After a year of mixed fortunes for the retail sector, we look ahead to the big issues that retail businesses will face in 2017.
It’s the people that matter
Without great people, products simply will not sell. The challenge in 2017 will come from the impact of higher costs arising from the National Living Wage and the Apprenticeship Levy. The winners will be those that don’t lose the trust of their teams by trying to recoup through subtle and not so subtle changes to the employee proposition.
Further cost headwinds ahead
The current economic climate may make for uncertain times. We expect to see upward pressure on costs and downward pressure on margins as the sector factors in changes to exchange rates. The recent business rates review and impact of upward only rent reviews will also play a part too. When forecasting ignore the impact of these at your peril.
Getting it right from the first touch to the last
The customer journey will move from being a ‘nice to do’ to being a top priority. Retailers must review and improve the entire customer journey and not just the final mile. Every touchpoint has to be right. Technology is a factor but equally important is company culture. This will challenge the department store models and others where the brand does not control the customer proposition.
Reputational risk and crisis management
Too many high profile businesses have spent too much time in the press for the wrong reasons. Whether it’s quality issues, customer protests or corporate governance failures, businesses must rethink their approach. Decisions will need to be more scientific and data-based but with higher quality oversight. Embedding good governance will move from being aspirational to a necessary requirement for optimum decision-making and transparency.
Beware the millennials
The millennials are coming of age as both consumers and as employees. In 2017, they will really start to challenge senior management who did not grow up as digital natives. ‘Watch out’ is the cry.
Growth through innovation and content
Customers need to be invited in and the critical role of content will become more acute for all retailers. How and what do customers need to know to allow them to build a relationship with retailers? The key word here and elsewhere is ‘digital’. The key question will be ‘which customers provide the best lifetime value vs cost of acquisition?’
The new axis of power
The key alliance on the board will become finance and marketing. Great customer data will drive decisions about what to sell, how to price, where to sell etc. This collaboration will be required to secure investment in technology and more importantly change how the business operates. Without this alliance a brand will fall behind the curve.
Post Brexit challenges
It is too early to predict with any certainty what the impact of Brexit on the economy might be, particularly without clarity on exit terms. However there are three areas which Brexit may affect in the medium to long term: changes in consumer confidence and thus behaviour; changes to employment and immigration laws; and changes to input costs. All three should be on the board agenda.
Find out more about how your business may be affected by future changes in the retail sector by contacting Andrew Westbrook or Rupert Eastell.