THE 2016 HOME SHOPPING TRENDS REPORT A COMPREHENSIVE REVIEW OF 2015 HOME SHOPPING TRENDS
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
Interview: Dara O’Malley, JD Williams
16-17
Clothing: High-End & Contemporary
18-19
Interview: Rob McMahon, Madeleine
20-21
Clothing: Mature
22-23
Interview: Lynn Cordall, Damart
24-25
Clothing: Mid Market
26-27
Food & Wine
28-29
Gardening
30-31
Generalist Retail
32-33
Interview: Arun Mundle, Easylife
34-35
Gifts, Gadgets & Entertainment
36-37
Home Interiors & Household Goods
38-39
Interview: Jo Whitworth, Plumbs
42-43
Positive Uk Economy Creating Retail Success by Mark Pragnell
44-45
How Weather Influences Customers Demand
46-47
Consumer Indicators
48-49
How We Consume Entertainment In The Home
50
About Us: Epsilon
51
About Us: The Abacus Alliance
52-53
How To Get More Insight
EXECUTIVE SUMMARY
04
EXECUTIVE SUMMARY Introduction & Executive Summary Lara Bonney, UK Country Director Epsilon Abacus Welcome to the 2016 Epsilon Abacus Annual Trends
role in driving sales, having a seamlessly integrated
report, which reviews consumer spending patterns
online and offline marketing strategy is the foundation
across the home shopping sector in 2015. This report is
for successful Home Shopping businesses. To shed light
now in its sixth year and for six years running we see
on how online devices compete for attention in the
overall growth in the market year on year. It shows a
modern living room, we are pleased to showcase the
vibrant, well established sector that is firmly embedded
Real Living research from the Internet Advertising Bureau
in the retail landscape. Many home shopping businesses
(IAB). Many home shopping businesses reported that
have worked hard to put the customer at the forefront
in recent years unusual weather patterns impacted
of everything they do and are seeing the return in the
spending trends so in this report we include research
form of revenue growth. This report is made possible
from Planalytics. This adds some science to the
by Abacus Alliance members sharing transactional
speculation that weather has an influence on sales. For
information on their customers. It is their willingness
an extra dimension, we asked business owners and
to provide monthly updates of new purchases that
senior directors for their views on the trends they saw
creates a dataset unparalleled in depth and breadth,
in their own home shopping businesses and the sector as
making it a reliable and robust platform for research that
a whole in 2015. Our thanks go to Lynn Cordall (Damart),
can be trusted. To give value back to the contributing
Arun Mundle (Easylife), Jo Whitworth (Plumbs), Dara
members and their marketing partners, we invest our
O’Malley (JD Williams) and Robert McMahon (Madeleine)
analytical time and expertise to give relevant insight into
for their time and contributions.
specific home shopping sectors to help future planning. Key trends in 2015 were an overall revenue growth
I hope you find something in this report that resonates
of 11.9% year on year, with a highlight of 18.1% revenue
and gives insight that can help you better understand
growth in September. The spike in September is possibly
consumer trends in the home shopping market. I’m keen
due to a delay in sales from August and an exaggeration
to hear your feedback on our findings so please email me
in comparison to the year on year revenue decline we
directly at lara.bonney@epsilon.com.
saw in September 2014 due to unseasonably warm weather. Despite minimal UK price inflation, the Average Order Value across the Home Shopping Sector grew by 3.0% from £57.10 in 2014 to £58.80 in 2015. In addition to showing revenue trends, we include monthly direct mail volumes provided by Ebiquity to add insight into some of the marketing activity that went into generating the revenue. This of course just reports on one part of the marketing spectrum but gives a little perspective. Mailing volumes were down year on year according to Ebiquity by 7.1% in 2015. An overview of the economy and wider UK retail market in 2015 adds context to the home shopping revenue trends in
this
report
Consumer
so
Indicators
we
are
created
delighted by
Step
to
include Solutions
Executive Summary Key Findings: • Sales in the home shopping market increased by 11.9% YOY • Q2 growth rate was highest of year at 14.8% YOY • Highest growth in a single month was September at 18.1% YOY • 3.0% growth in Ave Order Value, from £57.10 in 2014 to £58.80 in 2015
and commentary from Mark Pragnell from Capital Economics. While postal catalogues still play a vital
05
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. We identified a sample of members from each of the categories listed opposite:
In order to qualify for this analysis sample, the selected
examine seasonal trends, as well as year on year
members had to be trading actively throughout the
growth or decline. Mailing volume data for the industry
calendar years of 2014 and 2015, and have provided
was supplied by Ebiquity (www.ebiquity.com) who collect
up-to-date transactional information to the end of
information monthly from their UK panel. This content has
December 2015. For ease of presentation we have
been reproduced with their kind permission. Throughout
aggregated Abacus merchandise categories into six
this report we will present mailing volume trends by
macro categories; Clothing, Food and Wine, Gardening,
macro category and the overall home shopping sample.
Generalist Retail, Gifts Gadgets & Entertainment and
We reconfigured Ebiquity’s mailing volume figures to
Home Interiors & Household Goods. The following
produce indices to the two-year monthly average. Please
clothing sub-categories are large enough to allow
note that only mailing volumes for the Alliance members
independent
presented
selected for this year’s Annual Trends Report sample
separately: Contemporary & High-End, Mature and
have been included in the mailing trends analysis. The
Mid-Market. Trends are presented using indices to the
allocation of a member and the related Ebiquity mailing
two-year monthly average. The revenue in each month
volumes to a specific macro category was conducted by
of 2014/2015 is compared to the average monthly
Abacus. Mailing trends are not presented for the Food
revenue for the analysis period. This allows us to
& Wine category due to insufficient coverage.
analysis
and
have
been
“The revenue in each month of 2014/2015 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”
06
CLOTHING Children’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. Men’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.
07
HOME SHOPPING OVERVIEW
REVENUE AND MAILING VOLUMES, 2014-2015
Sales in the sample covered by the Annual Trends
Q3 growth of 12.1%. Q4 started with above average
Report grew 11.9% year-on-year (YOY) in 2015. This
growth in October (+12.3%) before slowing slightly in
follows three years of growth at an average rate of
the final two months of the year (November +10.3%;
10.4%, showing the continued strength in the sector.
December +8.6%). Average Order Value (AOV was
The growth rate for the home shopping brands covered
up 3.0% compared to the previous year, going from
by this report is in-line with the 15.7% increase in
ÂŁ57.1 in 2014 to ÂŁ58.8 in 2015. The year started
non-store retail sales repored by Office for National
with a substantial increase in AOV (+6.9% YOY in
Statistics. The year got off to a good start with January
January). This
was
and February both exhibiting strong growth (+12.6%
Gifts, Gadgets
&
and +13.1% YOY respectively).
YOY in January) and may be the result of consumers
predominantly Entertainment
driven
category
by
the
(+22.1%
delaying larger purchases until after Christmas to
08
Growth slowed somewhat in March (+8.4% YOY)
take advantage of January sales. The AOV growth rate
resulting in Q1 growth of 11.2%. April (+15.9% YOY)
gradually reduced in February and March reaching
and May (+15.1% YOY) were stronger than June
+0.8% in April, which showed the lowest increase
(+13.4% YOY) replicating the pattern seen in the first
for the year. In June the AOV growth rate picked-up
quarter. The growth rate of 14.8% in Q2 was the
again (+3.3% YOY) and remained around the annual
highest of the year. Q3 started with growth just below the
average until October. AOV growth accelerated in
annual average in July (+11.2% YOY) before slowing
November
substantially in August (+5.9% YOY), the lowest point
substantially in the last month of the year (+0.8%
of the year for sales growth. There was a strong
YOY).
recovery in September (+18.1% YOY), resulting in overall
in 2015. This follows a decline of 8.1% in 2014.
(+4.7%
Mailing
YOY),
Volumes
and
were
then
down
slowed
7.1%
YOY
The year started with increased mailing volumes in
throughout the year, and with a drop in May (-16.3%
both January (+11.9% YOY) and February (+12.0%
YOY) and a flat June (+0.0% YOY) Q2 was down 15.1%
YOY) before declining in March (-13.4% YOY). As March
YOY. The trend continued into Q3 with a decline of 17.1%.
is the largest mailing month in Q1, this resulted in
October saw a decline of 7.8% YOY before an increase
mailing volumes increasing by 1.7% in Q1. The trend
towards the end of the year (November +5.2% YOY;
for declining mailing volumes continued into Q2 with
December +17.5% YOY). This resulted in an overall
a drop of 26.3% in April. This was the biggest decline
increase of 2.2% in Q4.
AOV YEAR-ON-YEAR CHANGE, 2014-2015
REVENUE-ON-YEAR CHANGE, 2014-2015
09
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
10
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 2015 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 2014. Consumers in these categories tend to spend more of their annual budget in the pre-Christmas period (July to November), while consumers in more affluent categories spend proportionally more in the first six months of the year.
SPEND GROWTH BY ACORN CATEGORY, 2014-2015 18.0% 16.5% 15.9%
16.0%
14.0%
13.2%
12.7%
12.0% 10.2% 10.0%
8.0%
6.0%
4.0%
2.0%
0.0%
Urban Adversity
Financially Stretched
Comfortable Communities
Affluent Achievers
Rising Prosperity
REV TOTAL CH
SPENDING PATTERNS BY ACORN CATEGORY, 2014-2015 170
150
130
110
90
70
Affluent Achievers
Rising Prosperity
Comfortable Commnunities
Financially Stretched
Urban Adversity
11
CLOTHING OVERVIEW
12
CLOTHING OVERVIEW
REVENUE AND MAILING VOLUMES, 2014-2015
Clothing
has
been
one
of
the
most
successful
“just” 5.2%. The Average Order Value (AOV) in the category
categories in home shopping over the last five years,
declined compared to the previous year, although
with an astonishing average growth rate of 13.3% per
very marginally (-0.1% YOY). This is the third year in
annum. The trend continued in 2015, with the category
a row that the AOV has declined in Clothing (-2.7%
up 10.7% Year-On-Year (YOY) making this the sixth year
in 2013 and -0.5% in 2014). However, the rate of
of continuous growth. The year kicked-off with sales up
decline has now slowed significantly. This means
9.7% YOY in Q1 led by a very positive January (+11.0%
that the growth experienced in the category in 2015
YOY). The pace of growth increased going into Q2
and the previous two years was driven by existing
(+13.1% YOY) with the strongest performance in April
customers placing more transactions and/or more
(+14.0% YOY) and June (+13.4% YOY). Growth slowed
consumers
going into Q3, with July (+7.4% YOY) and August (+7.0%
volumes were down quite significantly in 2015 (-14.5% YOY)
YOY) both below the average for the year. September
There were particular declines in May (-29.4% YOY), August
was particularly strong (+17.2% YOY), possibly due to
(-27.3%) and September (-31.1%). The biggest increase
a poor September in 2014. As this is the largest month
was in November (+14.1% YOY), possibly indicating that
of Q3 in terms of revenue, the strong growth in sales in
retailers are pushing larger campaigns “deeper” into
September resulted in Q3 being up 12.1% overall. Q4 grew
the
in-line with the annual rate (+9.2% YOY) led by a strong
pages
performance in November (+12.1%). December was the
Clothing sub-categories: High-End & Contemporary,
worst performing month of the quarter with a growth of
Mid-Market and Mature.
coming
to
Autumn/Winter we
will
the
season.
examine
marketplace.
In
trends
the for
Mailing
following the
main
13
INTERVIEW WITH…
Dara O’Malley,
Head of Marketing at JD Williams In 2015 we saw our more mature customers continuing
Over time we are starting to see changing patterns in
to become more digitally aware with the online channel
customer loyalty. Older age customers are more loyal
becoming more important. We found that the tablet was
than new younger age customers so when older age
the fastest growing online order device for our older
customers move on, we have to work harder to get new
customers (age 55 – 75), whilst for those under 50s
younger age customers to become loyal. To respond to
the fastest growing device is mobile. Whilst the digital
this, we have put a stronger focus on segmentation so we
channel was strong for us and it is becoming increasingly
can treat and talk to customers differently. It is becoming
more important, we are conscious not to take our eye
apparent that we have to become much more shrewd
off the more traditional channels such as direct mail and
and knowledgeable in the way we segment, communicate
press which have been the bedrock of our marketing. We
with and promote to our customer. Our aim is one to one
believe that whatever channel we use, we need to give a
customer marketing but until we can truly make this
consistent experience for the customer.
happen, clever segmentation is the next best thing. We want to think of our customers as individuals and not a
We were more promotional in 2015 because we feel we
number. For us, getting contact frequency right, product
have to work harder to get the older customer to spend
customisation and making everything we do relevant to
money with us. We seem to be competing with spend
the customer is key.
on experience activity such as eating out and travel as well as spend on products and we found that we had to generate more orders per customer to gain the same value as previous years. Promotions are not responding as well as they used to, and I think it’s because there is so much choice and noise in the market. The customer is exposed to a variety of style, price and promotion offered by specialist retailers as well as traditional retailers. We have more to compete against and need to respond by adding variety to our product and making our brand something that our customers really connect with.
00 14
“Our aim is one to one customer marketing but until we can truly make this happen, clever segmentation is the next best thing”
This calendar year has been challenging for our market and our impression is that consumer confidence in the mature market, especially from those who rely on fixed
“The use of digital gives a window of opportunity to get extra sales before Christmas from those people who order during the Black Friday and Cyber Monday promotional period�
incomes from stocks and shares has been affected by the recent stock market downturn and the uncertainty created by the EU Referendum. Some older customers seem to be reigning in spend as a result. In 2015, Black Friday and Cyber Monday had the effect of pulling Christmas sales forward for us so going into the future we will plan our business slightly differently to accommodate it. The use of digital gives a window of opportunity to get extra sales before Christmas from those people who order during the promotional period. Last year Cyber Monday immediately followed Black Friday but there is a separation in 2016 so it would be interesting to see if this affects spending patterns. In my view, the biggest thing for multi channel retailers to focus on going into 2016 is to put customers at the heart of their marketing strategy, make sure they are being relevant to customers and ensure that they are maximising the ROI on marketing spend. If you can get the right mix of traditional higher cost paper led marketing activities with lower cost digital activity, you have more chance of communicating with customers in the right way for them and giving them a personalised experience of your brand.
15 00
CLOTHING HIGH END & CONTEMPORARY The High-End & Contemporary Clothing category grew 13.4% Year-On-Year (YOY) in 2015. This follows growth of 8.5% YOY in 2014, showing that demand in this sector continues to be very robust. There was strong growth across all quarters, with Q4 showing the biggest increase in sales YOY (+17.5%). The biggest month of the year for the category is November and there was very strong growth during this month (+24.5%). September was the best performing month in terms of growth (+30.9% YOY). This might be due to the month performing poorly in 2014 (-8.4% YOY compared to 2013). The Average
16
Order Value (AOV) in the High-End & Contemporary Clothing category was marginally higher in 2015 (+0.7%) compared to the previous year. This indicates that the majority of the revenue growth was driven by a higher number of transactions in the category rather than an increase in spend per order. Mailing volumes were very similar to the previous year with a very slight decline (-1.2% YOY). There was a significant decline in mailings between April and June (-56.9% YOY), but this was contrasted by significant increases in February (+61.5% YOY) and December (+120.2% YOY).
HIGH-END & CONTEMPORARY: Clothing REVENUE AND MAILING VOLUMES, 2014-2015
SEPTEMBER
SHOWED
30.9
HIGH-END & CONTEMPORARY CLOTHING GREW BY 13.4% YOY IN 2015
%YOY
GROWTH
AGE DISTRIBUTION
INCOME DISTRIBUTION
12%
60%
10%
50%
8%
40%
6%
30%
4%
20%
2%
10%
0%
0% 18-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65-69 70-74 75-79 80-84
Contemporary & High End Clothing
UK
85+
Less than £10,000 £10,000 £14,999
£15,000 £19,999
£20,000 £24,999
£25,000 £29,999
£30,000 £39,999
£40,000 £49,999
Contemporary & High End Clothing
£50,000 - £60,000 & £59,999 Over
UK 17
INTERVIEW WITH… Rob McMahon,
Director UK, Marketing and Sales at Madeleine The main purchasing trend we saw in 2015 was an increase in seasonal buying. Customers continued to buy products from our spring and summer collection well into autumn due to the delay of the colder weather. It seems that people buy for the weather at the moment rather than planning ahead for the next season. 2015 saw the continued shift towards people buying online, we’re not alone in saying that online is becoming the order channel of choice. However, we understand the importance of the catalogue in getting people onsite and because of this the catalogue remains an integral part of our marketing strategy, enabling us to convey the quality of our brand effectively and it is a strong motivator to purchase. By making our catalogue a high end printed item with coffee table appeal, it stays in
“We provide free returns on all orders. This is no longer seen as an offer, but an expectation by consumers who are used to seeing this across clothing retailers”
the home much longer and serves as a continuing reminder of our brand. We often receive orders four or five months after someone has received the catalogue. In terms of sending the catalogue to the
segmentation to understand what our customers buy
right people to attract new customers, we have had
across the home shopping sector.
great success through our work with Abacus.
use the share of wallet information to tailor customer
We were able to
vouchers and targeted incentives in a more intelligent We had an explosive growth year through a
way for more impact and a greater return. When offering
combination of using Abacus solutions to target
incentives and promotions to customers, we are always
catalogues at high quality prospective customers
mindful of the impact they have on brand perception and
and then making it simple for them to order online.
identity. It’s important to maintain our brand values, while
We also used Abacus customer segmentation
understanding that we need to offer relevant and targeted
solutions such as data tagging and share of wallet
incentives and promotions to remain competitive and provide what customers would like and expect. We are very engaged with Black Friday promotions and we will continue to use this as an activity to gain market share. We believe that we would lose out if we didn’t run any promotions during this time; anyone in our sector who ignores this opportunity would find themselves left out in the cold. By developing these offers we have managed to carve out a better level of customer service, including a dedicated free-phone line, which has resulted in our customers becoming more loyal. We provide free returns on all orders – this is no longer seen as an offer, but just an expectation by consumers who are now used to
18 00
seeing this across clothing retailers. We saw a positive
beyond. In 2016 we will focus our efforts on a greater
performance across most of our marketing channels
push for cross channel and cross platform marketing with
in 2015 and this led to year on year revenue growth.
the goal to become more specialised in the marketing
Online advertising, banner adverts and classic DR
we use to reach our customers. We would like to create
adverts all continued to work well for us. We strive to
mobile and online advertising messaging consistent
speak to our customers with a single voice, making sure
with our offline messaging to ensure that the brand is
that at every touch point the messages are consistent.
communicated cohesively to maintain the brand offering.
We adapt our messages appropriately to the different
The main challenge is to stay up to date with the trends
channels to ensure we are communicating in the best
and technology and continuing to communicate well
way to the customer. The main challenge we face is
with our customer. Our long term aim is for Madeleine
attribution. It is difficult to understand the role that each
to be a quality brand that is not perceived as a fad or
channel played in driving a customer to order and to
passing trend. Our mantra is “Fashion is the challenge of
know how we allocate response to each channel. This
standing out of the crowd whilst staying on trend”.
is something we will continue to work on in 2016 and
“By making our catalogue a high end printed item with coffee table appeal, it stays in the home much longer and serves as a continuing reminder of our brand”
19
CLOTHING
MATURE The Mature Clothing category grew by 6.8% in 2015, a lower rate compared to 2014 which saw sales growth of 12.1% Year-On-Year (YOY). Growth was consistent in the first half of the year (+8.3% in Q1 and +8.4% in Q2) before it accelerated in Q3 (+10.4% YOY). The worst performing quarter was Q4, with growth of just 1.0% YOY. The best performing month was September which saw growth of 20.2% whilst December was particularly poor with a decline of 11.9%. This is in stark contrast to 2014 which had seen September growth below the average for the year (+7.7 YOY v 12.1% for 2014 overall) and
20
very strong growth in December 2014 (+19.1% YOY). These changes may be caused by unusually warm weather depressing winter clothing sales in September 2014 and December 2015. The Average Order Value (AOV) in the category was marginally higher than in the 2014 (+0.7% YOY). This indicates that the majority of the revenue growth was driven by a higher number of transactions rather than an increase in spend per order. Mailing volumes were significantly lower than in the previous year (-24.2% YOY), with the biggest decline being in May (-42.5% YOY).
MATURE: Clothing REVENUE AND MAILING VOLUMES, 2014-2015
IN 2015
YOY GROWTH IN
SEPTEMBER
6.8% YOY GROWTH
AGE DISTRIBUTION 16%
INCOME DISTRIBUTION 25%
14% 20%
12% 10%
15% 8% 10%
6% 4%
5% 2% 0%
0% 18-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65-69 70-74 75-79 80-84
Mature Clothing
UK
85+
Less than £10,000 £10,000 £14,999
£15,000 £19,999
£20,000 £24,999
£25,000 £29,999
£30,000 £39,999
Mature Clothing
£40,000 £49,999
£50,000 - £60,000 & £59,999 Over
UK 21
INTERVIEW WITH… Lynn Cordall, Commercial Director at Damart As a home shopping clothing retailer aimed at the
grew and media inserts performed exceptionally well.
older age customer, we saw a few interesting trends
“Off the Page ads” performed a little more patchily over
in 2015. While in the past customers used to order
the year but are still strong. A key focus for us in 2015
early in the season, we saw the “buy now, wear now”
was to reduce our lead-time to market and get quicker at
concept speeding up; I think due to commoditisation
doing things. It’s no longer acceptable to take 18 weeks
on the high street for some product areas, but also
to put a catalogue out like it was years ago so we are
due to the uncertain weather patterns we have
shaving time from all parts of the process. We are also
seen in recent years. Customers don’t really want to
trying to be more effective with our marketing by using
spend until they need it. This presented a challenge
more segmentation and differentiated contact plans to
around service and delivery expectations because
give the customers what they really want while reducing
customers want things to arrive much more quickly,
paper and postage costs.
so we are offering more flexible options. Our customers with an average age of 70 are becoming
The biggest initiative that we invested in is our customer
more comfortable with online purchasing because
service. We invested in our people by carrying out
we saw an acceleration of orders coming through
extensive customer service training. We went through
on tablets and mobiles. The dominant device is the
accreditation for customer service and we compared well
tablet but mobile purchasing is growing rapidly and
against John Lewis.
while our overall percentage of online sales is still small, I think mobile sales may catch up or exceed
A big challenge we faced in 2015 was the discounting
tablet sales in the next few years.
mentality across the board. Customers shopping any channel now expect a deal or to be incentivised. How
With regard to marketing channels, most of them
the market has traded online has trained the customers
worked well in 2015. Catalogues have always
to expect this, whether it’s online or offline, distance
performed well for us, our online channel activity
or store.
“We understand that a customer aged 55 will have a different outlook to a customer who is 80”
22
It’s an established habit now, not just a recession impact behaviour that we think will continue. This doesn’t necessarily mean money off so we have to be more creative with our offers. We found high street retailers gaining ground into the home shopping space by offering discounts. Black Friday and Cyber Monday had a big impact on sales; we noticed 87% of similar companies to ours were offering an average of 30% discount over this period. We felt that the impact of Black Friday brought the sales forwards which then effected the last 4 weeks of the year. After testing we found that some of our customers did not like Black Friday so next year we will group our customers to ensure that we tailor these offers in a different way. It is important for Home Shopping companies to look at promotions and incentives that work across different channels. The future for us is personalisation, as one size doesn’t fit all. We are doing a lot of research into how customers
“Black Friday and Cyber Monday had a big impact on sales; we noticed 87% of similar companies to ours were offering an average of 30% discount over this period”
react to incentives and promotions. For example, we understand that a customer aged 55 will have a different outlook to a customer who is 80. We would like to automate the personalisation process in the future and building a Single Customer View database is key to helping us to understand and segment our customers for a one to one experience. We plan to test everything. Small changes can have big impacts. Going into 2016 we understand that while differentiation and personalisation is something we want to focus on in 2016, we mustn’t lose sight that people are buying the product and brand and we need to get this right. We will be ramping up testing around differentiated content and focusing on a contact strategy for different customer segmentations. We want to remove the fact that price or promotion is the determining factor, we want the customer to buy because of the brand. Buying online is very much about price and there is always someone who can undercut you. Differentiation is crucial.
23
CLOTHING MID MARKET
The Mid-Market Clothing category grew by 12.5%
This indicates that the revenue growth was driven by a
Year-On-Year (YOY) in 2015. This was a similar rate of
higher number of transactions rather than an increase in
growth to the previous year (+12.9% YOY in 2014). There
spend per order. Mailing volumes were down 11.6% YOY.
was growth across all months of the year, with June
At the beginning of the year mailing volumes increased,
exhibiting the strongest YOY growth (+21.1%) followed
with January and February volumes up 33.5%, but from
by September and November (both at +17.0% compared
March until October there was a decline in every month,
to 2014). This makes it the second year in a row that
resulting in a drop of 24.5% during this period. There was
November has had strong growth (+16.1% YOY in 2014).
a significant increase in November (+48.9% YOY), but this
The weakest sales growth was in July, with revenue up
didn’t continue in December as mailing volumes were up
“just”+4.0% YOY. The Average Order Value (AOV) in the
only marginally in that month (+0.5% YOY).
Mid-Market Clothing category was exactly the same YOY.
24
MID MARKET: Clothing REVENUE AND MAILING VOLUMES, 2014-2015
JUNE HAD THE
STRONGEST GROWTH OF
21.1%
YOY
YOY
12.5% GROWTH
IN 2015 AGE DISTRIBUTION
INCOME DISTRIBUTION
12%
30%
10%
25%
8%
20%
6%
15%
4%
10%
2%
5%
0%
0% 18-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65-69 70-74 75-79 80-84
Mid Market Clothing
UK
85+
Less than £10,000 £10,000 £14,999
£15,000 £19,999
£20,000 £24,999
£25,000 £29,999
£30,000 £39,999
Mid Market Clothing
£40,000 £49,999
£50,000 - £60,000 & £59,999 Over
UK 25
FOOD & WINE The Food & Wine category had a very strong 2015 with sales growth of 17.5% Year-OnYear (YOY). As you can see in the graph, the category is heavily weighted towards the end of the year due to increased demand during the pre-Christmas period. November, the second biggest month of the year behind December, saw exceptional sales growth of 28.4% YOY. December also exhibited very strong growth (+18.0% YOY) which contributed to Q4 being the strongest quarter of the year (+22.0% YOY). Q4 makes up nearly 40% of the annual revenue in
26
the Food & Wine category, so the performance during this quarter deeply affects (in this case positively) the performance of the entire year. The first three quarters of the year saw fairly consistent YOY growth of around 15% (+14.6% in Q1, +14.7% in Q2 and +15.5% in Q3). The Average Order Value (AOV) in the Food & Wine category was marginally higher in 2015 compared to the previous year (+1.3% YOY). This indicates that the majority of the revenue growth was generated by a higher number of transactions rather than an increase in spend per order.
FOOD & WINE
28.4
PERCENT
REVENUE AND MAILING VOLUMES, 2014-2015
YOY
GROWTH IN
17.5%
DECEMBER
YOY GROWTH
AGE DISTRIBUTION 14%
INCOME DISTRIBUTION 50%
45%
12%
40% 10%
35% 30%
8%
25% 6%
20% 15%
4%
10% 2% 5% 0%
0% 18-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65-69 70-74 75-79 80-84
Food & Wine
UK
85+
Less than £10,000 £10,000 £14,999
£15,000 £19,999
£20,000 £24,999
£25,000 £29,999
£30,000 £39,999
Food & Wine
£40,000 £49,999
£50,000 - £60,000 & £59,999 Over
UK 27
GARDENING Sales in the Gardening category grew by 6.6% Year-On-Year (YOY) in 2015. This represented a marked improvement over the previous two years which had seen declines in revenue (-9.4% YOY in 2013 and -0.3% in 2014). The growth was concentrated in the first nine months of the year (Q1 +3.7% YOY, Q2 +16.7% YOY and Q3 +11.2%) whereas the end of the year was more of a struggle with revenue down 5.7% in Q4. May saw the strongest annual growth (+27.5% YOY) while November saw the biggest decline (-13.3% YOY). The YOY decline we saw in November might be due to the seasonal pattern reverting to the
28
long term average after the exceptionally strong growth we saw in that month the previous year (+17.4% YOY in November 2014). There was a small increase in Average Order Value (AOV) in 2015 compared to the previous year (+2.1% YOY) which indicates that the revenue growth was mostly due to a greater number of transactions being made in the category. Mailing volumes were up in January (+4.2% YOY) and February (+4.0% YOY) but down significantly in the March to June period. This translated in an overall decline of -27.8% YOY in 2015.
GARDENING REVENUE AND MAILING VOLUMES, 2014-2015
MAY YOY
GROWTH OF 27.5%
YOY
GROWTH OF
6.6% AGE DISTRIBUTION
INCOME DISTRIBUTION
16%
30%
14% 25% 12% 20%
10% 8%
15%
6% 10% 4% 5%
2% 0%
0% 18-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65-69 70-74 75-79 80-84
Gardening
UK
85+
Less than £10,000 £10,000 £14,999
£15,000 £19,999
£20,000 £24,999
£25,000 £29,999
£30,000 £39,999
Gardening
£40,000 £49,999
£50,000 - £60,000 & £59,999 Over
UK 29
GENERALIST RETAIL The Generalist Retail category grew by 7.5% in 2015. This makes it the fifth year in a row of increased revenue in the category. There was growth across all quarters, although the first half of the year was stronger than the second half. Q2 had the biggest Year-On-Year (YOY) growth at 15.3% whilst the weakest growth was in Q4 (+2.2% YOY). The strongest month was April (+28.8% YOY) but there was growth across all months with the exception of August (-5.7% YOY) and November (-3.1% YOY). In 2014 November had 18.3% growth so this slight decline may be
30
the result of returning to normal revenue levels. The Average Order Value (AOV) in the Generalist Retail category was quite significantly higher in 2015 (+7.2% YOY). This can explain a large part of the YOY growth in this category. Mailing volumes grew by 6.9% YOY. The timing of mailing campaigns changed quite significantly, with more being mailed towards the end of the year than in 2014. Between July and October there was a decline of 36.7% in mailing volumes but in the final two months of the year mailings more than double (+102.3% YOY).
GENERALIST RETAIL REVENUE AND MAILING VOLUMES, 2014-2015
APRIL HAD THE
STRONGEST GROWTH OF
28.8%
YOY
7.5% YOY GROWTH
IN 2015 AGE DISTRIBUTION 12%
INCOME DISTRIBUTION
25%
10%
20% 8%
15% 6%
10% 4%
5%
2%
0%
0% 18-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65-69 70-74 75-79 80-84
Generalist Retail
UK
85+
Less than £10,000 £10,000 £14,999
£15,000 £19,999
£20,000 £24,999
£25,000 £29,999
£30,000 £39,999
Generalist Retail
£40,000 £49,999
£50,000 - £60,000 & £59,999 Over
UK 31
INTERVIEW WITH‌
Arun Mundle, Managing Director at Easylife In 2015 we saw consumer spending make a significant
and this worked with a fairly high degree of success. This
recovery compared to the past 5 years, in terms of
success, as well as new customer recruitment mailings
physical demand and average spend which improved
using Abacus Alliance data, grew our customer file
significantly across all sectors. The overall increase was
exponentially and we saw a clean profit on our campaigns
not quite back to pre-recession response, but a great leap
as a result.
forward. We saw a growth in online trade, however, our proportionate organic traffic remained static; ultimately
We explored a lot more dynamic and analytical targeting
our offline activity is still the driving force behind the sales.
in 2015 and this led to significant increases in conversion.
The website is simply being used more as the channel
We wanted to increase website conversion without
of preference to make the purchase. With consumer
negating the appeal for digitally recruited customers
spending on the increase, we altered our customer direct
from channels such as organic search, PPC and affiliates.
mail strategy by putting more emphasis on contacting
This process involved singling out individual segments
customers with recent purchases rather than focusing on
based on source and customer type and giving each
how much they spent. We assumed the general increase
one its unique dynamic proposition and journey. New
in consumer confidence and increased spending power
customers who were labelled as not digitally savvy
would naturally increase the average order value anyway
would get more confidence statements and slightly more clicks to checkout. The returning customer would have a reduced path to checkout with product selections based on previous viewing history. By combining these tactics, we improved our overall conversion rate by 30%.
“In 2015 we saw consumers spending make a significant recovery compared to the past 5 years�
National press insertions are still the heart of our media buying for the business. In 2015 this channel seemed to be erratic which without close supervision could have affected us badly. Managing our media booking inhouse provided us with the critical relationship with the publications and insights to navigate successfully through these pendulum swings of distribution. We saw consumer spend dip in the run up to the general election, but we recovered well with very good performance in quarter three. The suspicion is that the
00 32
demand was merely delayed. Cold weather is one of the critical ingredients in increasing the propensity to spend and the warm autumn did have a huge effect on demand. Overall demand was lower than anticipated, but it did create a healthy spread across the quarter. Normally, we see a big scramble for weather related products in a condensed period of time as soon as the weather turns. This puts a lot of pressure on stock control and fulfilment operations. As this didn’t happen it gave us a better opportunity to spread resources across the period, achieving better efficiency to counter balance the
“The website is simply being used as the channel of preference to make the purchase”
reduction in demand. It was these events or lack of them in early October that led us not to put too much emphasis on Black Friday/Cyber Monday or flash sales generally. The need for promotions seems self-fulfilling. Once consumers get used to a promotion, the expectation is set. On that basis, we tend to stay away from clearance or knocked down prices unless we are clearing obsolete stock. I would say that promotions do work, but you must be committed to a long-term strategy because dipping in and out can have a negative effect on the overall bottom line. In 2016 we will continue to focus on our core business, making it work harder and more efficiently. While consumer demand has been on the rise, the last five years of lean trade has taught us to continue the same strict monitoring but benefit from an increased response to generate an increased net operating profit. We have been quite ruthless in removing all the activities that were “nice to have” but added no real value to the business, as this was creating unnecessary distractions. We will be looking to revisit everything we do well and do it even better.
33 00
GIFTS, GADGETS & ENTERTAINMENT The Gifts, Gadgets and Entertainment category grew by 12.8% in 2015. There was increased sales growth across the first three quarters of the year (+25.3% in Q1; +25.5% in Q2; +18.0% in Q3) but there was a small decline in Q4 (-0.5% Year-On-Year), the biggest revenue quarter of the year and accounting for over 40% of 2015 sales. This was driven by a decline in November (-7.5% YOY), the biggest month of the year in terms of revenue. The largest growth was in May (+35.7% YOY). The first half of the year in 2014 saw a decline in revenues, so the 2015 increase during this period may in part be a
34
recovery from then. The Average Order Value (AOV) in the Gifts, Gadgets & Entertainment category was significantly higher in 2015 than in 2014 (+16.6% YOY). This indicates that there were actually fewer transactions in 2015 than the previous year, and that revenue growth was driven entirely by the increased spend per order. Mailing volumes were up 10.7% YOY. There were significant increases in mailing volumes in June (+47.1% YOY) and July (+55.5% YOY), but also some declines in April (-12.0% YOY) and November (-10.0% YOY).
GIFTS, GADGETS & ENTERTAINMENT REVENUE AND MAILING VOLUMES, 2014-2015
12.8 PERCENT
35.7% YOY
YOY
GROWTH
IN MAY
GROWTH
IN 2015
AGE DISTRIBUTION 12%
INCOME DISTRIBUTION 30%
10%
25%
8%
20%
6%
15%
4%
10%
2%
5%
0%
0% 18-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65-69 70-74 75-79 80-84
Gadgets, Gifts and Entertainment
UK
85+
Less than £10,000 £10,000 £14,999
£15,000 £19,999
£20,000 £24,999
£25,000 £29,999
£30,000 £39,999
£40,000 £49,999
Gadgets, Gifts and Entertainment
£50,000 - £60,000 & £59,999 Over
UK 35
HOME INTERIORS
& HOUSEHOLD GOODS The Home Interiors & Household Goods category grew by 13.6% in 2015. This is slightly lower than the previous year (+15.1% Year-On-Year) and is the fifth successive year of category growth. There was growth across all months, with the biggest growth seen in September (+24.2% YOY) and October (+22.2% YOY.) The lowest level of growth was in August (+4.5% YOY) and January (+5.0% YOY.) In 2014 there was exceptional growth in January (+27.2% YOY,) which may explain why the growth in January 2015 was
36
more restrained compared to other months. There was a decline in the Average Order Value (AOV) for the Home Interiors & Household Goods category of 2.8%. This indicates that the revenue growth was a result of an increase in the volume of transactions rather than a higher spend per order. Mailing volumes were marginally higher in 2015 (+1.6% YOY.) The biggest decline in mailings was in April (-28.0% YOY), whilst the biggest increase was in February (+24.3% YOY) closely followed by January (+21.1% YOY).
HOME INTERIORS & HOUSEHOLD GOODS REVENUE AND MAILING VOLUMES, 2014-2015
HOME INTERIORS & HOUSEHOLD GOODS SAW 24.2% YOY GROWTH IN SEPTEMBER
13.6%
YOY
GROWTH AGE DISTRIBUTION
INCOME DISTRIBUTION
14%
30.0%
12% 25.0%
10% 20.0%
8% 15.0%
6% 10.0%
4%
5.0%
2%
0%
18-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65-69 70-74 75-79 80-84
Home Interiors & Household Goods
UK
85+
0.0%
Less than £10,000
£10,000 £14,999
£15,000 £19,999
£20,000 £24,999
£25,000 £29,999
£30,000 £39,999
£40,000 £49,999
Home Interiors & Household Goods
£50,000 £59,999
£60,000 & Over
UK 37
INTERVIEW WITH… Jo Whitworth, Marketing Development Manager at Plumbs A recent trend I have seen is that more people seem to
has been positive we are also taking part in one hour
be looking for personalised and niche items and I believe
programmes on a TV shopping channel that explains the
that home shopping businesses are in a good position
process of the re-upholstering. We are also testing some
to offer those things. As a bespoke furniture covers and
video marketing which is proving to be a good way to
re-upholstery business, we offer a very hands-on, face–to-
communicate a more involved product. Going into 2016,
face service which gives us a positive point of difference.
the digital channels will be a focus for us with tests via
For our target market, which is the over 50’s, the
Affiliate and Facebook advertising.
emphasis on giving friendly advice and having someone to help you through the buying process can create a good
To support our service objectives, in 2015 we used data
buying experience for the customer and consequently
to understand and communicate with our customers
good advocacy.
more frequently through the buying cycle and after dispatch. We called more customers to talk them through
We recently reviewed our processes and found that our
the ordering process and afterwards sent them a thank
customers value service and quality above everything
you pack with incentives to order again, coupled with a
when deciding on a large item purchase. There is a lot
phone call to ask how the order process was for them.
of good brand imagery from furniture home shopping
We find that our customers really appreciate this more
businesses in the market at the moment which makes things look high quality, fresh and easy to purchase. This is attractive to consumers and is good for all of us in raising awareness that quality products are available from home shopping businesses at affordable prices. Bespoke furniture covers aren’t something you usually just order through the website, so our marketing objective is to get people to ask for a home visit. Our best channel in 2015 to achieve this was PPC (pay per click) but we know there was a halo effect from other marketing activity. We tried TV sponsorship last year for the first time and we believe this had a positive effect on response from all media channels. As a direct marketing company we usually look at every pound and try to work out how many leads we got from it. TV sponsorship is more brand awareness orientated but because it
38 00
“We tried TV sponsorship last year for the first time and we believe this had a positive effect on response from all media channels”
“Giving an offer works every time and if you want instant response, a time limit to the offer works even better”
personalised service. Customers often refer us to their
Going into 2016, we would like to be more adventurous
friends and encouraging this is at the forefront of our
and creative with our marketing by testing new media
thinking. “Recommend a friend” is very important for us
and approaches. To stimulate ideas and mitigate the
and simple incentives like vouchers for recommending a
risks, we plan to network with other companies, as often
friend work well.
it is not what you are doing but how you are doing it that can be critical for success. Understanding what has
Customers still expect incentives and promotion is still
worked and what hasn’t for similar businesses could
king in the home shopping world. We are competing with
give us the confidence to try things. Also, knowing the
high street furniture retailers who regularly have half
right agencies and third parties to work with for each
price sales so we have to give some sort of offer. Over
marketing discipline can make all the difference for
the years we have tested many type of incentives as well
strong campaign execution and performance.
as testing giving an offer versus giving no offer. Giving an offer works every time and if you want instant response, a time limit to the offer works even better. Added value order incentives are effective such as M&S vouchers. The Brand people say that the brand should speak for itself but I don’t think there is anything like a promotion or an offer to make someone act there and then.
39 00
40
OTHER THINGS TO KEEP IN MIND
41
POSITIVE UK ECONOMY CREATING RETAIL SUCCESS
By Mark Pragnell
Head of Commissioned Projects at Capital Economics Ltd
The British economic recovery is on the right track, largely
It fell from 5.6 per cent in January 2015 to just 5.1 per
because of consumers, and Brexit is unlikely to derail it.
cent at the end of the year. This led to a rise in pay growth whilst inflation remained subdued boosting household’s
Britain’s economy grew by its fastest pace since the
real earnings which rose by 2.4 per cent.
global financial crisis and was the fastest growing G7 economy in 2014. Last year, it lost out on first place to
There are concerns that the consumer recovery is
the United States. But despite a soft first quarter, the
unsustainable because it is in part being driven by
economy still expanded by a respectable 2.2 per cent in
unsecured credit growth. However, debt and interest
2015 as a whole. While some areas of the economy lost
payments as a share of incomes are well below their
momentum in 2015, the consumer recovery gained pace.
previous peaks. In 2016 downward pressure on inflation
Although in the early phase of the recovery retail sales
from lower oil prices and sterling’s previous appreciation
led the way, 2015 saw strong growth in spending on and
is set to fade.
off the high street. Consumers benefitted from falling oil prices which have plunged since their peak in mid-2014. The slump in energy prices has saved consumers the equivalent of 0.2 per cent of Gross Domestic Product on their fuel bills. This
increased
households’
annual
real
income.
Falling gas and electricity prices and food prices have also boosted households’ income. Indeed, real disposable income rose by an average of 3.5 per cent in the first three quarters of the year after contracting in both 2013 and 2014. This was one of the main reasons why household spending rose by its fastest pace in over a decade last year. Households were also given by a fillip by the continued improvement in the labour market. The number of people employed is currently at a record high and the unemployment rate has continued its slide.
42
“The economy expanded by a respectable 2.2% in 2015”
What’s more, employment growth is slowing now that the labour market is nearing full employment and we expect the Bank of England to hike interest rates for the first time in nine years later in the year. However, the tightening cycle is set to be very gradual and is unlikely to deter spending. The British economy should still grow strongly this year, by about 2.2 per cent in 2016, similar to last year’s rate. Admittedly, a number of factors threaten to undermine the recovery including the resumption of the fiscal
“Household spending rose at its fastest pace in over a decade last year”
squeeze and the uncertainty ahead of the European Union referendum. But we think that the economy should weather these relatively well. The Chancellor managed to soften the pace of fiscal tightening in his latest Budget, but the big picture remains that fiscal policy will be tightened more this year than last. That said, rising real earnings leaves households far better placed to deal with this stage of austerity than the last one. There are few signs yet that the referendum on Brexit is having any adverse impact on firms’ investment intentions and we do not think the vote will have a major impact on consumer spending either way. Unlike firms, we doubt that households would delay their spending. Consumers may be affected by Brexit if it hits domestic firms hard, but we doubt this would be the case. We continue to think that the United Kingdom’s prospects are good whether in or outside the European Union. As such, whatever happens, consumers won’t be flustered.
43
HOW WEATHER INFLUENCES CUSTOMERS DEMAND
Weather is a critically important external factor for
same from one year to the next. As the conditions change
consumer-focused businesses. This is because no other
so does the consumer response and 2015 proved to be
outside variable shifts consumer buying behaviour as
another year with glaringly different weather and sales
frequently, directly, immediately, or meaningfully as the
patterns.
weather. The climate outside affects decisions every day:
year-on-year weather changes affected retail businesses
from the clothing people wear to their food and drink
and the demand for specific product categories.
choices, from the leisure activities they pursue to the
Planalytics’
chores that need to be done in their homes, gardens, and
measurements of how much the weather (and only the
garages. The challenge for businesses is that the weather
weather) positively or negatively impacted demand for a
is always changing and the trends rarely seem to be the
product or overall transactions.
The following summary highlights how the
Weather-Driven
Demand
values
are
YEAR-TO-YEAR TEMPERATURE VARIATION (JAN-JUN)
44
The first half of 2015 was stubbornly cooler in comparison
made things even worse. Weather-Driven Demand
to both “normal” and the prior year. Whilst the chillier
(March 2015 v March 2014):
temperatures helped clear some winter merchandise in
Gardening Products -9%, Skirts -11%, and Casual
January and in early February, the trend did businesses
Trousers -6%. The less than favourable trend continued
no favours during the important spring selling season.
into April and into the run up to Easter, but warmer
March is a particularly important period for fashion
weather did arrive over the two weeks after Easter.
retailers along with DIY chains and garden stores as
Although this is not apparent on the monthly map, the
springtime officially arrives and the focus of consumer
long awaited warmup along with much drier conditions
activities and shopping changes. These retailers were
for Wales and the southern half of England finally
already facing strong turnover comparisons produced
helped kickoff spring spending in earnest and resulted
by a very warm March 2014 (7th warmest in 54 years)
in stronger demand for seasonal categories. Weather-
and Mother Nature was decidedly less generous
Driven Demand (April 2015 v April 2014): Garden Hoses
in 2015. Cooler temperatures throughout the UK
+10%, Beer +3%, and Shorts +5%. The conditions were
delayed the start of spring purchases and stormy
not as good for some categories such as Sleeveless
weather across the north in the first half of the month
Tops, which were down 11%. May turned less favourable
Lawn Mowers -25%,
By Tim Morris Managing Director, Planalytics Europe
overall with the UK overall experiencing an even stronger
(May 2015 v May 2014) highlight the regional differences
cold variance to 2014 than the first two spring months.
– Women’s Sandals were -36% in Manchester whilst only
London and other locations in southern England fared
-1% in London, Exterior Paint was -19% in Glasgow versus
better with temperatures closer to normal and less
+14% in Bournemouth.
rainfall. A couple of Weather-Driven Demand examples
YEAR-TO-YEAR TEMPERATURE VARIATION (JUL-DEC)
The year-on-year weather volatility continued in the
weather. December proved to be even worse for fashion
second half of 2015. The core of summer featured a much
and winter-focused businesses. It was the warmest
colder July that hurt seasonal businesses followed by a
December on record and this coming on the heels of a
warmer August that helped some companies rebound.
challenging November led to heavy discounting as retailers
As autumn arrived, clothing and department stores were
faced mountains of winter stocks that needed to be moved.
greeted by weather that encouraged consumers to think
Making matters worse, many locations in Ireland, Scotland,
about updating the fall-winter wardrobes. October’s cooler
and northern England faced record-breaking rainfall and
temperatures and clear skies supported footfall on high
flooding, further altering typical purchasing patterns.
street and stimulated seasonal buying. Weather-Driven
Weather-Driven Demand (December 2015 v December
Demand (October 2015 v October 2014): Knitwear +5%,
2014): Heaters -38%, Women’s Boots -13%, and Winter
Outerwear +11%, Soup +3%, and Cough-Cold Products
Coats -18%. For several winter clothing categories
+4%. It is said all good things must come to an end and
it
from a weather standpoint that definitely happened as
November-December period in at least 10 years.
the calendar flipped to November. Overall, November
Planalytics calculated that the unfavourable weather
2015 ended up being the 4th warmest in 55 years and
hurt topline sales by £-83 million at clothing store chains
this significantly slowed demand for winter items.
during the last two months.
was
the
worst
demand
environment
for
the
Weather-Driven Demand (November 2015 v November 2014): Hats, Scarves & Gloves -15%, Fleece -11%, and
David Frieberg, dfrieberg@planalytics.com,
Long-Sleeve Shirts -13%. The month also registered as
http://www.planalytics.com/
the 7th wettest November, hurting footfall for many retailers.
Clothing Store Transactions fell 2% due to
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CONSUMER INDICATORS
2015 - review of the year Digest of Consumer Behaviour
UK Retail – 2015 Review The performance of UK retail in 2015 can be characterise as lack lustre, especially in contrast to the resurgence seen in 2014. Overall the UK retail sector contracted in value in comparison to the prior year, albeit underlying price deflation of 2.3% saw volumes increase. Powered by Internet Retail the direct channel continued to register strong growth but at the expense of store visits which fell for the eighth consecutive year. (note:- s ales of automotive fuel are excluded throughout this review)
Retail overview
The value of seasonally adjusted UK retail was £340.3 billion in 2015 - a decline of -0.1% on 2014. With selling price deflation at -2.3% sales volume increased by 2.2% in the year.
Food
Food was the poorest performer of the three headline retail sectors with a decline in value sales of -2.0% and only minimal volume growth of 0.3%. Underlying price deflation was significant at -2.3%, as competition intensified. The future holds:- a sharply competitive market, and more selling-price deflation from Value traders.
Non-food
After exceptional growth in 2014 (7.9%) the non-food sector saw growth slow to just 0.5% in 2015. With price deflation of -2.0% driving selling prices down, volume growth was 2.5%.
Internet Channel Total retail sales via the Internet were £42.6 billion in 2015 compared with £38.6 billion in 2014. This represented:• •
growth of 10.5% 12.5% of total UK retail
Annual growth and participation 2011
2012
2013
2014
£bn
£bn
£bn
£bn
£bn
Total Retail Sales
302.4
310.8
320.8
340.5
340.3
Online Retail Sales
25.1
29.0
33.5
38.6
42.6
Annual growth
18.1%
15.3%
15.5%
15.3%
10.5%
Participation
8.3%
9.3%
10.4%
11.3%
12.5%
Subsector
2015
Growth slowing
The future holds:- economic and political uncertainty will suppress performance in this sector, whilst growth of Internet retail will continue to adversely impact shopping visits.
The Internet retail channel continues to increase its share of UK retail, however the rate of growth is slowing. 2013 2014 2015
Non-store (catalogue & pure play internet)
Annual growth
15.5%
15.3%
10.5%
Share of UK retail
10.4%
11.3%
12.5%
Non-store retail, comprising catalogue, online pure play and market trading, was worth £28.7 billion in 2015, an increase of 7.4% compared to 2014, outstripping all other sectors. As non-store retail continues to enjoy impetus from Internet growth its share of UK retail increased from 7.9% to 8.4%. The future holds:- continued growth for this direct-to-consumer sector, assisted by continued strength of pure play Internet traders.
Note:- Internet retail is a channel encompassing goods from all retail subsectors, not just pure play.
Shopping visits As Internet retail again increased its share of the overall UK retail in 2015, consumer shopping visits continued to fall. Compared to 2014 visits were 1.5% lower. Annual store footfall has fallen (year-on-year) for the fifth consecutive year. • • • • •
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Published by Step Solutions
2011 down 1.3% 2012 down 3.2% 2013 down 3.8% 2014 down 0.6% 2015 down 1.5%
www.stepsolutions.co.uk
By Tony Lahert Managing Director at ‘Step solutions’
2015 - review of the year
Consumer price inflation
Consumer credit (non-property/ex
student loans)
The annual headline rate of consumer price inflation (CPI) was 0.2% as at December 2015, down from 0.5% on the prior year. Movements in key retail sectors were:-
Consumers increased their indebtedness on nonproperty borrowing in 2015, ending the year at £178.3 billion - a significant increase of £10.4 billion, which was 5.6% up on a year earlier.
• • • •
Having reduced their exposure to this form of shortterm debt, since its recent peak of £188.9 billion in 2010, UK consumers appear to be content to see it increase at an accelerating rate.
Food down from -1.7% to -2.9% Clothing /footwear unchanged at -0.3% Furniture & HH goods down from 0.2% to -0.2% Alcohol and tobacco down from 5.0% to 0.3%
Residential property
Unemployment
The average UK house price ended 2015 at £196,999 up £8,553 (4.5%) compared to a year earlier. UK house prices have now eclipsed the high reached in October 2007, standing £10,955 higher. Compared to the low point of February 2009 prices have improved significantly - by £49,553 (33.3%).
The level of UK unemployment decreased by a further 172,367 during 2015, ending the year at 1.689 million people unemployed. This is a rate of 5.1% unemployed, the lowest for over 10 years and compares to 5.7% a year earlier.
This important aspect of UK consumer confidence will drive both consumer confidence and retail demand in the forthcoming year.
For more information contact:
www.stepsolutions.co .uk
Anthony Lahert - +44 (0) 7973 714075 Neil Hargreaves - +44 (0) 7796 958750 Bill Mitchell +44 (0) 7966 772619
Compared to the high reached in November 2011 there were 1,023,797 fewer people unemployed in the UK, by 2015 year end.
Published by Step Solutions Limited The Consumer Indicators brand, trademarks and the intellectual property of the underlying data processes of CI are the sole property of Step Solutions Limited. Copyright © Step Solutions Limited 2015. All rights reserved
47
HOW WE CONSUME ENTERTAINMENT IN THE HOME
The average UK home contains 8.3 connected devices (smart phones, TVs, tablets laptops etc). This is 12% more than a year ago according to YouGov (Omnibus, Feb 2016). And with time spent online about 3 hours and TV viewing about 3 and a half hours, how does the average household, divide its screen time?
Research Objectives: People use devices for 2 hours, 59 minutes a day*
People watch TV for 3 hours, 35 minutes a day**
But people only have a finite amount of attention How do they really divide this attention between different screens?
What really happens in the modern living room?
*UKOM data provided by comScore H2 2015 **BARB - Average daily viewing calculated by total weekly viewing figures sourced from http://www.barb.co.uk/whats-new/monthly-viewing-summary
To gain a picture of this new media world in the living room,
in-home ethnography. This short abstract draws on data
the IAB (Internet Advertising Bureau) commissioned its
from the quantitative and passive monitoring elements to
Real Living research, conducted by Sparkler in November
shed light on how devices compete for attention in the
2015. The research combined a quantitative online study
modern living room.
with passive monitoring of app and online usage with
Mobile technology has changed the way we consume entertainment in the home Total
16-34’s
Only
57%
78%
50%
…agree that mobile technology has changed the way they consume entertainment in the home
…of people would now say their TV set is the main focal point of their living room
Source: Quantitative Survey, Question Q13 “Please read the following staments about watching TV or online video content in this context and tick any that you personally agree with” and Q23 “Thinking more generally about the role of technology in your life, which of the following do you agree or disagree with?” Base: Total–n=1010, 16-34’s–n=323.
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By Clare O’Brien, Senior Industry Programmes Manager, IAB UK
Over half (57%) of those surveyed agreed that ‘mobile
use of connected devices at home whilst watching TV is
technology has changed the way that I consume
so prevalent that access to multiple screens should be
entertainment in the home’. This increased to over
considered the norm. 70% of online UK adults said they
three quarters (78%) of 16 – 34 year olds. These changes
ordinarily use a connected device whilst watching TV
mean that only half (50%) of those surveyed now think
content at home. This increases to almost nine out of ten
of the TV as the main focal point in the living room.The
(87%) of 16 – 34 year olds.
Access to multi-screens is now the norm
70%
87%
…of people claim to ordinarily use a second screen whilst watching their television set
…of those aged 16-34 years old claim to ordinarily use a second screen while watching their television set
Source: Quantitave Survey, Question Q14 “Over the course of the evening, would you ordinarily use one of your mobile devices whilst watching TV or online video content at home?”. Base: Total–n=1010, 16-34s–n=323.
The Full Real Living results
Recommendations
The full results available from www.iabuk.net/real_living
Given the massive changes in consumer behaviour and
also include bio-metric data gathered two respondents
the disruption to the way we consume entertainment
over two evenings and emphasise the variety of sources
in the home it’s vital that advertisers think about the
that account for ‘high attention’ moments in the living
implications that these finding have, for example:
room – for example from connected devices – smartphones, tablets and laptops – in addition to the TV.
• There is no hierarchy of screens in the living room, only fragmentation of attention. Connected devices should be regarded as equals to TV when trying to connect with highly attentive people in the home.
“There is no hierarchy of screens in the living room, only fragmentation of attention”
• The constant availability of multiple screens means it’s vital to grab people’s attention quickly and then hold on to it to convey your message; failure to do so will make them turn to more compelling content on a different screen. For more information email: research@iabuk.net or visit www.iabuk.net/real_living
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ABOUT US: EPSILON
Epsilon is the global leader in creating connections between people and brands. An all-encompassing global marketing company, we harness the power of rich data and groundbreaking technologies, engaging creative and transformative ideas to get the results our clients require. We employ over 7,000 associates in 70 offices worldwide.
How can we help you? Marketing data Understand your customers’ lifestyles, attitudes and behaviours, and connect with them on a deeper level.
Insights & strategy Step into your customers’ lives and see things as your customers see them.
Marketing technology Make smarter, more effective connections between your brand and your customers.
Creative services Engage your customers with fresh, intelligent creative that connects them to your brand at an emotional level.
Media reach We source and select the right media, so you know that you’re reaching your audience in the right way. Our hard work is reflected in the results we achieve for our clients. Their trust means we continue to grow and gain recognition from the industry.
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ABOUT US: THE ABACUS ALLIANCE
The Abacus Alliance is the UK’s largest transactional data cooperative. Multi-channel retail members share and regularly update their transactional customer databases to create a combined view of what households are buying across the market. This shared database gives access to precise insight and targeting across direct mail, email, online and telemarketing channels for deeper engagement with current customers or to reach new prospects. Over 500 multi-channel retailers contribute their customer and transactional database to the Abacus Alliance, totalling 18m households, 26m individuals, 576m transactions and £20bn spend.
How can we help you? Recruit Maximise the return on investment on your customer acquisition campaign by targeting new customers who look like your best customers.
Retain Reactivate lapsed customers and enquirers by identifying those who are likely to buy again.
Realise Track customer performance, benchmark against your competitive category and measure share of wallet.
Contact Us: web: www.epsilonabacus.com email: info@abacusdirect.com twitter: @abacusalliance LinkedIn: Epsilon Abacus You Tube: abacusalliance
51
MARKET INSIGHT REPORT
Business intelligence is becoming ever more important in a fast moving, multichannel environment. Understanding consumers’ buying patterns can give you the competitive edge when allocating your marketing spend and planning for the year ahead. The Annual Trends Report provides a valuable overview of revenue and marketing activity trends in your category. However, more tailored insights are available through our Market Insight Report.
Market Share & Transaction Trends Module Compares the purchases customers have made with your business to their spending within your competitive category. The analysis also shows how your market share changes over time and can be used to measure effectiveness of past strategies, as well as to identify opportunities for business growth.
Opportunities: • Develop strategic plans and forecasts by studying the historical growth in the industry. • Plan merchandising and marketing strategies for the upcoming year. • Perform due diligence when assessing most viable opportunities for mergers, acquisitions and investments.
Seasonality Module Identifies months with the highest potential in which to increase market share, by sending more promotions to your customer database and prospects. The information can be used to optimise a circulation plan, adjust timing of promotional offers and determine allocation of marketing resources.
Opportunities: • Plan budget by determining optimal mail frequencies and circulation quantities by month, quarter or season. • Determine the prime campaign dates by pinpointing when the season peaks for your business and your competitive category.
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Merchandise Category Module Confirms what other product types your customer is purchasing across the Abacus Alliance. This analysis will identify how your customers penetrate our 21 consumer merchandise categories and will help to identify opportunities for new product lines that appeal to your buyers.
Opportunities: • Determine customer loyalty and discretionary spending power by analysing the total amount your households are allocating to your category versus other categories. • Identify new merchandise lines, partnerships, acquisitions, or spin-off opportunities.
Demographic Profile Module Provides a profile of your buyers compared with your competitive category and the Alliance as a whole. The report covers key demographic variables such as age, household income and presence of children, along with lifestyle interests, online purchase activity and newspaper readership.
Opportunities: • Formulate advertising and creative strategies for each marketing channel. • Develop niches and/or expand into broader markets by identifying demographic differences between your company and the competitive category. • Identify most valuable and loyal customer markets by profiling those households that account for a majority of your sales amount.
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CONTACT US
Find out more about membership Ben and his team introduce new members to the Abacus Alliance, helping to grow the depth and breadth of data whilst ensuring it is constantly refreshed with new and varied transactional and web browsing data information. Fifty-five retail brands joined us in 2015, adding new transactions for over 5 million UK
Ben Collier Business Development Director
households. Please speak to him to learn more about how the Alliance database and contributing data works.
t: +44 (0)20 8943 8011 m: +44 (0)7717 767 352 ben.collier@epsilon.com
Want to discuss our solutions and innovations? Dylan is responsible for overall leadership of the Business Development and Client Management teams. His experience and knowledge ensures that Abacus is constantly providing new, relevant services that keep Alliance members ahead
Dylan Jenkins Sales Director
of their competition. Please contact him if you’d like to provide feedback about our solutions or discuss ideas for future innovation.
t: +44 (0)20 8943 8023 m: +44 (0)7919 534 799 dylan.jenkins@epsilon.com
Customer retention and insight products Michele is responsible for Abacus’ strategic services team. He overseas the suite of bespoke analysis and reports to help members understand more about their customers, which in turn maximizes revenue and return on investment.
Michele Masnaghetti Strategic Services Director t: +44 (0) 20 8943 8036 m: +44 (0)7500 049 171 michele.masnaghetti@epsilon.com
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Please contact him if you would like further information on our customer retention or insight products.
TRUSTED BY:
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Find out more telephone: +44 (0) 20 8943 8000 web: www.epsilonabacus.com twitter: @abacusalliance LinkedIn: Epsilon Abacus You Tube: abacusalliance