As shock followed shock in terms of profit warnings and Commercial Income challenges, resulting in junk-stock ratings and an SFO investigation of the biggest and most successful retailer the UK has ever produced, the emergence of a multiple sector squeezed by Waitrose at the top and an increasingly respectable discounter sector grabbing mults’ lunch from below, all in danger of being bypassed by savvy consumers demanding more convenience, online service levels to a standard being defined by Amazon, and above all insisting on demonstrable value for money, it is no wonder that those of us still standing have absorbed five years’ worth of experience in the year 2014.
Moreover, this accelerated experience should help us to look deeper and realise that all of these shocks are merely the results of prolonged flatline demand. After all, who really cares about the ‘how & when’ of accounting for commercial income when the company is growing at 5%+, like-for-like…?
In practice, we have been rudely awakened from a thirty year credit-fuelled dream, and are now undergoing cutbacks of excess at all levels to arrive at a point where real value can be recognised and exchanged.
As we enter what promises to be another unprecedented trading year, it is tempting to regard last year’s and 2015’s anticipated cut-backs as negative, and even causing some nervousness for those that are uniquely experiencing unprecedented sales growth, perhaps we should view this new market differently?
Instead of regarding the prolonged flatline demand as part of a continuing spiral, how about seeing it as the elimination of surplus, with demand gradually working through the surplus that has resulted from the past 30 years of ‘artificial’ growth?
In other words, in the way that post-Christmas dieting has already begun to yield results for some, so too the savvy consumer has spent the last year re-assessing and modifying their purchasing behaviour in the following ways:
- ‘Making do’ with existing food/non-food stocks and leftovers
- Food wastage being ’corrected’ by the weekly shop
- Less ‘wasteful’ car journeys to out-of-town superstores when a local shop can be more convenient, a source of exercise and helps to reduce car running costs…
- First-hand discovery that discounters are ok, that private label is worth including in the ‘making-do’ repertoire, and can even be ‘better than brands’ in some cases…
Where is this headed?
The above ‘excess’ has combined with retailers’ discovery of the under-used product-tail in large-space retail, where 20% of the assortment accounts for 80% of sales, resulting in a fall in land-bank values, the inevitable closure of at least 20% of mults’ existing selling space, to point us at unprecedented cut-backs in consumer and retail demand in 2015, in order to absorb the now unwanted surplus. In the process, the retailers will rationalise ‘over-lapping’ brands in many categories, in order to simplify the retail offering at point-of-sale.
What to do about it?
Patently, there is a need to reassess fundamental demand for your brand, vs. available alternatives, and cut back obvious surplus, before the consumer/retailer does it on your behalf…
But keep in mind, we are talking about ‘surplus to demand’. In other words, if we cannot make a case within the retail business for a real place for our brand, in a deal that is ‘obviously’ better than that available elsewhere, we are simply delaying the inevitable.
But, the consumer still needs our product. Now we need to help them re-appreciate our brand…and ensure that we cultivate every flicker of demand, nurturing through 100% availability, meeting consumers’ need to access the product however, whenever and wherever they choose…
If they choose to meet us in the aisle, they are in effect inviting us to hand-hold their journey to the brand…minimum.
In fact, in a positive sense, it could be said that at long last we have reached a trading year that will eliminate the surplus and as a result, holds genuine opportunity for those that have the courage to go back to the fundamentals of consumer and trade need-management, faster and better than the other guys…
However, for those that have not reached this level of awareness, 2015 will present an even more astonishing world that appears to be going topsy-turvy, a world where WOW! can often morph into MOM?….
