It’s no secret that the retail industry will be heavily affected by Brexit but instead of adopting a “wait and see” attitude it is important to learn lessons from the recent recession to try and stay ahead of the competition and keep your business on track.
The retail industry continued to grow during the recession, led by the budget retailers’ sales increasing by 6% in 2009*. Poundland opened 41 new stores in 2008-09 and rapidly increased its customer base as households felt greater pressure on their disposable incomes.
On the other side of the coin, retailers positioned in the middle of the market in terms of value and quality suffered during the recession and some have since collapsed into bankruptcy. BHS and Austin Reed, two such examples, failed to adapt to changing consumer demands and lost relevance in the market, making little of their heritage whilst struggling to adapt to contemporary styles and competition from online retailers and the likes of TK Maxx and Primark.
Post-Brexit consumer confidence dropped to a level not seen since the 2008 recession. Interestingly, confidence dropped much more in the north of England (19 points) than in the south (2 points). From an income perspective, confidence fell most for households earning £25,000-£49,999**, adding to the theory that Brexit like the recession has hit the ‘middle market’ of the retail industry the hardest. Those retailers who remained passive and allowed themselves to drift suffered from reduced demand and revenue. This trend is triggered by the response from middle-income households to large economic shocks, in which their drop in confidence translates into reduced spending. Generally speaking, less demand from middle earners results in less business for the ‘middle’ retailers.
So then… How can you make sure your business comes out on top?
- Use social insights to better understand your customers
Given the increasing complexity in understanding customers’ attitudes and shopping habits, retailers need to use a more holistic approach than mystery shopping to ensure they remain relevant and competitive in the market. This can be achieved through a mixture of quantitative and qualitative techniques, such as focus groups and accessing mobile and location data
- Focus on your USP. What makes shopping with you unique?
Failed retailers such as BHS and Austin Reed lost their USP and therefore their identity. They failed the simple “What’s in it for the customer?” test. Rather than hedging your bets, understand what it is the customer most likes about shopping with you… and super-size it.
- Become more agile to change
At North Highland we have a lot of experience in supporting Retail clients become flexible and adaptable to large-scale changes like Brexit and beyond. The key is to reduce the lag between the event, in this case Brexit, and the response. After 3 months, one whole quarter of trading, it’s imperative to demonstrate to the supplier, employee, shareholders and to a lesser extent the customer a clear plan, and vision of what the future will look like in a post-Brexit world.
At North Highland we believe that despite the clear challenges it will bring, Brexit can deliver significant opportunity for retailers as long as they can clearly align themselves with changing consumer demands at times of uncertainty. We pride ourselves in working alongside clients to ensure their most complex business challenges become their greatest opportunities. We see Brexit as one of these opportunities and you can read more on our thoughts on how employers can best deal with the challenges that will come with Brexit here.