Retailing in the Week Ahead, Week 48
Welcome back from the Black Friday bonanza. This year’s Black Friday took place in more countries than before, extended across more categories than before, lasted longer than before and included more gimmicks than ever. Some retailers called it Black Week, others called it Black Weekend. No matter what you called it, it was certainly in your face.
So, you will be forgiven if you did not see the other news coming out of last week: Global commodity and stock market sell-offs. Once again, global geopolitical concerns have generated some wild swings in markets. This runs the gamut – oil, commodities futures and share prices. While we would love to believe that this is a one-off hit, it appears we might be in for a longer run of market volatility. The only question to ask, then, is what is the expected impact on retail in 2019?
Potential Impact on Retail
Let’s quickly explore five key areas of change in 2019:
- Investor confidence: Investors are beginning to apply a pessimistic lens to evaluating companies, retailers included. Many newspaper headlines have focused on the sell-off in FAANG stocks (Facebook, Amazon, Apple, Netflix, and Google). However, a cautious approach generally affects all stocks. Expect many retailers to present a more cautious set of plans come early 2019 when they report plans for the year ahead.
- Commodity purchases: Retailers and suppliers will find equal opportunities to either buy in smaller quantities (with expectation of a better price in the future) or in bulk quantities (with expectation that current ‘deal’ is the best on offer). This typically means more spontaneous promotions as well as ‘Big & Bold’ promotional messaging.
- Consumer confidence: Consumers generally shop more cautiously when the future outlook is cloudy. Expect some variations on this theme across countries, demographics and in job markets for 2019.
- Supplier relations: Retailers generally expect more agility from suppliers – bring me a deal when prices improve, help me connect with uncertain consumers, bring me some research that will help me improve ranges, and so on.
- Partnership: It is hard to predict, but many ‘new economy startups’ may face difficult rounds in obtaining funding, making it even more important than ever for retailers to pick the right partners when venturing into new economy spaces such as voice commerce, social commerce, digital couponing, digital wallets, blockchain, robotics, AI, agile fulfilment, and so on.
Three Messages for 2019
In total, we believe three messages should resonate for companies wanting to succeed in 2019.
1. Plan to Unplan. Plans are the foundation of success for any organisation. However, when volatility hits, sometimes it is more important to understand how you “unplan” – telling people to stop what they are doing and start doing something differently – than it is to plan. Spend time now considering key moments in 2019 where you can unplan your organisation.
2. Price to Reprice. Likewise, pricing is only as good as the market conditions related to supply/demand/perception. Set your prices for 2019 in ways where you can easily move up or down to new levels depending on conditions. For example, in Turkey prices are inflating rapidly – how and when will you move prices up? Alternatively, in the UK and Japan, particularly in non-food categories of retail, prices have been falling once again. What process will you put in place to make sure price perception is sharp in markets where consumers expect discounts and lower prices?
3. Organise for Disorganisation. When volatility is widespread in business environments, managers need to allow for some disorderly approaches. Great managers will set some policies and rules now, so that when individuals need to make quick decisions without assistance, they can do so with confidence and a lack of fear. Alternatively, you could have an organisation that is afraid to act which may result in paralysis or lack of speed. Please note, small and local brands typically have the ‘organise for disorganisation’ as part of their DNA. 2019 may be a year where it is imperative for big companies to get this cultural shift right.
What do you think? Will 2019 be volatile? Will retail move on a new path? What can we do to stay in front of volatility?
Here are links to great pieces of work we published on Retail IQ in Week 47:
I hope to see some of you in Turkey next week. If not, I hope you get the chance to read next week’s piece. When you get a chance, please share your thoughts or questions on ‘Volatility’, or any other topic. Good luck in the week ahead.
Ray Gaul – Ray.Gaul@KantarConsulting.com and @KantarConsulting or @RayGaul on Twitter plus LinkedIn