of the year, exhibited very strong sales (+29.8% YOY) and the second biggest month of the year, November, also saw exceptional growth of +29.0% YOY. This contributed to Q4 being the strongest quarter (+29.2% YOY). Q4 makes up nearly 40% of the annual revenue in the Food & Wine category, so the performance during this quarter deeply impacts the performance and success of the entire year. The first three quarters of the year saw fairly consistent YOY growth (sales were up 18.6% in Q1, 18.8% in Q2 and 22.2% in Q3). The Average Order Value (AOV) in this category was marginally lower in 2016 compared to the previous year (-2.3% YOY). This indicates that revenue growth was generated by a higher number of transactions rather than an increase in spend per order. The increased competition in this sector may have resulted in more aggressive offers/sale periods, which could have affected AOVs.

Food & Wine REVENUE, 2015-2016

YOY Change

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

2016 vs 2015 Temperature (Â°C)

0.9

0.4

-0.2

-1.4

1.7

1.2

0.9

0.8

2.7

-0.2

-3.3

-2.0

2016 vs 2015 Rainfall (mm)

26.3

35.0

-8.8

35.3

-45.2

45.3

-26.8

-16.6

46.6

-23.5

-65.0

-136.4

DECEMBER

FOOD & WINE GREW BY 23.4% YOY IN 2016

AGE DISTRIBUTION

SHOWED

29.8% YOY

GROWTH

INCOME DISTRIBUTION

Food & Wine

UK 23

Gardening Sales in the Gardening category grew by 5.5% Year-On-Year (YOY) in 2016. Although the pace of growth wasnâ&#x20AC;&#x2122;t as fast as in the previous year (sales grew 6.6% in 2015), the performance was still significantly stronger than in the two years before that (-9.4% YOY in 2013 and -0.3% in 2014). The year got off to a poor start with a decline in Q1 (-4.9% YOY) unlike the previous year which had seen growth in this quarter (+3.7% YOY in 2015). The first two months of the year were wetter than in 2015 (January +26.3mm rainfall; February +35.0mm rainfall) which may have contributed to this. Q2 was particularly strong, with growth of 16.6% YOY led by April (+19.6% YOY). Q3 growth was more restrained (+4.5% YOY), but growth in Q4 accelerated again (+15.8% YOY). October (+25.5% YOY) and November (+18.6% YOY) were particularly strong. November 2015 had seen a significant decline (-13.3% YOY) so the growth in 2016 showed a recovery. The year ended similarly to the previous, with a decline in December (-1.5% YOY) although not as large as in 2015 (-13.3% YOY). There was a small increase in Average Order Value (AOV) in 2016 compared to the previous year (+2.3% YOY) which indicates that the revenue growth was mostly due to a greater number of transactions being made in the category. Mailing volumes were down in Q1 (-20.0% YOY) but increased between April and December (+25.8% YOY). This translated in to an overall increase of +4.5% YOY in 2016.

Gardening REVENUE AND MAILING VOLUMES, 2015-2016

YOY Change

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

2016 vs 2015 Temperature (Â°C)

0.9

0.4

-0.2

-1.4

1.7

1.2

0.9

0.8

2.7

-0.2

-3.3

-2.0

26.3

35.0

-8.8

35.3

-45.2

45.3

-26.8

-16.6

46.6

-23.5

-65.0

-136.4

2016 vs 2015 Rainfall (mm)

OCTOBER

GARDENING GREW BY 5.5% YOY IN 2016

AGE DISTRIBUTION

SHOWED

25.5 %YOY

GROWTH INCOME DISTRIBUTION

Gardening

UK 25

Interview with... Overall, 2016 was a good year for us. We saw nice steady

Our key challenge going forward comes from the competitive

sales growth, particularly over the spring period. The weather

landscape as more bricks and mortar garden centres move

was quite kind with not too many extremes which always

online. We’re lucky though to have years of experience of

makes for a good season. Not surprisingly, weather can have

selling to people in this way. We really need to harness this

a massive effect on us. If there’s an extreme set of weather

for our advantage above these physical retailers.

circumstances, we do see a negative impact: if it’s a nice steady few weeks, we get a pick-up. A good September gave

Another challenge is the ‘Amazon’ effect. Customers want

us a bit of an extension to our season. However, autumn is a

everything the minute the order is placed. We’ve got a

small season, so while we have seen a little benefit, it’s not

different type of product in so much as a lot of it we have

hugely significant.

to grow. It’s all about how we manage those customer expectations for a product that maybe can’t be delivered

Whilst Brexit hit many companies, in terms of what customers

straight away. It’s not a new challenge but one that becomes

are prepared to spend with us, it did not really have a major

more of an issue every year.

impact on our sales. Much of what we sell is relatively low ticket so issues like this have less of an effect on us than they

While the web side of the business has become more and

would on a bigger purchase - something that takes a bit more

more important, our catalogue continues to play a key role

thought and consideration. Buying a pack of £10 plants isn’t

in our marketing. It supports our digital presence and drives

hugely a considered purchase.

online purchases while still holding its own, because we’ve got a lot of older customers.

In terms of currency swings, we are going to see the same impact as many other companies are facing. This will have an effect on us but thankfully, so far, it has not been too big.

“While the web side of the business has become more and more important, our catalogue continues to play a key role in our marketing”

Vicky Ager, Head of Client Sales & Direct Trading at Thompson & Morgan

In 2016 we did an awful lot of testing. We’re obviously continuing to try new things this year, but we’re also able to roll out some of the tests. We’ve seen some really good success from what we were innovating and doing last year but we can’t stop - we’ve got to keep testing and searching for the next things to do. This year, the unknown element is GDPR and what it’s really going to mean for us. It’s been a topic of conversation internally for quite a while. I think it’s fair to say that since the beginning of 2017, we’ve really upped a notch in terms of what we’re looking at. At the moment, with little guidance, we’re simply taking a look at our current practices and what our customers may be expecting from us. Once we’ve got more guidance and a clearer picture of what we’re doing, we can decide what changes need to be made to fit into the regulations. It’s very much steady as we go, not panicking and

“We’ve seen some really good success from what we were innovating and doing last year but we can’t stop - we’ve got to keep testing and searching for the next things to do”

not making any snap decisions. One area it feels like we are going to have to look at is how we approach our customer marketing. In particular, we need to ensure they understand the benefits of sharing their data. This is a very different approach we to have to take, being very much educational-driven.

Generalist Retail The Generalist Retail category grew by 15.5% in 2016. This makes it the sixth year in a row of increased revenue in the category. There was growth across all quarters. Q2 had the biggest Year-On-Year (YOY) growth (25.5%), whilst the weakest quarter growth was in Q1 (+11.4% YOY). The strongest months were April (+28.7% YOY) and May (+65.4% YOY). June was the only month that saw a decline (-0.4% YOY). The Average Order Value (AOV) in the Generalist Retail category was significantly higher in 2016 (+6.7% YOY). This can explain some of the YOY growth in this category. Mailing volumes declined slightly for the year (-2.8% YOY). The timing of mailing campaigns also changed significantly, with more being mailed at the beginning of the year (+37.0% YOY in January/February). Between March and June there was a decline of 33.2% in mailing volumes but between September and November it grew by 49.9% compared to 2015. The year ended with a significant decline in volumes in December (-66.1% YOY).

Generalist Retail REVENUE AND MAILING VOLUMES, 2015-2016

YOY Change

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

2016 vs 2015 Temperature (Â°C)

0.9

0.4

-0.2

-1.4

1.7

1.2

0.9

0.8

2.7

-0.2

-3.3

-2.0

26.3

35.0

-8.8

35.3

-45.2

45.3

-26.8

-16.6

46.6

-23.5

-65.0

-136.4

2016 vs 2015 Rainfall (mm)

MAY

GENERALIST RETAIL GREW BY 15.5% YOY IN 2016

AGE DISTRIBUTION

Generalist Retail

SHOWED

65.4 %YOY

GROWTH INCOME DISTRIBUTION

Generalist Retail

UK 29

Gifts,Gadgets & Entertainment The Gifts, Gadgets & Entertainment category grew by 2.7% in 2016, less than the 12.8% growth in 2015. The year started poorly with a significant decline in January (-33.7% YOY). This may be a result of aggressive sales pre-Christmas, such as extended Black Friday and Cyber Monday offers, leading to fewer consumers delaying purchases until the January sales. Sales improved in February (+19.8% YOY) and March (+10.3% YOY) but the weak start to the year resulted in an overall Q1 decline of -7.4% YOY. Q2 performance was much better (+19.2% YOY) led by April (+28.7% YOY). Q3 sales were closer to 2015 (+2.0% YOY) with only July showing strong growth (+20.4% YOY). There was a small growth in Q4 (+1.3% YOY) despite a decline in November (-1.4% YOY) which is the biggest revenue month of the year. The Average Order Value (AOV) in the Gifts, Gadgets & Entertainment category was marginally higher in 2016 than in 2015 (+2.4% YOY). This indicates that there were slightly more transactions in 2016 than the previous year, as revenue grew at a similar rate to the increased spend per order. Mailing volumes were up 6.3% YOY. There were significant increases in mailing volumes in March (+39.2% YOY) and April (+54.2% YOY), but also declines towards the end of the year in October (-26.7% YOY) and November (-15.2% YOY).

Gifts, Gadgets & Entertainment REVENUE AND MAILING VOLUMES, 2015-2016

YOY Change

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

2016 vs 2015 Temperature (Â°C)

0.9

0.4

-0.2

-1.4

1.7

1.2

0.9

0.8

2.7

-0.2

-3.3

-2.0

26.3

35.0

-8.8

35.3

-45.2

45.3

-26.8

-16.6

46.6

-23.5

-65.0

-136.4

2016 vs 2015 Rainfall (mm)

APRIL

SHOWED

28.7

GIFTS, GADGETS & ENTERTAINMENT GREW BY 2.7% YOY IN 2016

%YOY

GROWTH

AGE DISTRIBUTION

Gifts, Gadgets & Entertainment

INCOME DISTRIBUTION

Gifts, Gadgets & Entertainment

UK 31

Home Interiors & Household Goods The Home Interiors & Household Goods category grew by 9.2% in 2016. This is slightly lower than the previous year (+13.6% YOY) and is the sixth successive year of category growth. There was growth across all months, with the biggest occurring in April (+19.8% YOY) and December (+15.8% YOY). The lowest level of growth was in August (+3.7% YOY), a month that showed below average growth in 2015 as well. In 2015 there was stronger than average growth in June (+17.9% YOY), but this was not the case in June 2016 (+3.9% YOY), where growth was more restrained. There was a decline in the Average Order Value (AOV) for the Home Interiors & Household Goods category of -4.4%. This indicates that the revenue growth was a result of a significant increase in the volume of transactions rather than a higher spend per order. Mailing volumes were marginally higher in 2016 (+1.6% YOY). The biggest decline in mailings was in April (-28.0% YOY), whilst the biggest increase was in February (+24.3% YOY), followed by September (+21.1% YOY).

Home Interiors & Household Goods REVENUE AND MAILING VOLUMES, 2015-2016

YOY Change

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

2016 vs 2015 Temperature (Â°C)

0.9

0.4

-0.2

-1.4

1.7

1.2

0.9

0.8

2.7

-0.2

-3.3

-2.0

26.3

35.0

-8.8

35.3

-45.2

45.3

-26.8

-16.6

46.6

-23.5

-65.0

-136.4

2016 vs 2015 Rainfall (mm)

APRIL

SHOWED

19.8

HOME INTERIORS & HOUSEHOLD GOODS GREW BY 9.2% YOY IN 2016

%YOY

GROWTH

AGE DISTRIBUTION

Home Interiors & Household Goods

INCOME DISTRIBUTION

Home Interiors & Household Goods

UK 33

Interview with... For our business, the most obvious impact of Brexit has

In 2017, our biggest opportunity is understanding the role

been the pressure on margins from increases in cost prices

digital plays in our customer’s lives and then presenting

of products we buy. The drop in value of the pound against

them with a personailsed experience that is frictionless,

the dollar has driven numerous proposals for increases from

intuitive and as relevant as possible. Currently our website

suppliers which has become a real distraction for a buying

is used as a preferred channel of ordering. Whilst this may

team keenly focused on sourcing relevant product for our

be understandable for some segments of our customer base,

audience. The challenge is what you do with your retail prices

it also presents a real opportunity to meet the needs of the

and whether or not you choose to pass on increases to the

customers who sit more in the “baby boomer” category.

customer that, in some cases, are unavoidable. As a business with a more mature customer base, there has been concern

We have never been so well positioned to use the huge

around how Brexit may impact spending confidence when

amount of data at our fingertips to our advantage. We have

those customers rely heavily on savings and investment

better tools, models and more access to expertise than

returns. However, so far, this does not seem to have had a

ever before. We will use this to gain a clearer insight, better

noticeable impact.

predict, create more refined segments and more accurately analyse this data to help serve our customers. Countless

2016 was another positive year for the business but was

opportunities exist through a clear data strategy to help us

definitely more volatile than previous years. Early spring

market more effectively and efficiently and to drive growth

saw a challenging period across both established and new

by being more relevant to our customers.

customer groups with a strong recovery going into later spring and the summer. We continued to drive innovation through our products and promotions and focused hard on maximising our ROI on our marketing spend. Autumn and Christmas were to plan and although the cyber period is not as exceptional for us as others, it was still very robust. Recruitment through both press inserts and DM was probably the most volatile area and the hardest to predict.

“Countless opportunities exist through a clear data strategy to help us market more effectively”

James Lowe, Managing Director at House of Bath

The main challenge in 2017 will be around customer

We are very nimble as a business and this is a strength.

recruitment

Erratic

We need to continue to be so in all areas and focus on

performance, a congested marketplace and a demand for

constantly reviewing our processes as we continually

more customers in areas where the pools of opportunity are

develop. We have to ensure we have the right balance of

decreasing, all lead to tough conditions. Balance between

quality delivery, effectiveness of marketing and product

continuous improvements in efficiency, better ROI and the

strategies and efficiency that will allow us to serve our

need for growth also will be a challenge but one that can be

customers better.

through

traditional

channels.

addressed if the opportunities are developed well. With the GDPR approaching, the first stage for us has been This year, continuous development is key to our growth.

one of understanding. In addition to the direction published

Keeping aligned to a customer base that has ever-changing

by the ICO, we have conversed with a number of other groups

preferences is important. We will be looking at developing

around what GDPR means to a retail business like ours:

new recruitment channels and maximising user-generated

from legal/compliance experts through to other retailers and

content, especially customer reviews which are so powerful.

businesses such as Epsilon Abacus. We have tried to establish

Re-creating our offline browsing experience online is always

what it is we are bound to do in order to meet the GDPR and

a focus and tough but key to engaging our existing and new

how best to address this in a commercially positive manner

customers. We always look for innovation and creativity in

and in a way that helps the customer. Awareness is crucial

the catalogues and other mailings we send out; new types

throughout the business, from board level down to individuals

of paper, formats, promotional devices etc. Also, linking up

within marketing teams. Reviewing how we obtain consent

with appropriate and relevant partners that can enhance

and thinking about how we need to make changes has been

what we offer to our customers is important to present a

another area of focus. Also looking at areas such as our

more rounded offering to stimulate further customer loyalty.

privacy statement and reviewing how this might look in light

These are just a handful of ideas that we will be testing and

of the GDPR. The next stage is putting some of the changes

exploring in 2017.

that we will have to make into testing to quantify the impact on the business. Keeping up to speed with developments

Our key priority is putting our customers at the centre of our

around areas such as â&#x20AC;&#x153;legitimate interestâ&#x20AC;? is also key as this

marketing strategy. Learning more about them, understanding

will have a direct impact on the changes we make.

what is important to them, what they need, how they view us and our competition and thinking from their point of view in all we do. Weâ&#x20AC;&#x2122;re focusing on the journey they go through with us to ensure it makes sense and is engaging. All things we do currently but we need to supercharge if we want to become more relevant in their eyes.

Interview with... Chloë Thomas talks about how her eCommerce clients are adapting to today’s business environment. Last year, Brexit had the same effect on smaller and larger retailers. Currency fluctuations made the biggest impact because a lot of companies buy their products from overseas, so margins have been eroded. By Christmas 2016 they were just absorbing these, but this year we’ll see multi-channel retailers upping their prices. While the fall in the pound remains a big challenge, companies are looking to address this by de-risking their structure. In

“Marketers should be saying ‘Right, what have we actually got that we’ve never used properly?’ ”

particular, they are seeking ways to generate turnover from more attractive currencies. For many businesses, I’m seeing that one solution is using marketplaces. Amazon’s Fulfilment by Amazon (FBA) model has made it incredibly easy for eCommerce businesses to quickly build a European sales base with little effort, by doing much of the hard work for them. 12 months ago we would not be talking about a branded retailer adopting this: today, the marketplace option has become a powerful strategy people are considering.

The ongoing political uncertainty means, for many companies, it’s hard to justify increasing marketing spend and trying new things. Marketers should be saying, ‘Right, what have we actually got that we’ve never used properly?’ which is a good thing. For example, companies have invested in email marketing systems with the ability to develop segmentation and trigger automated campaigns and responses but have never used them. Instead the approach has simply been to email blast everyone. There are huge marketing gains to be made by companies from building welcome sequences or abandoned basket campaigns. By utilising the tools they have better, businesses can become stronger, without actually costing them more.

Chloë Thomas, Founder of eCommerce MasterPlan

While welcome emails may not be an innovation, it’s what I’m encouraging all my clients to do at the moment. Companies that are winning are those that are getting the basics right rather than taking a ‘what’s the next bright shiny object’ approach. Gains can also be achieved by looking at what you’re doing now, listening to what customers are saying and putting solutions in place to solve any issues. When it comes to data, my clients begin looking at developing a segmentation strategy for customer acquisition or to drive repeat purchases once they have that initial basic data. This often begins with a simple buyer vs. enquirers segmentation. People are also using data to trigger campaigns: for example, someone has bought for the first time so let’s set up a post purchase email sequence. It’s all about triggering activity based on recent customer actions, so recency is a very important factor. While many of my clients are digital-focused, I’m forever going on about the fact that direct mail and a catalogue are

“While welcome emails may not be an innovation, it’s what I’m encouraging all my clients to do it at the moment. Companies that are winning are those that are getting the basics right rather than taking a ‘what’s the next bright shiny object’ approach”

hugely powerful mediums that should be tested and used. To most of them, a marketing investment is relatively small so a catalogue is a big shift in mindset. Some are busy testing catalogues at the moment and it’s never something that’s off the table. It’s about working out what’s the right way to do it and when’s the right time to introduce one. One of my clients is using personal message sent out on cards to people who bought from her. She’s got fantastic repeat purchase rates. It’s not necessarily scalable but it works well at the minute.

CONSUMER INDICATORS

2016 2016 - Review - Review of of thethe year year

2016 - Review of the year 2016 - Review of the year

UK Retail - 2016 Review Digest Digest of Consumer of Consumer Behaviour Behaviour

2016 saw a distinct resurgence in the performance of UK Retail (excluding sales of Value terms, the year was one of two halves, with H1 (pre-Brexit Digest of H2 Consumer Behaviour vote) showing growth of only 1.7% and a much healthier 4.5%. In terms of Volume, UK Retail -a2016 Review 2016 2016 sawsaw distinct a distinct resurgence resurgence in the in the performance performance of UK of UK Retail Retail (excluding (excluding sales sales of automotive of automotive fuel). fuel). In In 2016 saw a distinct resurgence in the performance of UK Retail (excluding sales of automotive fuel). In the pattern was similar with H1 growth of 3.8%, increasing in H2 to 5.6%. Visits to Value terms, the terms, year was onethe of twoyear halves, with H1 (pre-Brexit vote) showing growth ofwith only 1.7% and (pre-Brexit Value Value terms, the year was was one one of two of two halves, halves, with H1 H1 (pre-Brexit vote) vote) showing showing growth growth of only of only 1.7% 1.7% and and H2 a much healthier 4.5%. In terms of Volume, the pattern was similarretail with H1 stores growth of 3.8%, sawincreasing the same trend of growth - up by 4.9% in the second half - the first in H2 H2 to Visitshealthier to retail stores saw the4.5%. same growth up 4.9% in the second half - the was H2 a 5.6%. much a much healthier 4.5%. Intrend terms Inofterms of- Volume, ofbyVolume, the the pattern pattern was similar similar with with H1 H1 growth growth of 3.8%, of 3.8%, increasing increasing first2016 real signsaw of growth in recent years. Retail sales via in the Internet followed theof same pattern, with real sign growth in recent (excluding years. Retail sales sales of via automotive the internet followed same distinct resurgence thesaw performance of UK Retail fuel). In-the 2016 –15.4% Review of the Year in H2 in ofH2 to 5.6%. toinaH1, 5.6%. Visits Visits to to retail stores stores saw thethe same same trend trend of growth of growth - upup by by 4.9% 4.9% in the in the second second halfhalf the - the increases and 25.6% in H2 retail pattern, with increases of 15.4% in H1, and 25.6% in H2 Value terms, the year was one of two halves, with H1 (pre-Brexit vote) showing growth of only 1.7% and

UKUK Retail Retail - 2016 - 2016 Review Review

Digest automotive of Consumer Behaviour fuel). In

UK Retail - 2016 Review

first first real real sign sign of growth of growth in recent in Internet recent years. years. Retail Retail sales sales via via thethe Internet Internet followed followed thethe same same pattern, pattern, with with Retail overview Channel Digest of Consumer Behaviour

H2 a much healthier 4.5%. In terms of Volume, the pattern was similar with H1 growth of 3.8%, increasing in H2 to 5.6%. Visits to retail stores saw the same trend of growth - up by 4.9% in the second half - the This represented:• growth of 20.6% Retail sales via the Internet followed the same pattern, with first real sign of growth in recent years. • 14.6% of total UK retail Food Retail Retail overview overview Internet Internet Channel Channel increases of 15.4% in H1, and 25.6% in H2 The food sector saw volume sales growth of 3.7%. Value growth was held back due to price deflation of -2.0% TheThe value value of seasonally of seasonally adjusted adjusted UK UK retail retail waswas £351.3 £351.3Total Total retail retail sales sales via via thethe Internet Internet were were £51.4 £51.4 billion billion in in (caused by intense competition), leaving value growth of just 1.7%. The worth in 2016 2016 compared £42.6 billion in 2015. billion billion insector 2016 inwas2016 – an£154.6 – increase anbillion increase of 3.1% of 3.1% on 2015. on 2015. With With selling selling2016 compared withwith £42.6 billion in 2015. Retail overview Internet Channel The future holds:continuedat competitive market, with price price deflation deflation -1.6%, at -1.6%, sales sales volume volume increased increased by by an anThisThis represented:represented:pressure on margins, due to the low value of £-sterling The onvalue of seasonally adjusted UK retail was £351.3 Total retail sales via the Internet were £51.4 billion in impacting imports. exceptional exceptional 4.7% 4.7% in the in the year. year. • growth of£42.6 20.6%billion in 2015. • growth of 20.6% billion in 2016 – an increase of 3.1% on 2015. With selling 2016 compared with Non-Food at -1.6%, The price non-food deflation sector sales volume increased by sales 3.6% in volume increased by an • 14.6% of total retail • 14.6% of total UK UK retail This represented:Food Food 2016, with underlying price deflation of -1.3% leaving Total retail sales via Internet were £51.4 billion in increases increases of 15.4% of 15.4% in H1, in H1, andand 25.6% 25.6% in H2 intheH2 2016 compared with £42.6 billion in 2015.

The value of seasonally adjusted UK retail was £351.3 billion in 2016 – an increase of 3.1% on 2015. With selling price deflation at -1.6%, sales volume increased by an exceptional 4.7% in the year.

Internet Retail Sales - not seasonally adjusted Annual growth and participation

Subsector

Total Retail Sales

2012

2013

2014

2015

£bn

2016 £bn

311.9

321.1

340.7

340.6

351.3

Online Retail Sales

29.0

33.4

38.5

42.6

51.4

Annual growth

15.3%

15.4%

15.3%

10.6%

20.6%

Participation

9.3%

10.4%

11.3%

12.5%

14.6%

exceptional 4.7% in the year.

Source ONS - excluding auto fuel (not seasonally adjusted

Sustained online growth of 20.6% Internet Retail Retail Sales Sales - not- seasonally not seasonally adjusted adjusted TheThe food food sector sector sawsaw volume volume sales sales growth growth ofgrowth 3.7%. of 3.7%. Value Value•Internet After a decline in growth intensity between 2014 and •Annual growth growth waswas heldheld back back duedue to price to deflation deflation of kicked-on -2.0% of -2.0% 2015 price the Internet retail channel in 2016 and14.6% of total UK retail Food Annual growth growth and participation and participation continues to increase its share of UK retail. (caused (caused by sector intense by intense competition), competition), leaving value growth growth of of Retail Sales - not seasonally adjusted The food saw volume salesleaving growth of value 3.7%. Value 2013 2014 2015 Internet 2016 20122012 20132013 20142014 just just 1.7%. 1.7%. TheThe sector sector wasdue was worth worth £154.6 £154.6 billion billion inof2016 in 2016 growth was held back to price deflation -2.0% Annual growth 15.4% 15.3% 10.6% 20.6%

value growth of 2.3%. The sector was worth £163.5 billion in the year.

The future holds:- inflationary pressure, combined with political uncertainty are likely to affect performance in this sector, whilst growth of Internet retail will continue to adversely impact store profitability.

Non-Store (catalogue & pure play Internet)

Annual growth and participation Subsector Subsector £bn £bn

£bn £bn

20152015 20162016 £bn £bn

Share of UK retail 10.4% 11.3% of 12.5% 14.6% (caused by holds:intense competition), leaving value growth The The future future holds:continued continued competitive competitive market, market, with with 2013321.1321.1 2014 340.7340.7 2015 340.6340.6 2016 Note:- Internet retail is a channel encompassing goods TotalTotal RetailRetail SalesSales2012311.9311.9 just 1.7%. The sector was worth £154.6 billion in 2016 all low retail subsectors, pure play. pressure pressure on margins, on margins, duedue to the to from the low value value of not £-sterling ofjust£-sterling Subsector £bn £bn £bn £bn £bn Online Online RetailRetail SalesSales 29.0 29.0 33.4 33.4 38.5 38.5 42.6 42.6 The future continued competitive market, with Shopping Visits impacting impacting on holds:imports. on imports. Total Retail Sales 311.9 321.1 340.7 340.6 351.3

Non-store retail, comprising catalogue, online pure play and market trading, was worth £33.2 billion in 2016, growth of 15.4% compared to 2015, outperforming all other sectors. As non-store retail continues to enjoy the impetus from Internet growth its share of UK retail increased from 8.4% to 9.4%.

continued of Internet retail and many pressure on margins, due to theDespite lowthevalue ofgrowth £-sterling years of decline, footfall into stores actually increased Annual Annual growth growth in 2016 compared to 2015, the first such increase sinceRetail Sales Non-Food Non-Food Online impacting on imports. before the 2008 crash.

The future holds:- continued growth for this direct-toconsumer sector, assisted by the strength of pure play Internet traders.

£bn £bn 351.3351.3 51.4 51.4

15.3%15.3% 15.4%15.4% 15.3%15.3% 10.6%10.6% 20.6%20.6%

29.0

33.4

38.5

42.6

51.4

Participation in Participation

9.3% 9.3% 10.4%10.4% 11.3%11.3% 12.5%12.5% 14.6%14.6% The The non-food non-food sector sector sales sales volume volume increased 3.6% by 3.6% Retail Sales All of increased the annual increaseby was achieved inin Q4 when visitsgrowth 15.3% 15.4% 15.3% 10.6% 20.6% Annual Non-Food were 8.9% up on 2015, overcoming a significant decline in Source Source ONS - excluding ONS - excluding auto fuel auto (not fuel seasonally (not seasonally adjusted adjusted 2016, 2016, withwith underlying underlying price price deflation deflation of annual -1.3% of trends -1.3% leaving leaving the first half. The since 2012 are as follows. Participation 9.3% 10.4% 11.3% 12.5% 14.6% The non-food sales volume increased by£163.5 3.6% in value value growth growth of sector 2.3%. of 2.3%. The The sector sector was worth worth £163.5 billion billion 2012was down 3.2% Sustained Sustained online online growth growth Source ONS - excluding auto fuel (not seasonally adjusted with underlying price deflation 2013 down of 3.8% -1.3% leaving in2016, the in the year. year. value growth of 2.3%. The sector was worth 2014 down 0.6% £163.5 billion After After a decline a decline in growth in growth intensity between between 2014 2014 andand Sustained online growth intensity The future future holds:inflationary inflationary pressure, pressure, combined withwith inThe the year.holds:2015 down 1.5%combined 2015 2015 thethe Internet Internet retail retail channel channel kicked-on kicked-on in 2016 in 2016 andand a decline in growth intensity between 2014 and 0.3% political political uncertainty uncertainty are are likely likely to2016 affect toupaffect performance performance in After incontinues continues to increase to increase its share its share of UK of UK retail. retail. The future holds:- inflationary pressure, combined with 2015 the Internet retail channel kicked-on in 2016 and this this sector, sector, whilst whilst growth growth of Internet of Internet retail retail willwill continue continue political uncertainty are likely to affect performance in continues to increase its share Published by Step Solutions www.stepsolutions.co.uk of UK2014 retail. 2013 2013 20142015 20152016 2016 tothis adversely to sector, adversely impact impact store store profitability. profitability. whilst growth of Internet retail will continue 2013 2014 2015 2016 Annual Annual growth growth 15.4% 15.4% 15.3% 15.3% 10.6% 10.6%20.6% 20.6% to adversely impact store profitability. Seasonally adjusted - % change on prior year 7.0 5.0 3.0 1.0

Oct 16

Dec 16

Nov 16

Jul 16

Sep 16

Aug 16

Apr 16

Jun 16

May 16

Jan 16

Mar 16

Dec 15

12 Mth Rolling Average

Feb 16

Nov 15

Jul 15

Oct 15

Sep 15

Year on Year % change

Aug 15

Apr 15

Jun 15

May 15

Jan 15

Mar 15

(3.0)

Feb 15

(1.0)

Non-Store Non-Store (catalogue (catalogue & pure & pure play play Internet) Internet)

Annual growth 15.3% 10.6% 20.6%14.6% Share of UK of UK retail retail15.4% 10.4% 10.4% 11.3% 11.3% 12.5% 12.5% 14.6% Non-Store (catalogue & pure play Internet) Non-store Non-store retail, retail, comprising comprising catalogue, catalogue, online online pure pure playplayShare Share of UK retail 10.4% 11.3% 12.5% 14.6% Note:Note:Internet Internet retail retail is a is channel a channel encompassing encompassing goods goods and and market market trading, trading, was was worth worth £33.2 £33.2 billion billion in 2016, in 2016, Non-store retail, comprising catalogue, online pure play from from all retail all retail subsectors, subsectors, notnot just just pure pure play. play. growth growth of 15.4% of trading, 15.4% compared compared to 2015, to£33.2 2015, outperforming outperforming Note:Internet retail is a channel encompassing goods and market was worth billion in 2016,all all other other sectors. sectors. As compared As non-store non-store retail continues continues to to enjoy from all retail subsectors, not just pure play. growth of 15.4% toretail 2015, outperforming allenjoy other sectors. AsInternet non-store retail continues the the impetus impetus from from Internet growth growth its share its share oftoUK ofenjoy UK retail retailShopping Shopping Visits Visits the impetus from Internet growth its share of UK retail Shopping Visits increased increased from from 8.4% 8.4% to 9.4%. to 9.4%. Despite Despite thethe continued continued growth growth of Internet of Internet retail retail andand many many increased from 8.4% to 9.4%.

Despite the continued growth of Internet retail and many years years of decline, of decline, footfall footfall into into stores stores actually actually increased increased TheThe future future holds:holds:continued continued growth growth for for thisthis direct-todirect-toyears decline, footfall stores actually increased The future holds:continued growth for this in 2016 inof2016 compared compared to 2015, tointo 2015, thethe first first such such increase increase since since consumer consumer sector, sector, assisted assisted by the by the strength strength of direct-toof pure pure playplay 2016 compared to 2015, consumer sector, assisted by the strength of pure play inbefore before 2008 crash.the first such increase since thethe 2008 crash. Internet Internet traders. traders. Internet traders.

before the 2008 crash.

Retail Sales Seasonally Seasonally adjusted adjusted - % change - % change on prior on year prior year

Allwere ofwere the annual increase wasovercoming achieveda in when decline visits 8.9% 8.9% up on up 2015, on 2015, overcoming significant aQ4 significant decline in in were 8.9% up on 2015, overcoming a significant decline in thethe firstfirst half. half. TheThe annual annual trends trends since since 2012 2012 are are as follows. as follows. the first half. The annual trends since 2012 are as follows.

All of Allthe of the annual annual increase increase waswas achieved achieved in Q4 in when Q4 when visits visits

Retail Retail Sales Sales

Seasonally adjusted - % change on prior year

7.0

5.0

2012 down 3.2% 2012 down 3.2% 2012 down 3.2%

3.0

7.0 5.0

2014 2014 down down 0.6% 0.6% 2014 down 0.6%

(1.0) (1.0) (1.0)

2015 down 1.5% 2015 down 1.5% 2015 down 1.5%

Jan 15

(3.0) (3.0) (3.0)

Year on Year %Year change 12Mth MthRolling Rolling Average Year on Year Year on % change % change12 12 MthAverage Rolling Average

Step Solutions Published Published bybyStep by Step Solutions Solutions 38Published

Dec 16

2013 down 3.8% 2013 down 3.8% 2013 down 3.8%

3.0

Feb 15 Jan 15 Feb Mar 15 Mar 15 Feb 15 Apr 15 Apr 15 Mar 15 May 15 May Apr 15 15 Jun 15 Jun 15 May 15 Jul 15 Jul 15 Jun 15 Aug 15 Aug 15 Jul 15 Sep 15 Sep 15 Aug 15 Oct 15 Oct 15 Sep 15 Nov 15 Nov 15 Oct 15 Dec 15 Dec 15 Nov 15 Jan 16 16 Dec 15 Feb 16 16 Jan 16 Mar 16 Mar 16 Feb 16 Apr 16 Apr 16 Mar 16 16 May May 16 Apr 16 16 Jun Jun 16 May 16 Jul 16 Jul 16 Aug 16 Jun 16 Aug 16 Sep Jul 16 16 Sep 16 Oct 16 Aug 16 Oct 16 Nov Sep 16 16 Nov 16 Dec 16 Oct 16 Dec 16 Nov 16

3.0

1.01.0 1.0

2016 2016 0.3% 0.3% 2016 upup up 0.3% www.stepsolutions.co.uk www.stepsolutions.co.uk www.stepsolutions.co.uk

By Tony Lahert, Managing Director, Step Solutions

2016 – Review of the Year

Consumer price inflation Consumer credit (non property/ex student loans) Consumer price inflation Consumer credit (non property/ex student loans) Consumer price inflation Consumer credit (non property/ex student loans) Consumer price inflation Consumer credit (non property/ex student loans) Consumer price inflation Consumer credit (non property/ex student loans) annual headline rate of consumer price inflation (CPI)Consumers Consumers significantly increased their indebtedness TheThe annual headline rate of consumer price inflation (CPI) significantly increased their indebtedness

The annual headline rate of consumer price inflation (CPI) Consumers significantly increased their indebtedness The annual headline rate of consumer inflation (CPI) Consumers significantly increased their indebtedness The annual headline rate of consumer price inflation (CPI) price Consumers significantly increased their indebtedness was as at December 2016, up from December 2015 non-property borrowing in ending year was 1.6% as up from December 2015 on non-property in ending the year at was 1.6% as 1.6% at December up from 2016, December 2015 on non-property borrowing in 2016, ending the year at borrowing was 1.6% as December at2016, December 2016, up from December 2015 on non-property borrowing in 2016, 2016, ending the year at was 1.6% as at at December 2016, up from December 2015 on on non-property borrowing in 2016, 2016, ending thethe year at at when it was just 0.2%. Movements inMovements keyMovements retail sectorsin £192,379 billion - an sectors increase of £13,548 billion, which when it was just 0.2%. in key retail £192,379 billion an increase of £13,548 billion, which when it was just 0.2%. key retail sectors £192,379 billion an increase of £13,548 billion, which when it was 0.2%. Movements in 7.6% key £192,379 billion - an increase of £13,548 billion, which when it was justjust 0.2%. Movements in was key retail billion - an increase of £13,548 billion, which were:upretail on a sectors yearsectors earlier. £192,379 were:7.6% aa year earlier. were:was 7.6% up on a earlier. was 7.6% up on year earlier. were:waswas 7.6% up up on on a year year earlier. • were:Food moved from -2.9% to -1.1% • Food moved from to -1.1% • • Clothing /footwear up from -0.3% to-2.9% 1.2%to -1.1% Food moved from -2.9% Having reduced their exposure to this form of short- term • Food moved from -2.9% to -1.1% • Food moved from -2.9% to -1.1% • Furniture & HH goods up from -0.2% to 0.6% debt to £152.9 billion in November 2012, the trend then Clothing /footwear up from -0.3% to 1.2% • ••Clothing /footwear up from -0.3% to 1.2% Clothing /footwear up from -0.3% toincreasing. 1.2% ConsumersHaving Clothing /footwear from -0.3% tobeen 1.2% • • Alcohol and tobacco up from 0.3% up to 2.4% has appear to reduced be content to Having reduced their exposure to form of term their exposure to form of term Having reduced their exposure to this this form of shortshortterm reduced their exposure to this this form of shortshortterm see itto rise0.6% at this alarmingly highHaving rate. Much increase is currency exchange rateup related, Furniture & HH goods from -0.2% to 0.6% •• of ••this Furniture & HH goods up from -0.2% debt to £152.9 billion in November 2012, the trend then debt to £152.9 billion in November 2012, the trend then Furniture & HH goods up from -0.2% to 0.6% Furniture & HH goods up from -0.2% to 0.6% on imported goods, whilst strong competition in the food debt to £152.9 billion in November 2012, trend then debt to £152.9 billion in November 2012, thethe trend then Alcohol tobacco from 0.3% to 2.4% been increasing. Consumers appear to be content • is•still Alcohol andand tobacco up up from 0.3% to 2.4% hashas been increasing. Consumers appear to be content to to sector driving prices lower.

Alcohol tobacco from 0.3% to 2.4% been increasing. Consumers appear to be content • •Alcohol andand tobacco up up from 0.3% to 2.4% hashas been increasing. Consumers appear to be content to to it at alarmingly high rate. see it at alarmingly high rate. Much of increase is exchange rate related, Much of increase is exchange rate related, Consumer Credit (ex Student Loans) Retail prices (CPI) see it rise rise at this this alarmingly high rate. seesee it rise rise at this this alarmingly high rate. Much of this this increase is currency currency exchange rate related, Much of this this increase is currency currency exchange rate related, imported goods, whilst strong competition in food on imported goods, whilst strong competition in food on imported goods, whilst strong competition in the the food on on imported goods, whilst strong competition in the the food sector is still driving prices lower. sector is still driving prices lower. sector is still driving prices lower. sector is still driving prices lower. Non property debt - £ value

% change on prior year

£bn 200

4.0

195 190

3.0

185

2.0

180

Retail prices (CPI) Retail prices (CPI) Retail prices (CPI) Retail prices (CPI) % change on prior % change on prior year year

Consumer Credit (ex Student Loans) Consumer Credit (ex Student Loans) Consumer Credit (ex Student Loans) Consumer Credit (ex Student Loans) Non property - £ value Non property debt -debt £ value

175

1.0

170

Non property - £ value Non property debt -debt £ value £bn £bn £bn £bn 200 200 200 200 195 195 -1.0 150 195 195 190 190 3.0 3.0 Year on year change 190 190 3.0 3.0 185 185 185 185 2.0 2.0 180 180 2.0 2.0 180 180 175 175 175 175 by a further The 1.0 average The level of UK unemployment decreased 1.0 UK house price ended 2016 at £205,898, up 170 170 1.0 1.0 (4.6%) £9,069 compared to a year earlier. UK house prices 97,493 during 2016, ending the year at 1.597 million 170 170 165loans) student have now greatly eclipsed the pre-crash high reached in people unemployed.(non property/ex 165 165 165 0.0 0.0 160 160 October 2007, standing £19,854 higher. Compared to the The0.0 annual headline rate of consumer price inflation (CPI) Consumers significantly increased their indebtedness 0.0 160 160 This is a rateborrowing of 4.8% unemployed, the lowest for over 10 waspoint 1.6% as December 2016, up from on non-property in 2016, ending low of at February 2009 prices have December grown by 2015 £58,152 155year at 155 the years billion and compares to 5.1% a year155 earlier. 155 which when was just 0.2%. Movements in key retail sectors £192,379 - an increase of £13,548 billion, -1.0it -1.0 (39.4%). 150 150 -1.0 -1.0 were:was 7.6% up on a year earlier. 150 Compared to the high reached in 150 November 2011 there 165 160

Oct 16

Dec 16

Jul 16

Nov 16

Sep 16

Apr 16

Aug 16

Jun 16

May 16

Jan 16

Mar 16

Feb 16

Oct 15

Dec 15

Sep 15

Nov 15

Jul 15

Aug 15

Apr 15

Jun 15

May 15

Unemployment

Growth of moved this UK home-owner asset has driven both • Food from -2.9% to on -1.1% year change Year onYear year change were 1.111 million fewer people unemployed in the UK, Year year change in 2016 and will Year retail yearon change consumer confidence and demand • Clothing /footwear uponfrom -0.3% to 1.2% by reduced 2016 year end. Having their exposure to this form of short- term likely continue to do so in the forthcoming year. • Furniture & HH goods up from -0.2% to 0.6%

Residential Property : UK Residential property Residential property Much of this increase is currency exchange rate related, Residential property Residential property on imported goods, whilst strong competition in the food •

Alcohol and tobacco up from 0.3% to 2.4% (Nationwide BS)

House prices - average house price

Dec Dec 1616

Jan Jan 1515

Dec Dec 1616

Feb Feb 1515 Jan Jan 1515 Mar Mar 1515 Feb Feb 1515 Apr Apr 1515 Mar Mar 1515 May May 1515 Apr Apr 1515 Jun Jun 1515 May May 1515 JulJul 1515 Jun Jun 1515 Aug Aug 1515 JulJul 1515 Sep Sep 1515 Aug Aug 1515 Oct Oct 1515 Sep Sep 1515 Nov Nov 1515 Oct Oct 1515 Dec Dec 1515 Nov Nov 1515 Jan Jan 1616 Dec Dec 1515 Feb Feb 1616 Jan Jan 1616 Mar Mar 1616 Feb Feb 1616 Apr Apr 1616 Mar Mar 1616 May May 1616 Apr Apr 1616 Jun Jun 1616 May May 1616 JulJul 1616 Jun Jun 1616 Aug Aug 1616 JulJul 1616 Sep Sep 1616 Aug Aug 1616 Oct Oct 1616 Sep Sep 1616 Nov Nov 1616 Oct Oct 1616 Dec Dec 1616 Nov Nov 1616

Consumer credit

Consumer price inflation

Jan Jan 1515

Mar 15

Jan 15

Residential property

Feb 15

Oct 16

Dec 16

Nov 16

Jul 16

Sep 16

Aug 16

Apr 16

Jun 16

May 16

Jan 16

Mar 16

Feb 16

Oct 15

Dec 15

Nov 15

Jul 15

Sep 15

Aug 15

Apr 15

Jun 15

155

May 15

Jan 15

Mar 15

4.0 4.0 4.0 4.0 Feb 15

0.0

% change on prior % change on prior year year

debt to £152.9 billion in November 2012, the trend then has been increasing. Consumers appear to be content to Unemployment : UK see it rise at this alarmingly high rate.

Unemployment Unemployment Unemployment Unemployment

% of UK work-force

% 7.2

average house price ended 2016 at level unemployment decreased aa further The average UK house price ended 2016 at up level of UK unemployment decreased by aa further The average UK house price ended 2016 at £205,898, £205,898, upThe The level of UK unemployment decreased by further TheThe average UK UK house price ended 2016 at £205,898, £205,898, up up TheThe level of of UK UK unemployment decreased by by further Consumer Credit (ex Student Loans) Retail prices (CPI) £9,069 (4.6%) compared to a year earlier. UK house prices 97,493 during 2016, ending the year at 1.597 million £9,069 (4.6%) compared to a year earlier. UK house prices 97,493 during 2016, ending the year at 1.597 million £9,069 (4.6%) compared a year earlier. house prices97,493 97,493 during 2016, ending year 1.597 million £9,069 (4.6%) compared to atoyear earlier. UK UK house prices during 2016, ending thethe year at at 1.597 million have now greatly eclipsed the pre-crash high reached in people unemployed. have now greatly eclipsed the pre-crash high reached in people unemployed. have greatly eclipsed pre-crash high reached people unemployed. have nownow greatly eclipsed thethe pre-crash high reached in inpeople unemployed. October 2007, standing £19,854 higher. Compared to October 2007, standing £19,854 higher. Compared to October 2007, standing £19,854 higher. Compared to the theThisThis October 2007, standing £19,854 higher. Compared to the the aa rate of unemployed, lowest over is of unemployed, the lowest for over 10 israte rate of 4.8% 4.8% unemployed, the lowest for over 10 ThisThis is aais rate of 4.8% 4.8% unemployed, thethe lowest forfor over 10 10 low point of February 2009 prices have grown by £58,152 low point of February 2009 prices have grown by £58,152 point of February 2009 prices have grown by £58,152years lowlow point of February 2009 prices have grown by £58,152 years and compares to 5.1% a year earlier. and compares to 5.1% a year earlier. years compares to 5.1% a year earlier. years andand compares to 5.1% a year earlier. (39.4%). (39.4%). (39.4%). (39.4%). Compared to high reached in 2011 there Compared to high reached in 2011 there Compared to the the high reached in November November 2011 there Compared to the the high reached in November November 2011 there Growth home-owner asset driven both Growth of this UK home-owner asset has driven both Growth of this UK home-owner asset has driven bothwere Growth of of thisthis UK UK home-owner asset hashas driven both were 1.111 million fewer people unemployed in the UK, 1.111 million fewer people unemployed in the UK, were 1.111 million fewer people unemployed in the UK, were 1.111 million fewer people unemployed in the UK, For more information contact: consumer confidence and retail demand in 2016 and will consumer confidence and retail demand in 2016 and will Published by Step Solutions Limited consumer confidence and retail demand in 2016 and will consumer confidence and retail demand in 2016 and will by 2016 year end. by 2016 year end. Anthony Lahert +44 (0) 7973 714075 The Consumer Indicators brand, trademarks and the intellectual by 2016 year end. by 2016 year end. likely continue to do so in forthcoming year. likely continue to do so forthcoming year. propertyyear. of theyear. underlying data processes of CI are the sole property likely continue toHargreaves do so the in (0)the the forthcoming likely continue to Neil do so in in the forthcoming Residential property Unemployment +44 7796 958750 of Step Solutions Limited. £210

sector is still driving prices lower. £205

6.8 6.4

£200 % change on prior year

Non property debt - £ value

£bn 200 6.0

4.0 £195

195

£190 3.0

185 5.2 180 4.8 175

Oct 16

Dec 16

Nov 16

Sep 16

Aug 16

Jul 16

Oct 16

Dec 16

Nov 16

Jun 16

Apr 16

May 16

Sep 16

Jul 16

Aug 16

Jan 16

Feb 16

Mar 16

Apr 16

Jun 16

May 16

Mar 16

Oct 15

Dec 15

Nov 15

Jan 16

Dec 15

Feb 16

Jul 15

Sep 15

Aug 15

Oct 15

Nov 15

Sep 15

Jun 15

Apr 15

May 15 Jul 15

Jun 15

Aug 15

Jan 15

Mar 15

150

Feb 15

155

Apr 15

160

May 15

4.4

165 4.0

Jan 15

Bill Mitchell +44 (0) 7966up 772619 The average UK house price ended 2016 at £205,898, The Copyright level of ©UK unemployment decreased by areserved further www.stepsolutions.co.uk Step Solutions Limited 2017. All rights £9,069 (4.6%) compared to a year earlier. UK house prices 97,493BS) during (Nationwide BS) 2016, ending the year at 1.597 million (Nationwide (Nationwide BS) (Nationwide BS) have now greatly eclipsed the pre-crash high reached in people unemployed. House prices - average house House prices - average house priceprice UK work-force % of % UKofwork-force House prices - £19,854 average house price House prices - average house priceCompared UK work-force % %of % UKofwork-force October 2007, standing higher. to the % This is a rate of 4.8% unemployed, the lowest for over 10 % % low point of February 2009 prices have grown by £58,152 £210 £210 7.2 7.2 years and compares to 5.1% a year earlier. £210 £210 (39.4%). 7.2 7.2 Compared to the high reached in November 2011 there £205 £205 6.8 6.8 Growth of this UK home-owner asset has driven both £205 £205 6.8 6.8 were 1.111 million fewer people unemployed in the UK, consumer confidence and retail demand in 2016 and will 6.4 6.4 by 2016 year end. £200 £200continue likely to do so in the forthcoming year. 6.4 6.4 £200 £200 6.0 6.0 £195 £195 6.0 6.0 Residential Property : UK (Nationwide BS) Unemployment : UK £195 £195 House prices - average house price % of UK work-force 5.6 5.6 % 5.6 5.6 £190 £190 £210 7.2 £190 £190 5.2 5.2 £205 6.8 5.2 5.2 £185 £185 6.4 £200 £185 £185 4.8 4.8 4.8 4.8 6.0 £195 £180 £180 4.4 4.4 5.6 £180 £180 4.4 4.4 £190 5.2 £175 £175 4.0 4.0 £185 4.8 £175 £175 4.0 4.0 Jan Jan 1515

Feb Feb 1515 Jan Jan 1515 Mar Mar 1515 Feb Feb 1515 Apr Apr 1515 Mar Mar 1515 May May 1515 Apr Apr 1515 Jun Jun 1515 May May 1515 JulJul 1515 Jun Jun 1515 Aug Aug 1515 JulJul 1515 Sep Sep 1515 Aug Aug 1515 Oct Oct 1515 Sep Sep 1515 Nov Nov 1515 Oct Oct 1515 Dec Dec 1515 Nov Nov 1515 Jan Jan 1616 Dec Dec 1515 Feb Feb 1616 Jan Jan 1616 Mar Mar 1616 Feb Feb 1616 Apr Apr 1616 Mar Mar 1616 May May 1616 Apr Apr 1616 Jun Jun 1616 May May 1616 JulJul 1616 Jun Jun 1616 Aug Aug 1616 Jul Jul 1616 Sep Sep 1616 Aug Aug 1616 Oct Oct 1616 Sep Sep 1616 Nov Nov 1616 Oct Oct 1616 Dec Dec 1616 Nov Nov 1616 Dec 16

Nov 16

Oct 16

Sep 16

Aug 16

Jul 16

Apr 16

Jun 16

May 16

Dec Dec 1616

Mar 16

Apr 15

Jun 15

4.0

Feb 16

Feb Feb 1515 Jan Jan 1515 Mar Mar 1515 Feb Jul 15Feb 1515 Apr 1515 Aug 15 Apr Mar Mar 1515 Sep 15 May May 1515 Oct 15 Apr Apr 1515 Nov 15Jun Jun 1515 May 1515 Dec 15May Jul 15 Jan 16 Jul 15 Jun Jun 1515 Feb 16 Aug Aug 1515 Mar 16 Jul Jul 1515 Apr 16Sep Sep 1515 Aug 15 May 16 Aug 15 Oct Oct 1515 Jun 16 Sep Sep 1515 Jul 16 Nov Nov 1515 Aug 16 Oct Oct 1515 Dec Sep 16Dec 1515 Nov Nov 1515 Oct 16 Jan 16 Jan 16 Nov 16 Dec Dec 1515 Dec 16 Feb Feb 1616 Jan Jan 1616 Mar Mar 1616 Feb Feb 1616 Apr Apr 1616 Mar Mar 1616 May Jan 15May 1616 Apr Apr 1616 Feb 15 Jun Jun 1616 Mar 15 May May 1616 Apr 15 JulJul 1616 Jun 1616 May 15 Jun Aug 1616 Jun 15Aug JulJul 1616 Jul 15 Sep Sep 1616 Aug 15Aug Aug 1616 Sep 15 Oct Oct 1616 Sep 16 Oct 15Sep 16 Nov Nov 1616 Nov 15 Oct Oct 1616 Dec 15 Dec Dec 1616 Nov Jan 16Nov 1616

Unemployment :: UK Unemployment :: UK Unemployment UK Unemployment UK

4.4

May 15

Jan 15

£175

Feb 15

£180

Mar 15

Jan Jan 1515

Residential Property :: UK Residential Property :: UK Residential Property UK Residential Property UK

Dec Dec 1616

Oct 16

Dec 16

Nov 16

Dec 16

Nov 16

Jul 16

Aug 16

Sep 16

Oct 16

Sep 16

Aug 16

Apr 16

May 16

Jun 16

Jul 16

Jun 16

May 16

Jan 16

Feb 16

Mar 16

Apr 16

Mar 16

Feb 16

Oct 15

Nov 15

Dec 15

Jan 16

Oct 15

Dec 15

Year on year change

Nov 15

Sep 15

Aug 15

Jul 15

Sep 15

Aug 15

Apr 15

Jun 15

May 15

Apr 15

May 15

Jun 15

Mar 15

Jan 15

Feb 15

Jan 15

Mar 15

-1.0

170

Feb 15

0.0

Mar 15

1.0

Feb 15

£180 £175

5.6

190

£185 2.0

more information contact: For For more information contact:

Published byPublished Step Solutions Limited Limited Published Step Solutions Limited by Step Solutions Lahert: +44 (0) 7973 714075by more information contact: ForFor more information contact: For more information contact: For more information contact: Published byAnthony Step Solutions Limited Published byTheStep Solutions Limited Published by Step Solutions Limited Consumer Indicators brand, trademarks and the intellectual property of the Neil Hargreaves: +44 (0) 958750 +44 (0)Anthony 7973 Anthony 714075 Lahert TheLahert Consumer Indicators brand, trademarks and7796 the intellectual +44 (0) 7973 714075 +44 (0) 7973 714075 The Consumer Indicators brand, The Consumer Indicators brand, trademarks the the intellectual underlying data processes oftrademarks CI are theand sole and property ofintellectual Step Solutions Limited. property of +44 the underlying processes of CI 7966 are theThe sole property Anthony Lahert +44 (0)data 7973 714075 Anthony Lahert (0) 7973 714075 www.stepsolutions.co.uk Bill Mitchell: +44 (0) 772619 Consumer Indicators brand, trademarks and intellectual The Consumer Indicators brand, trademarks and the the intellectual Neil Hargreaves +44 (0) 7796 958750 of Step Solutions Limited. Anthony Lahert

www.stepsolutions.co.uk

Bill Mitchell

property of Copyright the underlying data processes ofare CI are the property property of the underlying data processes of CIAll the solesole property © Step Solutions Limited 2017. rights reserved. property of the underlying data processes CI are the property property of Solutions the underlying data processes of CIofare the solesole property Hargreaves +44 (0)Limited 7796 958750 NeilNeil Hargreaves +44 (0) 7796 958750 of Step Limited. of Step Solutions Limited. Copyright ©+44 Step Solutions 2017. All rights reserved Hargreaves +44 (0) 7796 958750 NeilNeil Hargreaves (0) 7796 958750 of Step Solutions Limited. of Step Solutions Limited. Bill Mitchell +44 +44 (0) 7966 772619Copyright Bill Mitchell (0) 7966 772619 39 Copyright © Step Solutions Limited 2017. All rights reserved © Step Solutions Limited 2017. All rights reserved Bill Mitchell +44 +44 (0) 7966 772619Copyright Bill Mitchell (0) 7966 772619 Copyright © Step Solutions Limited 2017. All rights reserved © Step Solutions Limited 2017. All rights reserved

+44 (0) 7966 772619

www.stepsolutions.co.uk www.stepsolutions.co.uk www.stepsolutions.co.uk www.stepsolutions.co.uk

Interview with... Rosemary Smith discusses how companies should be

A decision for organisations going forward is whether they

preparing for the advent of the General Data Protection

will be able to rely on consent or will look to rely on one

Regulation (GDPR) in May 2018.

of the other applicable conditions for processing the data. This includes the balance of interests, or legitimate interests,

As they prepare for GDPR implementation, businesses should

where a company may process personal data if it is in their

already be looking at the customer data they’ve acquired

legitimate interests to do so, and these are not overridden by

and what consent for future marketing they have obtained.

the legitimate interests of the consumer.

They also need to be identifying to what degree they have informed their customers about what they want to do with

So, what does this mean in practice? Well, there’s guidance

their data.

in the GDPR suggesting that if an individual is a customer, it would be a reasonable expectation they will want to receive

The challenge is that many businesses have inadequate

further communications from that company. There is also a

records on how they’ve obtained the data and what they’ve

specific statement written into the regulation stating that the

notified individuals about.

use of data in pursuit of direct marketing may be considered a legitimate interest. This is good, in that it helps provide

Companies must start finding out what, at different times,

some clarity around this notoriously tricky concept.

they have told individuals, or asked them to agree to. Many companies have taken a soft view on obtaining consent for marketing, presuming that just because someone has bought from them, they would expect to receive future communications. It is also important companies identify whether the data they hold is going to be usable for the same purposes going forward. The current consent guidance from the Information Commissioner’s Office takes the view that if you want to process data based on consent, this has to be an affirmative action and an unambiguous consent. So, as recommended by the ICO, a full opt-in to use data for marketing purposes.

“The challenge is that many businesses have inadequate records on how they’ve obtained the data and what they’ve notified individuals about”

Rosemary Smith, Director at Opt-4

There are conditions. If you were previously relying on an implied consent and now you’re going to rely on legitimate interest, you must communicate this to your customers and they must have the right to object to this. In your next catalogue or next mailing, this must be included, to ensure that individuals are aware of the change. At the same time, multi-channel retailers should be ensuring that their privacy policies are clear in informing customers that their processing will rely on legitimate interests, again highlighting how the individual can opt-out. A new area GDPR will cover concerns profiling. Multi-channel

“It’s a chance to educate people; a chance to put across the positive benefits to individuals of allowing their data to be used”

retailers will need to think about what profiling they are currently carrying out - online and offline - and how they are potentially targeting individuals, based on their behaviours. If someone’s data is being processed to ascertain whether they might be a potential customer for a particular product or offer,

This has implications for staff and companies must ensure

then they are being profiled. As the GDPR is currently being

anyone customer facing - be it internal customer service

interpreted, profiling for direct marketing purposes can be

teams or those in a retail environment - is aware of the

carried out. However, this must be based on full notification

forthcoming changes and given the necessary training and

to the individual and they must have a right to object. Any

support.

profiling which has “legal or significant effect” would need consent, unless it is necessary for entering into a contract.

My advice at the minute is don’t panic. Having a plan of action is important but it should flex as the guidance comes out and

Although GDPR may still appear a long way off, it will herald

it becomes clearer how things are going to be interpreted.

some significant changes that may require significant changes

Although the ICO is taking a fairly hard line at the minute,

to a company’s systems. Many mail order legacy systems

this is a significant change to the way personal data can be

are transaction-driven. They’re not designed to record if

collected and used. I think if an organisation can show it has

an individual has given consent or not; if they’ve objected

planned for the changes and is moving in the direction of

to certain types of communications, or if they’ve agreed to

GDPR compliance, this will be some mitigation if they do not

their data being shared with third parties. As everything gets

get everything done by the deadline.

more complex, these system fixes are an area that may well require the full period up to GDPR to get straight.

I also think it’s important to look at the opportunities GDPR offers. A key tenet is transparency - about how you want

Then there are the increased rights for individuals under

to process data, what you’re going to do with it, whether

GDPR. For example, people may want access to the data you

it’s going to be shared. It’s a chance to educate people; a

have on them via a subject access request. Going forward,

chance to put across the positive benefits to individuals of

this has to be offered free of charge. If an individual requests

allowing their data to be used in controlled ways through

access, companies must have processes in place that define

more relevant offers and tailored deals. The industry needs to

how the requests will be handled and how they will fulfill the

recognise this and be taking advantage of it now.

request and record it.

PERMISSION STATEMENT RESEARCH

··

A legal opt-out statement generates 24% higher permission than a legal opt-in statement A friendly opt-out statement gives 47% higher permission than a legal opt-in statement

The Abacus Alliance cooperative database gives you a deeper understanding of consumer purchase patterns to make your marketing campaigns more relevant and interesting to the consumer.

Example opt-out permission statement We think you’d enjoy some of the latest products and offers by post from other trusted retailers and organisations. If you would

Central to this is consumer data – information consumers have given their permission to share with third parties. The forthcoming GDPR legislation may mean you have to review the type and wording of the statement you use to obtain permission from consumers to share data with third parties.

prefer not to receive these by post, please tick this box. To learn more about our partners, see our privacy policy at www.xxxxxx The graph below highlights how different permission statement wording influences people’s reactions to sharing their data: 1. Permission statement wording impacts on

To provide you with some pointers when reviewing

willingness to share data

your permission statement, we commissioned Opt-4, an independent data protection and permission marketing consultancy,

carry

out

research

around

consent

mechanisms. Its aim was to gauge consumer reactions to a range of third party permission statements, testing optin (asking consumers to tick a box if they agree) versus opt -out (asking consumers to tick a box if they don’t agree) and different editorial styles.

Key Finding: • By adopting a friendly, informative opt-out permission statement for direct mail purposes, rather than a legal-sounding one, you can positively impact people’s willingness to allow their data to be shared

An opt-in approach suppresses consumers’ willingness to give permission to share their data. By adopting an opt-out approach with a legal tone, this willingness to share improves by 24% compared to the opt-in ‘legal tone’ statement. Developing an opt-out policy written in a friendly, informative manner boosts consent by 47%.

Impact of Permission Wording on Consumer Willingness to Share Personal Data

Some interesting demographic differences were also discovered which could impact on a multi-channel retailer, depending on the make-up of their target audience. 2. Men are happier to share data in an opt-out environment

Why this is important to you With the advent of GDPR, it is important Alliance members comply with GDPR while also continuing to maximise their consumer permissions. Itâ&#x20AC;&#x2122;s also important to remember that for postal direct mail, adopting an opt-out approach to collecting data from consumers to share with third parties is acceptable. If you all play your part, the Alliance will continue to prosper, your models will continue to perform and everyone will continue to benefit. Disclaimer This does not constitute legal or compliance advice and it should not be relied on as such by any member or third party. Subject to liability which cannot be excluded by law, Epsilon Abacus shall have no liability whatsoever in relation to this guidance, including, without limitation, liability for negligence and misrepresentation.

Again, a friendly opt-out permission statement drives a

It should be tabled that while the legislation allows businesses

greater uplift in willingness to share data for men and women.

to continue using an opt-out box under the legitimate interest

For men, however, this is more significant, resulting in a 67%

route, the ICO says in their guidance dated 20160519 â&#x20AC;&#x153;When

uplift, compared to 38% in women.

using opt-in boxes, organisations should remember that to comply with PECR they should provide opt-in boxes to obtain

3. Older age groups are more comfortable with friendly opt-out statements

specific consent for each type of electronic marketing they want to undertake (e.g. automated calls, faxes, texts or emails). Best practice would be to also provide similar opt-in boxes for marketing calls and mail.â&#x20AC;?

A known fact is that younger people are more comfortable (and more accustomed) to sharing their data. However, an opt-out friendly tone has a positive consent uplift for older consumers. Adopting this approach saw an 85% improvement in the willingness of the 55+ demographic to share data, compared to a legal tone opt-in. 43

About Us Epsilon Abacus helps multi-channel retailers grow their businesses by taking full advantage of the Abacus Alliance, the UKâ&#x20AC;&#x2122;s most comprehensive transactional database of actively buying people.

ABOUT US: EPSILON ABACUS

Joining the Abacus Alliance gives you access to a unique source of consumer purchasing behaviour information: Information built from tens of millions of consumer transactions and representing over ÂŁ20 billion of UK spend. The Abacus Alliance provides you essential market insight to improve the effectiveness of your marketing to deliver a greater return on your marketing investment. Specifically, it helps you to:

Grow your sales by reaching people sharing the same purchasing habits and lifestyle traits as your best customers but have yet to buy from you.

Grow your profitability by retaining your best customers, persuading lapsed customers to buy again and encouraging enquiries to become actively spending customers.

Make better decisions

by using the insights to improve your marketing, such as understanding the best time to mail and the best product mix to offer to attract new buyers.

Epsilon Abacus is part of Epsilon, one of the three businesses within Alliance Data. Find out more at www.epsilonabacus.com

ABOUT US: EPSILON & ALLIANCE DATA

Abacus Epsilon is part of Epsilon, an all-encompassing global marketing innovator. Epsilon provides unrivaled data intelligence and customer insights, world-class technology including loyalty, email and CRM platforms and datadriven creative, activation and execution. Epsilon includes Conversant®, its digital media arm, a leader in personalised digital advertising and insights, and CJ Affiliate, one of the world’s largest affiliate marketing networks. Recognised by Ad Age as the #1 World’s Largest CRM/Direct Marketing Network, #1 Largest U.S. Agency from All Disciplines and #1 Largest U.S. Mobile Marketing Agency, Epsilon employs over 8,000 associates in 70 offices worldwide. Epsilon is an Alliance Data® company.

Alliance Data® (NYSE: ADS) is a leading global provider of data-driven marketing and loyalty solutions serving large, consumer-based industries. The Company creates and deploys customised solutions, enhancing the critical customer marketing experience; the result is measurably changing consumer behavior while driving business growth and profitability for some of today’s most recognisable brands. Alliance Data helps its clients create and increase customer loyalty through solutions that engage millions of customers each day across multiple touch points using traditional, digital, mobile and emerging technologies. An S&P 500 and Fortune 500 company headquartered in Plano, Texas, Alliance Data consists of three businesses that together employ more than 17,000 associates at approximately 100 locations worldwide. Alliance Data’s Card Services business is a leading provider of marketing-driven branded credit card programs. Epsilon® is a leading provider of multi-channel, data-driven technologies and marketing services. LoyaltyOne® owns and operates the AIR MILES® Reward Program, Canada’s premier coalition loyalty program, and Netherlands-based BrandLoyalty, a global provider of tailor-made loyalty programs for grocers.

TRUSTED BY US

Find out more web: www.epsilonabacus.com telephone: +44 (0) 20 8943 8000 email: info@abacusdirect.com