Christmas trading and technology: what the experts say

The raft of retailer Christmas trading results announced to the market since December 25th have been a cause of positivity and concern in near equal measure.

Businesses such as Next, John Lewis and House of Fraser have posted some encouraging figures, but Thursday saw Marks & Spencer (M&S) announce a sales decline for its third quarter and Morrisons' reveal a like-for-like festive sales drop of 5.6%, compared to last year.

The UK's largest retailer Tesco experienced a 2.4% decline in Christmas trading in comparison to 2012, while Debenhams issued a profit warning on New Year's Eve after sluggish trading activity. Mothercare followed suit earlier this week when it cited negative consumer reaction to delivery charges as one reason for a slowdown in sales.

It goes without saying that all of the UK's leading retailers are making or already have made some significant investment in their multichannel offering, while some – such as Morrisons and The John Lewis Partnership – are spending millions on overall system upgrades that they hope will future-proof their businesses.

On Friday, the British Retail Consortium said that UK online sales of non-food products grew 19.2% in December versus a year earlier, while eCommerce represented 18.6% of total non-food sales during the month. Overall UK retail sales were up 0.4% on a like-for-like basis, compared to the same month in 2012.

Essential Retail caught up with a number of industry commentators to analyse which companies are ahead of the game in terms of tech investment, and to understand who is struggling and what they must do to return to the growth trail.

Robert Gregory,  global research director at Planet Retail, commented: "The dire Christmas results of Morrisons, which out of all the UK grocers is playing catch-up in terms of eCommerce, proves beyond doubt that investment in online is not just necessary/a nice to have but virtually essential for long-term survival.

"Shoppers view only brands, rather than channels, and increasingly want a seamless shopping experience – whether in-tore, on a computer, a tablet or mobile. The winners this year were those which recognised this and had the systems in place to give shoppers that single view they demand."

Nick Bubb, retail analyst and member of the KPMG/Ipsos Retail Think Tank (RTT), commented: "The accelerating channel shift to both more online shopping and more convenience store shopping is causing big problems for even the best equipped operators in the supermarket industry and it is crucifying those that have been left behind, like Morrisons."

Paul Martin, managing director at Boxwood Insights, remarked: "Christmas trading for UK retailers delivered a mixed bag – with the likes of John Lewis Partnership, Next and Nisa announcing positive results and on the flipside retailers such as Debenhams, Tesco and Morrisons posting more challenging numbers.

"The overarching message is that the overall trading environment remains difficult but one key positive message has been the growth of online sales. Specifically fuelled by sales through tablets and mobile devices Tesco reported 14% year-on-year online sales growth and Sainsbury's more than 10%. Retailers like House of Fraser and John Lewis Partnership that have invested heavily in their technology systems to enable online transactions and fulfilment are reaping the rewards."

Reflecting specifically on M&S's latest trading figures, which once again saw the retailer's general merchandise business prove a drag on overall sales, Neil Saunders, managing director at Conlumino, said: "One area where M&S has made good strides is in online and multichannel. The growth rate here is strong and remains above that of the overall market. Moreover, we believe there is significant potential for M&S to drive even more sales through online over the next few years. International is also another area of progress; while it is currently an embryonic part of the business, it will deliver future dividends for the group.

"In a nutshell, however M&S is still telling the same old story: a great food business with a general merchandise business that simply must try harder."

Dr Tim Denison, director of Ipsos Retail Performance and KPMG/Ipsos RTT member, added: "The great diversity in the trading figures underline how important it was this Christmas for retailers to offer their customers the ultimate in convenience, to shop at the times and use the channels that suited them best. 

"More than ever before, people shopped indiscriminately across the channels, buying in-store or online at their leisure, focused more so on finding and buying chosen gifts than favouring a particular channel. Retailers that couldn't offer a multichannel service and seamless operations clearly missed out."

Daniel Lucht, director at Research Farm, said: "In grocery, Morrisons and Tesco results have clearly disappointed, but at least Tesco's online grocery growth has been strong, as has Sainsbury's, which just managed to keep its quarterly growth record on track. [Homeware retailer] Dunelm did well, reaping the benefits of investing in its multichannel offer and a new fulfilment centre.

"Looking ahead, I believe the retailers we are talking about right now are already doing what is necessary, with Morrisons buying into the Ocado model and impressive transformation at Tesco (from the hudl to blinkbox, their new semi-automated dark stores for online grocery to its 3P marketplace).

"M&S is moving from the Amazon platform to its own online platform, so we should see some innovation and evolution in the offer, and it is reorganising its supply chain. Lastly, Sainsbury's is building its first dark store for the online grocery offer."

Bryan Roberts, director of retail insights at Kantar Retail, commented: "Christmas was late, Christmas was tough and Christmas was tech-driven.

"A number of retailers have hinted that this was the first 'mobile Christmas', with others adding that click & collect has been a non-negotiable requirement for many shoppers. Certainly, those retailers that are well-equipped in mobile and multichannel have fared relatively well and it is notable that Morrisons' abysmal performance was directly pinned to an absence from the online arena.

"Mothercare's profit warning, while not a huge surprise, was attributable in part to a withdrawal of free shipping compared to last year. What this suggests is that shoppers want to shop a retailer across all channels. For most retailers, this means being present in these channels and not penalising those shoppers who wish to move across them – there will come a time when delivery charges and shipping fees will be seen as curious relics of a bygone era."