Recent yearly results published by Dixons Carphone are good news for all retailers, whether multiple or independent.
Despite price increases and decreasing consumer confidence following the Brexit vote, Dixons has been able to beat the downward trend, increasing pre-tax profits by 10 per cent and like-for-like sales by four per cent compared with 2016.
Looking at the whole of the UK, some key categories have seen lower sales. With TV, for example, seeing a 14.9 per cent unit sales decrease last year, it’s positive news for UK retail that the number-one consumer electronics retailer is proving that consumers are still heading to the high street to buy household tech.
As an agency that represents tech brands in UK retailers, including Dixons Carphone, Gekko’s results in-store agree with theirs, with sales having increased by 5.6 per cent relative to the same period in 2016.
One category that has been particularly significant in improving results for tech retail has been the smart home. Still a growing sector, expected to be worth $58.47 billion (£45.3bn) globally by 2020, the smart home is enthusing consumers to upgrade their appliances and home technology.
In a recent campaign for a smart-home brand, Gekko’s training team created a 68 per cent uplift in knowledge among store staff, which helped deliver a healthy 36 per cent sales uplift in the following weeks.
For independent retail, the strong results seen by Dixons Carphone set an optimistic tone. Gekko knows that 74 per cent of consumers prefer to shop in-store, because it allows them to see, touch and experience the product before buying. Dixons’s results show that consumers are still heading to the high street when looking to purchase a high-ticket item.
These ‘considered purchases’ – products that shoppers need time to think about before deciding it’s right for them – require that additional assistance only found in physical retail.
To match the large retailers in their success, independents need to create a welcoming, ‘showroom’-style atmosphere that will encourage shoppers to try out products before they buy.
A conversation with knowledgeable store staff can easily transform a browser into a customer. Developing categories, such as the smart home, are important areas for potential growth.
Set your store apart by offering shoppers an experience they can’t find in larger retailers, and you too can see these positive results.
The ERT Turning point Summit held in February touched on the many opportunities that face independent retail.
Like it or not, I refer to these as opportunities, as challenges paints a negative picture rather than an optimistic future in the most dynamic of industries – technology.
One area that we must remain optimistic about, as it’s a certainty, is Brexit and the impact this is having on trading even before Brexit has happened. By the time you read this, the Government will have triggered Article 50, starting the process of extricating the UK from the EU.
When the vote happened, there was much debate regarding the immediate impact in trading. In August, I wrote: “Any price increases will certainly not be absorbed by resellers, and will instead be passed on to the end user”. With the significant fall in sterling against the dollar (10 per cent) and euro (seven per cent), many brands chose to use this as reason to make trading that little bit more difficult for retail, in particular technology.
First to raise the average price of every product by 10 per cent was Dell, later followed by Apple who chose to increase prices by around 25 per cent again across every product, with a MacBook Pro jumping from £999 to £1,249. It wasn’t just hardware, however, as apps all increased from 79p to 99p and £7.99 to £9.99, all on the back of the Brexit vote and currency fluctuations.
Microsoft followed with an 11 per cent increase, and more recently Sonos, with what are now ‘old’ products, increased their pricing by 25 per cent across the entire range which took effect on February 23, taking a Play:1 from £169 to £199 and Play:5 from £429 to £499.
In the MDA category, although not a blanket price increase, many European brands, including Siemens and Indesit, are demanding payment in euros from distributors, pushing up retail prices due to a ‘trickle-down’ effect resulting from the increasingly unpredictable and unfavourable exchange rate.
These brands have something in common: they are category leaders and, to a certain extent, dictate the development of their respective categories through a rigid pricing structure and go-to-market plan. What they perhaps do not appreciate is that consumers aren’t stupid and can choose to opt for other brands with more appealing price points – an opportunity for emerging and established brands and retailers to explore.
The challenge for retail is how to up-skill your work force to continue selling the same products they’ve always sold successfully, but now at a higher price point. Sales teams will have to work harder to close a sale, and perhaps longer, but for no incremental benefit to you. Retailers don’t benefit in the same manner from what some may consider an arbitrary price increase, with only a slight or no increase in margin.
While many who voted ‘out ‘may have never considered that the costs of goods we import would go up, the reality is that it becomes a convenient rationale for many brands to apply an increase, blaming Brexit, and passing the cost on to consumers rather than absorbing this themselves. This is likely to be applied across every category.
Away from tech, others brands, such as Tesla and Lego, have both applied a five per cent increase, stating that this action was taken as “direct result of the continuing devaluing of the UK pound”. We saw what happened when Unilever tried to increase the cost of products such as Marmite by 12.5 per cent – the public made it known that they have a choice and they would choose to abandon a brand for a similar product. You need to have rather good brand equity to successfully manage price increases that impact on your loyal customers’ pockets.
Call it a ‘Brexit levy’ if you like, but let’s be realistic: it’s not going away. With Article 50 triggered, currency fluctuations could prove to be more negative and incur further price hikes. On the other hand, they could become positive, but if so I suspect we won’t see brands roll back price increases, instead retaining their increased pricing model to establish range pricing.
Whatever the outcome, market economics means retailers of all types must remain optimistic and have a clear vision of hope as they navigate the future. This includes pushing back on brands that make it harder to sell. Perhaps by introducing into your categories new or up-and-coming brands that could offer you more margin and your customers a better product at a reasonable price they are happy to pay.
Whoop, whoop it’s almost Christmas, and if you haven’t already considered what you’ll be ranging, here is some inspiration to convert shoppers into valuable customers.
Secretly, we love to buy for ourselves when shopping for presents. The truth is out there, it’s no secret, with everyone on average spending £84 on themselves when Christmas shopping – that’s an accessory like a pair of headphones or an SDA to kick-start that New Year’s resolution in healthy eating.
The most popular Christmas gifts are entertainment-based, with 63 per cent choosing these over clothes, food and drink, spending an average of £489.04 on approximately 14.8 gifts for 8.3 people – that third of a person only needs something small.
Now, with an identified average spend per person of £61 (in addition to the previously mentioned £84), what do you range that meets that price point? Not much, I’m guessing, thus increasing the importance in making sure that those items that fall within this price point are clearly visible and appealing to shoppers in your store.
New technology is still available to buy, think Ring’s video doorbell, which also won the Editor’s Choice category at this year’s T3 Awards. At £159, its innovation and functionality can be justified by ease of installation and potential as a household gift. Speaking of innovation, think Jabra’s range of wireless headphones, leading the way in the ‘hearables’ category, merging high-quality audio increasing through the range with fitness tracking via your ears.
Equally, on the back of the phenomenally successful and much discussed The Great British Bake-Off, there’s an SDA at a range of prices that every fan of the show desires to grace their kitchen or make them a better baker. These include the Kenwood mini choppers, AEG blenders and the KitchenAid hand mixer or, if you’re really generous, the Artisan stand mixer and Magimix 5200XL food processor. With SDAs helping the 41 per cent of Brits cooking from scratch, the opportunity to develop your sales, across the SDA category, can be linked to a gift purchase.
With two-in-five shoppers stumped on what to buy their friends and family, they can be swayed as 68 per cent buy based on deals and 62 per cent on convenience. By highlighting the deal, its USP and suggested target audience, closing a sale among the 40 per cent who are undecided could be simpler than you thought.
Moving up the generosity scale, a premium audio device is the perfect gift for any audiophile or music-loving household. Consider an expert in the audio category, such as Naim – also a T3 winner. The Mu-so wireless speaker combines stylish design with unrivalled sound quality filling your home with your favourite tunes compatible with all the popular streaming services – very appropriate for the Christmas period.
With premium audio sales growing by 22 per cent year on year, it’s a great opportunity to increase your average basket value. Perhaps use a showroom style approach, allowing customers to see the speakers in a living room setting, perhaps even syncing their phones to the speaker to test the wireless connectivity. Creating some in-store theatre is key to selling these premium items.
Addressing those entertainment shoppers, the huge media coverage enjoyed by the exciting Virtual Reality category – expected to exceed $2 billion globally this year – means it could be the time to start stocking a VR or AR proposition within your line up. The eagerly anticipated PlayStation VR is an accessory for the vastly popular PS4, of which there are over 1.5 million in homes across the UK. This is due to launch on October 13 and expected to RRP at £349.
Now, this may be more than the average spend, but it’s an exciting, innovative product with a forecasted 50 games available by the end of the year, with highlights such as Batman Arkham VR and EVE: Valkyrie. It’s going to be huge and a welcome gift for any PS4 user or their family. If this is beyond your ranging, think Google Cardboard. With an RRP of £15 and thousands of available apps, it’s the ideal stocking filler for anyone of any age with any brand of smartphone. With Sky and Freeview experimenting with VR as well, entertainment platforms are taking the technology mainstream.
Take some comfort in knowing that only 14 per cent of shoppers surveyed return an electronic gift. If sold correctly, return rates should be negligible within your store especially if you’ve trained your staff. Remember ranging is one thing, but if your team doesn’t know what you range, what your core Christmas items are, how to sell these correctly to the right customer by identifying what they want and matching USPs and how to close a sale, there’s no guarantee of success.
Perhaps consider incentivising your staff to attach your lower-priced items to higher-priced transactions, assisting an increase to your average basket value.
Santa Baby may be coming down the chimney with some great tech, if you get your ranging and training right.