By Peter Smedley
The consumer sector is probably the area of the economy that has seen the most disruption from new business models and been the subject of most speculation regarding its health due to economic uncertainty. Yet consumer spending and confidence have remained robust, largely due to rising real wages and record low levels of unemployment, which is helping to dampen the impact of more negative factors such as concerns around Brexit. Sector transformation is set to accelerate, as companies continue to try and keep up with fast-changing consumer demand. The rapid rise of e-commerce – though physical stores will still have a role to play – and the exponential growth of socially conscious consumption habits are likely to be two of the dominant trends shaping the landscape in recent years and will result in the emergence of a very different consumer sector.
UK consumer confidence remains robust
Consumer confidence stabilised in H1 2019, but remains considerably below its two year average as consumers remain unsettled by political and economic uncertainty, with many shoppers stalling their spending. That being said, falling inflation, rising real wages, and record employment levels are strengthening consumers’ finances, partially countering Brexit fears. At the end of 2018 the spending power of British workers had increased to its highest level in two years, following the biggest rise in real pay since September 2016.
Rapid rise of e-commerce set to accelerate
The seemingly unstoppable rise of e-commerce in recent years it set to accelerate as consumers constantly look online as opposed to the high street.Recent industry reports estimate that between 2020 and 2030, half of the UK’s existing brick and mortar shop premises will be gone, with 100,000 store closures, leaving only 120,000 premises left on the UK high street. In this same period, e-commerce is predicted to account for 40% of UK retail sales.[i]
The UK is certainly a market leader in global e-commerce, with 95% of UK consumers shopping online at some point. Amazon is now the fifth biggest retailer in the UK accounting for £4 in every £100 spent in retail in the UK last year. [ii]At the same time,independent UK retailers are taking advantage of this trend through their own online sites. Some 25% of John Lewis’ sales now come through its website while some £2.9bn of Tesco’s revenue is online, which is second only to Amazon.
Physical stores still have a role to play
There is no doubt that an online presence is vital for retailers.Yet this does not mean that physical stores should be abandoned or neglected. Brands that invest in their in-store experiences reaping the benefits on their bottom line. For example, a key mistake made by Toys R US was to position the company’s stores as locations to ‘go and buy toys’ as opposed to shops to experience toys and fun activities, which consequently led to the company losing out to online competitors. Virgin Holidays provides an example of a company offering an immersive in-store experience with customers being able to try upper-class seats that have been set-up in shop as well as use virtual reality goggles to preview their potential holiday experience.[iii]Acquisitions of physical store operations by e-commerce giants Amazon, JD.com and Alibaba show that they still value a physical presence and that this is still important. Online is definitely the way forward, but retailers are not rushing to simply abandon the high-street, rather many are realising that if they use their physical outlets to offer unique customer experiences it will help draw customers in and boost sales.
Conscious consumerism and healthy eating are key drivers
Alongside e-commerce, the other significant trend driving consumer spending is the rise of the socially conscious consumer alongside a focus on healthy produce. Some 75% of the British public say that they modify their consumption due to social concerns and have become more conscious about their use of consumer items including plastic, non-recyclable materials, dairy, meat, sugar, salt, gluten, palm oil, travel, clothes and products that have been tested on animals.[iv]
Plastic concerns the UK public the most with 46% actively reducing their plastic usage. It’s not just the younger generations that are driving this this with 65% of 75+ year olds consciously trying to reduce their plastic waste. Brands have already begun to take advantage of these trends. Key examples include: Iceland with its stance against palm oil and promise to go plastic-free by 2023, Tesco launching its own brand vegan range and PretA Manger boosting its veggie Pret offering through its acquisition of EAT. Brands which don’t take this quickly growing trend into account will see their market share erode quickly going forward.
A very different consumer sector is emerging
A more ethical, value driven approach by consumers, raised expectations around customer experience and the disruption caused by digitally native businesses is fashioning a very different consumer sector. It is a sector where customers’ buying decisions are more than ever swayed by the values displayed by companies and where trust is increasingly hard to foster as customers expect transparency, authenticity and ethics. Consumers also expect contextualsied, tailored engagements cross multiple touch points. These may appear tough metrics to meet, but those consumer businesses that match or surpass them will be the companies that survive and thrive in the new era of retail.
UK delays review of business rates tax until autumn
LONDON (Reuters) – Britain’s finance ministry said it would delay publication of its review of business rates – a tax paid by companies based on the value of the property they occupy – until the autumn when the economic outlook should be clearer.
Many companies are demanding reductions in their business rates to help them compete with online retailers.
“Due to the ongoing and wide-ranging impacts of the pandemic and economic uncertainty, the government said the review’s final report would be released later in the year when there is more clarity on the long-term state of the economy and the public finances,” the ministry said.
Finance minister Rishi Sunak has granted a temporary business rates exemption to companies in the retail, hospitality, and leisure sectors, costing over 10 billion pounds ($14 billion). Sunak is due to announce his next round of support measures for the economy on March 3.
($1 = 0.7152 pounds)
(Writing by William Schomberg, editing by David Milliken)
Discounter Pepco has all of Europe in its sights
By James Davey
LONDON (Reuters) – Pepco Group, which owns British discount retailer Poundland, has targeted 400 store openings across Europe in its 2020-21 financial year as it expands its PEPCO brand beyond central and eastern Europe, its boss said on Friday.
The group opened a net 327 new stores in its 2019-20 year, taking the total to 3,021 in 15 countries. The PEPCO brand entered western Europe for the first time with openings in Italy and it plans its first foray into Spain in April or May.
Chief Executive Andy Bond said its five stores in Italy have traded “super well” so far.
“That’s given us a lot of confidence that we can now start building PEPCO into western Europe and that expands our market opportunity from roughly 100 million people (in central and eastern Europe) to roughly 500 million people,” he told Reuters.
To further illustrate the brand’s potential he noted that the group has more than 1,000 PEPCO shops in Poland, which has a significantly smaller population and gross domestic product than Italy or Spain.
The company, which also owns the Dealz brand in Europe but does not trade online, has already opened more than 100 of the targeted 400 new stores this financial year.
Pepco Group is part of South African conglomerate Steinhoff, which is still battling the fallout of a 2017 accounting scandal.
Since 2019 Steinhoff and its creditors have been evaluating a range of strategic options for Pepco Group, including a potential public listing, private equity sale or trade sale.
That process was delayed by the pandemic, but Steinhoff said last month that it had resumed.
“The business will be up for sale at the right time. It’s a case of when, rather than if,” said Bond, a former boss of British supermarket chain Asda.
Pepco Group on Friday reported a 31% drop in full-year core earnings, citing temporary coronavirus-related store closures.
Underlying earnings before interest, tax, depreciation and amortisation (EBITDA) were 229 million euros ($277 million) for the year to Sept. 30, against 331 million euros the previous year.
Sales rose 3% to 3.5 billion euros, reflecting new store openings.
($1 = 0.8279 euros)
(Reporting by James Davey; Editing by David Goodman)
Fashion-focused livery launch reveals new colours for Gasly, Tsunoda in 2021
Scuderia AlphaTauri debuted their colours for the 2021 Formula 1 season as drivers Pierre Gasly and Yuki Tsunoda unveiled the team’s new look with the livery for their AT02 racecars. The setting was a fashion-forward launch in the all-new showroom of AlphaTauri, Red Bull’s premium fashion brand.
Salzburg (AUSTRIA) – Formula 1 team Scuderia AlphaTauri served up a stylish preview of the new F1 season with a presentation of its 2021 livery alongside key looks from the upcoming Autumn/Winter 2021 collection of Red Bull’s premium fashion brand, AlphaTauri. The launch – held at AlphaTauri’s new showroom in Salzburg, Austria and presented digitally – marked the first time that drivers Pierre Gasly of France and Yuki Tsunoda of Japan have appeared together as teammates.
After a successful first season racing in AlphaTauri colours, the Italian outfit is looking to challenge the top of the ultra-competitive midfield in 2021, and the two young drivers have been assigned clear-cut roles. Gasly is Team Leader. The 25-year-old, who made his Formula One debut with the team in 2017 under its former name, Scuderia Toro Rosso, has earned two F1 podiums. During the 2020 campaign, Gasly’s maiden win at Monza was a defining moment for him and the team under its new name.
Tsunoda, 20, is the first Japanese driver to race in F1 since 2014, his promotion coming off the back of a fast, four-season trajectory from winning the 2018 F4 Japanese Championship and finishing third in the 2020 FIA F2 Championship to entering the top-level ranks this year. Expectations are high for his rapid style of learning to complement the experience of Gasly.
“The decision to go for Pierre and Yuki in 2021 was taken because Scuderia AlphaTauri’s philosophy is still to give talented young drivers from the Red Bull Junior Program the opportunity to step up to F1 and to educate them – this is why Yuki now gets his chance,” explained Team Principal Franz Tost. “With Pierre on Yuki’s side we have an experienced driver, who can help our Japanese rookie to develop faster, but at the same time we can aim for good results. I think this pair is the best possible scenario to achieve both our targets, and I’m also confident this will be a successful one.”
In 2020, Scuderia AlphaTauri won best livery by a landslide, and the team’s all-new, matte blue and white racecar livery took center stage with the drivers at the fashion event, anticipating the 2021 model that will debut at pre-season testing in Bahrain on 12 March. The test is the precursor to an unprecedented 23-race schedule, and in preparation for the demanding calendar both drivers have spent time at Red Bull’s Athlete Performance Center for intense fitness testing.
“I’m ready to take on the role of team leader. Yuki is a very quick driver, and he will help us move the team forward – we will work together to achieve that,” said Gasly, the team’s all-time top points scorer. “I really believe last year was the team’s best in terms of the way it worked, the development, the performance and the way it managed the race weekends. I’m always hungry for more, and I’m sure we can achieve great things in 2021.”
Tsunoda, who was honored with the Anthoine Hubert Award for best Formula 2 rookie in 2020, added, “I’ve been lucky enough to spend some time with Scuderia AlphaTauri ahead of the season, so I’m already developing strong relationships and learning a lot from them – including Pierre, who is an incredible talent. My main goal is to learn quickly and deliver results as soon as possible, and I’m really excited to get started.”
The launch at the AlphaTauri Showroom not only gave Gasly and Tsunoda a preview of the AlphaTauri Autumn/Winter 2021 fashion collection, but the drivers had the chance to select their new off-grid looks ahead of the season start.
Ahmet Mercan, CEO AlphaTauri, summarized: “This is a triple reveal at a unique point of time: a new AlphaTauri Showroom where fashion meets F1, a first look at the AW21 AlphaTauri collection and the unveiling of the new Scuderia AlphaTauri F1 livery and driver pairing.”
Scuderia AlphaTauri fans don’t have long to wait for racing action: The FIA Formula 1 season kicks off at the Bahrain Test on 12-14 March, in preparation for the Bahrain Grand Prix on 28 March.
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