In response to the fast changing nature of retail, independents need to adapt their product mix to maximise sales in growth areas and learn to use the web as an effective marketing tool, argued the speakers at retra’s 70th anniversary conference in Gateshead. Richard Stevenson reports.
Retra’s 70th anniversary conference was marked by a background of the most difficult high street trading conditions in living memory.
But it was clear from the near 300 delegates and 30 exhibiting manufacturers attending the two day event in Gateshead that the high street was not simply going to lay down and die.
Through a series of presentations, from speakers as diverse as GfK, manufacturers and internet consultants, the need to embrace change, improve marketing and concentrate on stronger performing market sectors was a common theme. As retra president Andrew O’Gorman remarked in his opening keynote address, “The last few years have been the most turbulent in the last 30 years and those who survive will be those who adapt.”
He noted that, while the price of major appliances and major CE products has plummeted over the last two decades, operating costs have soared. During this period customers have become more savvy and price-centric, while independents have been under constant attack from multiples, supermarkets and the internet. O’Gorman described the more recently emerging fulfilment operations, which allow non-electrical retailers to leverage their brand to sell electrical goods online, as “sucking the life out of the high street.”
The conference theme of ‘The Winning Pitch’ was beginning to sound a little optimistic from the outset and by the time GfK’s business group director, Nigel Catlow took to the stage it was clear a more accurate theme would have been ‘Staying Alive’. At last year’s conference Catlow gave a bleak overview of the UK electrical markets, softened only by his laconic wit. His opening gambit this year was simply; “like last year, only worse”.
The GfK presentation starkly highlighted the serious decline in most major sectors, particularly CE, but also underlined where opportunities remained strong. Top line shock figures on the CE market showed a decline of nearly 20% in the last 12 months, equating to a staggering £1bn loss at retail. The photography sector had also been hit hard by the growth of smartphones, showing a 7% decline year on year.
Major domestic appliance sales remained fairly flat in volume over the last 12 months, with a small increase in average price point barely adding 1% to the overall market value. While there was some good news in the IT sector, which showed a healthy 5% increase in value, the majority of that growth has come from Apple iPads and other tablet devices that are not traditional fare for most CE independents. Perhaps the only beacon of light among this gloomy outlook was small domestic appliances, which due to soaring values in premium products, reported a solid 5% increase. However, taken as a whole the overall UK electrical market to February 2012 was down 5.5%.
Alongside the grim economic climate GfK identified the key issues responsible for driving the market down. The first is consumer confidence, currently at a 20 year low of -30%.
Secondly, the UK consumer is traditionally an early adopter of technology, often way ahead of other EU countries, and in many cases we have reached saturation.
An even greater issue for independents is the changing nature of UK shopping habits. Nearly 16% of all retail goods are now sold online and this figure is likely to grow by at least 1% every year for the foreseeable future. It is even worse in key electrical sectors with online sales of white goods going from 16% of the total market to 23% in the last two years. This trend is not only likely to continue, it may even accelerate as UK consumers begin to leverage the 25m connected devices they bought last year alone. The average user already spends over four hours a week shopping from a tablet or smartphone and this figure is set to rise as more families become at ease with surfing a tablet while watching the TV.
So what can possibly rectify this dire situation for independents? The answer according to GfK’s Catlow is in changing your product mix and capitalising on natural market opportunities. Independents should look into MDAs if they are not doing so already, SDAs and IT goods. SDA for example has shown consistent growth through the last few recessionary years, particularly at the premium end, such as bean to cup coffee makers and high value floorcare, and is worth well over £2bn at retail. Only 2.2% of the UK SDA market is sold by independents, which looking at it another way is a 97.8% growth opportunity.
The same is true of the £3bn UK MDA market of which only 20% goes via independents at this time. In this sector premium features do drive value growth with high capacity washing machine, luxury side-by-side refrigeration, range cookers and induction hobs all adding significant value.
In a series of manufacturer presentations the common themes of working together, embracing the internet as a selling tool (in store and online) and concentrating on higher value products prevailed. Sony’s consumer sales director, Chris Bowen understandably opened his presentation by stating he was glad to see the back of the last financial year. Sony had a particularly troubled 12 months trading, culminating in the announcement of 10,000 redundancies worldwide the week before the conference. He noted that the AV and IT markets together fell 7% in volume and 16% in value last year, indicating that the market is reverting to closing the deal on price.
“UK consumers have around £320bn of discretionary spending power yet only 3% of that goes on AV and IT equipment,” said Bowen. “For many consumers the retail experience is confusing, disjointed, and full of conflicting advice. We estimate that £2.2bn of sales are ‘lost’ as customers start the sales journey but fall out and never purchase. We need to work together, minimize confusion among consumers and better exploit the innovation that we as an industry are so good at.”
With ever more CE devices connected to the internet and controlled by an iPhone or Android App, Bowen suggested TV retailers should look to high bandwidth broadband and get customers to interact with Smart TVs for example using their own devices in store. “It is going to be another tough year but exciting things can happen and we must work together.”
The same sentiment echoed throughout the presentation by Michael Steinle, CEO of BSH Home Appliances. Noting a 4.7% increase in the value of their MDA business in the UK, Steinle commented, “Makers need to talk directly to retailers about marketing and work together. As 80% of people now research a white goods purchase online, the marketing must be across all channels to engage the customer. Let’s talk about marketing, not the price.”
BSH has a selective partner programme for Bosch, Neff and Siemens retailers designed to support marketing and sell through.
Second day of conference, started with the presentation by Graham Loosley of marketing consultants KPI, was a whirlwind of dynamic information regarding improving internet marketing.
The two key areas Loosley identified as areas that retailers should strive to optimise was email marketing and mobile web. “There is huge growth in mobile web traffic and mobile search and next year we predict some 30% of all web traffic will be via a mobile device,” said Loosley. “One in three mobile searches are looking for local results and this presents high street retailers with a great opportunity for location-
based marketing and web optimisation.”
As Google keeps changing its search engine parameters Loosley noted how increasingly complex it is to get and retain a high position in natural search rankings. While link building used to make a big difference to a site’s search ranking, today mobile links, video content and links to trending social media is required to get you above your competitors. As the top three results in a Google search get over 60% of the click through traffic, this is a vital element in marketing your store on line.
The small opportunity
After the many presentations highlighting the difficulties in the market and small points of bright light in the gloom, Morphy Richard’s sales director, Gary Sharp delivered a fabulously informative and up beat look at the opportunities in the small domestic appliance market.
“While volume in the SDA market has shown a slight decline of 2-3% year on year, the value has gone up 8.7% to well over £2bn in the same period,” noted Sharp. He highlighted the spectacular growth in high value coffee makers, many now with price points over £500, as well as Morphy’s own electronic toaster, DeLongi’s Style range, Philips and Tefal’s air fryers and Bissell’s Deep Clean floorcare. All of these products are driving up market value and benefit from widespread promotion, often on prime time TV, by the manufacturer. These infomercials are usually available from the manufacturer to be played in store too.
In addition to the growing value, the SDA market offers products that catch the eye in window displays, increase footfall in store and are often impulse purchases.