Monday, 19 March 2018

The changing retail environment in the UK

Tanvir Ahmed

Thousands of Wilko workers facing redundancy as retailer announces staff shake-up
– The sun, 11th August 2017
Tesco to axe 1,200 head office jobs
– BBC News, 28 June 2017
Sainsbury’s cost cuts threaten 1,000 jobs
– The Telegraph, 5 August 2017
Thousands of Asda workers face redundancy or reduced hours – the Guardian, 10 August 2017
If I scan some of the news on UK’s newspaper, those shocking news on redundancies will pop-up. Clearly, the top retailers are struggling and taking different cost saving initiatives. Back in 2015-2016, a common news was how big losses those big retails made in the previous financial year.Like Tesco reports worst results in 96-year history with £6.4bn loss or Asda suffering worst sales fall in its 67-year history.
Why? What suddenly has changed that those big giants are facing their worst nightmare? Let’s do some deep diving into UK’s retail landscape. There are three keywords which are making all the differences –
1. Deflation
2. Discounting
3. and Discounters
Deflation: All the big supermarket chains are struggling, falling profits. Overall media and promotional spend reduced significantly and they are reducing the number of stores to save overheads and minimize loses.
Discounting: One of the key drivers of those results are the massive price war. Brands are still reliant on promotions.
• 42% of branded sales are on promotion
• 60% of branded promotional sales are price cuts
As a result, all the top retailers falling return on capital invested and supply chain savings passed on to consumers to stimulate demand.
Discounters: Shift of spend are getting away from large stores. Aldi and Lidl hit 11% market share in exit 2015. With accelerated store openings and aggressive sizing-pricing offering, discounters are now on track to hit 15% market share by 2020.
As a result of those changing scenarios, UK’s retailers are trying to find new ways to differentiate. One of the key areas they all are putting the best effort behind is the eCommerce (Digital sales) platform. The industry has realized that consumer shopping trend, habit and preferences are changing. This is for sure that online will continue to grow sales faster than stores (Click vs. Brick). The recent data shows that while Brick sales are flat, click sales increasing. Consumers are now connecting and then shopping. 30% GB shoppers regularly shopping online. All the retailers are trying to maximize this opportunity and rework on overall strategy. With <3% market share of online grocery Amazon lack scale and they have invested 15b in their European infrastructure since 2010. The Implications of this initiate will be that Amazon already attract more grocery shoppers than Ocado. Amazon Fresh (daily delivery in urban locations) has potential to disrupt the market. Time will answer what will be the picture. This is for sure that, in markets like the United Kingdom – online shopping & discounts have changed the entire picture in no time. This will be interesting to observe how Bangladesh companies and entrepreneurs change the trade structure and how fast that change will take place? One thing for sure, consumers are getting the most benefit out of this.

About the writer:
Tanvir Ahmed is an experienced marketer & strategist, based in the UK. He is the founder of Academy for Professional Qualification, chief consultant of ALIANAz Ltd. and leading his own breakthrough innovation project jointly with UK central research lab.
A Photographer who loves to travel (covered 30+ countries in 4 continents), has a passion for innovation and (perhaps inevitably) a Bangladeshi cricket fanatic!

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