Comment: Mastering performance during the peak shopping season

The UK’s leading retailers have been busy reporting the results of Christmas trading performance over the past few weeks. How a retailer fares in the intense competition over the Christmas period can make or break them.

While the results were expectedly mixed, one common thread was the rise of strong online sales as UK shoppers sought greater convenience, preferring to bargain hunt from the comfort of their homes.

Figures from the British Retail Consortium (BRC) showed that UK retail store footfall actually fell by 3.5% in December – the biggest decline in the past five years – giving pure online players a prime opportunity to shine.

And they did shine: Boohoo reported that it had its best Black Friday period ever as sales doubled over the Christmas period due to the popularity of its PrettyLittleThing and Nasty Gal online brands. Likewise, AO World continued to drive double-digit sales growth in its UK business over the peak period.

A greater variety of delivery options from both etailers and bricks-and-mortar retailers with online offerings meant that many purchases of last minute gifts were done online. Furthermore, with slow wage growth and a squeeze on discretionary spending, UK consumers looked for competitive prices and value, choosing to do their research carefully online before spending.

The investments many online pure players made over the course of the last year to ensure customers experienced a seamless service and swift delivery over the Christmas period paid off. According to the latest Christmas Shipping study from Kurt Salmon, part of Accenture Strategy, UK etailers under-promised and over-delivered for customers, particularly when it came to free and fast delivery.

Around 50 UK apparel, luxury, beauty and consumer goods retailers with online offerings were measured on their ability to fulfil customer orders quickly and accurately over the busy Christmas season. The retailers that particularly excelled during this period included: Amazon, Argos, Beauty Bay, Boohoo, Escentual, Lookfantastic, Missguided, New Look, Whistles and White Stuff.

The study found that many UK etailers outperformed their bricks-and-mortar counterparts when it came to speedy shipping, with deliveries taking on average 2.6 days compared to 3.4 days, respectively. These retailers gave themselves added flexibility during the busy period by providing a range of shipping dates, but the majority delivered for customers much earlier than promised.

On average, etailers also offered lower delivery charges for home deliveries. It is evident from the study that many bricks-and-mortar retailers continue to struggle with effectively managing logistics and fulfilment costs for last mile delivery.

Other findings from the study included:

  • UK retailers gave shoppers free shipping options, but with a catch: 86% of retailers surveyed offered a free delivery option over the busy Christmas period, but half offered it on the condition shoppers picked up goods in-store through Click & Collect, as opposed to getting goods delivered to their door. Also, 66% offered a free standard delivery option to homes, but the majority (73%) of these retailers only did so if customers met a minimum spend threshold.
  • The rise of ‘ghosting’: While all orders were confirmed via email, the amount of communication thereafter varied greatly, with many retailers ‘ghosting’ customers, leaving them in the dark and failing to communicate when orders would arrive.
  • The increasing cost of convenience: The average cost of same-day delivery this Christmas was £8.13, a huge 40% premium compared to next day delivery (average £5.80). Only 12% of retailers surveyed offered a same-day service, a slight increase compared to 2016 (8%).

As UK retailers continue to analyse their results over the last period and plan for the next peak season, many will be reconsidering the purpose, size and format of their store portfolios. They will look to boost analytics capabilities to gain deeper insights into customer preferences, and bolster operations and supply chain infrastructure to ensure they can continue meeting increased demand for online orders.

A priority for multi-channel retailers will be to align their ecosystems to survive as etailers continue to grow without the shackles of legacy bricks-and-mortar systems. Doing so will be essential to ensure they capitalise on a continuing trend towards more online sales, and will stand them in good stead for the next peak trading season.

Siobhán Géhin, MD at Kurt Salmon, part of Accenture Strategy.