Written by Steve Collinge – International Speaker, Thought Leader, 2022 Top Retail Influencer, MD Insight Retail Group & Executive Editor Insight DIY.
There’s no doubt that the last two years have been a rollercoaster for the Global Home Improvement Industry. Whether it was managing our way through enforced store and branch closures during lockdown or dealing with unprecedented customer demand and subsequent supply chain challenges, it has been one significant challenge after another.
And now, as this article goes to print at the end of January 2022, we appear to be heading towards the final phase of the pandemic. I have chosen my words carefully, as we’ve all experienced too many false-dawns since we were first introduced to COVID-19.
If we believe and hope to expect a more stable period for our industry, what are the trends that have emerged in the UK, from this dramatic period in our history and what do I believe is now in-store for us in 2022?
Further online growth
Whilst stores and branches were closed, it is was no surprise that online sales accelerated to unprecedented levels, but has that growth been maintained since they re-opened.
Pre-Covid the online share of total retail sales in the UK peaked at around 20% in January 2020 and this rapidly accelerated to 32.8% in May during the first lockdown, peaking again at 37.7% in January 2021 and then settling down to between 26-30% during the final quarter of 2021.
Covid has taught us several key lessons. As retailers and merchants, we’ve learnt the importance of investing in our websites, having a well-executed click’n’collect option for consumers and a supply chain that can cope with delivering to customers how, when and where they want it. As consumers, we’ve learnt that we can buy almost anything online including paint and it doesn’t arrive having spilled everywhere! We’ve learnt that quite often the range, prices, quality, and service online not only match the physical shopping experience it beats it.
In a report published by ComReg and reported in The Irish Times in June 2021, The survey found there had been “a surge” in online buying over the past year due to the Covid-19 pandemic and the incidence of consumers buying goods online weekly or more frequently had doubled since the onset of the pandemic. The main reasons consumers gave for buying online were better prices (61%); the convenience of delivery (57%); and a better range of products available online (55%).
When asked about their future online shopping habits, most consumers expected their e-Commerce activity to remain at the same level or increase in the next 12 months, whilst e-Commerce sellers also expected online sales to remain high over the next year and they predict further growth in the medium term. For SMEs selling online, seven in 10 expect an increase in demand for online buying in the next three years.
Most consumers expect to keep shopping online after pandemic www.irishtimes.com/business/retail-and-services/most-consumers-expect-to-keep-shopping-online-after-pandemic-1.4584382
Our combined experiences of the last two years point clearly in one direction, the growth in the percentage of online retail sales is going to continue. Where it will eventually level-off, is very difficult to say, but whilst buying online offers the tempting proposition of lower prices, greater convenience and wider choice, we need to plan for consistent growth for some years to come.
The Widest Online Range
Towards the end of last year in the UK, it became obvious that two very distinct and opposing strategies were beginning to emerge across the established retailers. When it came to the management of bricks’n’mortar stores, it was all about range reduction and simplification, driving efficiencies through supplier consolidation and in-store stock reduction.
However, several retailers having learnt from the last two years, are taking a very different approach when it comes to the management of their online offer. Here it’s a contrasting strategy, where the focus is on competing head-to-head with Amazon, eBay and Wayfair and offering the broadest range possible, often supported through a Drop-Ship service from an extended supplier base.
Screwfix is a good example of a retailer set on a very different path, choosing to dramatically expand their website, committing to add at least 30,000 new lines to its online offer before the end of 2022, virtually opening the doors to a flood of new products and suppliers.
With some retailers warehouses bursting at the seams in the UK, it would be impossible to take a significant number of completely new suppliers and thousands of products into an existing supply chain. The administration burden alone for the supply management teams would make this objective impossible to achieve.
However, in recent months I’ve become aware of a company called Virtualstock, one of a new generation of supply chain and procurement solution providers. In simple terms, invited suppliers provide their product range, sku and stock data to Virtualstock, who’s SaaS platforms then integrates seamlessly with the retailers or merchants own systems. This enables the retailer to offer a significantly increased online range, with all orders taken shared back through the platform to suppliers who drop-ship directly to consumers homes or trade locations, with everything monitored and controlled on behalf of the retailer via a dashboard.
Virtualstock is used extensively in the retail sector in the UK to provide extended online range solutions via dropship and is the catalyst behind the range extension plans of Screwfix and B&Q.
Other clients include Harvey Norman, Argos/Sainsbury’s, Curry’s, Robert Dyas and John Lewis Partnership, the latter who claim that between 60-70% of their total sales are now generated online. I’ve always accepted the adage that there are only two ways to grow a retail business – acquire new customers, which is costly and difficult or sell more products to your existing customers, those who already visit your stores and websites and like your brand. A wider online range means more online customers and more sales and these are sales without any risk of stock management.
Without doubt there is now a race developing between the largest, established players, a race to expand their online offer and become the market leader in a far wider range of product categories. In 2022 and beyond, I expect to see more retailers joining this race, partnering with companies like Virtualstock or launching their own marketplaces to ensure that they can claim to have ‘the widest range’.
The ‘Digital First’ Store
It still surprises me when I see Home Improvement retailers regularly replacing and throwing away cardboard promotional, pricing and point of sale materials when promotions end or ranges change. When you take the time to notice it, the amount of cardboard and paper that’s used and disposed of on a regular basis by our retail stores and merchant branches is considerable.
In these days of corporate sustainability strategies and carbon reduction, I just can’t believe that retailers and merchants have not seen this as low hanging fruit and made the decision to replace all this cardboard and paper with digital labelling and screens. And for those of you who are thinking, it’s all ok because we use recycled cardboard, it’s not.
Just think of the process that the cardboard point of sale goes through. Firstly, there’s the design, the printing, the packaging of the item for delivery to every single store, the transport costs, the unwrapping, the positioning in store and then finally 4-8 weeks later the disposal of the materials in a skip to yet again be collected and disposed of. When you do the maths, the cost in man hours and handling alone make it a very questionable investment.
I’m convinced that in 2022 many retailers and merchants will be waking up to the unnecessary waste that they create and begin testing and trialling the alternatives. With relatively limited up-front investment, retailers can now take advantage of the wide range of high-quality digital screens that are available. Not only do they look so much better than their cardboard ancestors, in research with consumers, they are far more effective in communicating the message and closing the sale and that’s before you consider the benefits to the environment and less staff hours due to handing in-store. Let’s also not forget one of the key benefits in that all the screens can be updated centrally at the same time with just one click on a mouse.
Home Improvement retailers, merchants and garden centres have been very slow to adopt this form of new technology, whereas consumers are now used to seeing these screens everywhere, McDonald’s restaurants, cafes, other retail outlets and even bus stops. I believe 2022 will be the year when companies to throw away their last piece of cardboard and embrace digital for good.
Let’s hope we all experience a more stable period for our industry in 2022, giving us the much-needed time to consider and embrace the trends and changes that will impact our industry as the year progresses. Without doubt we will see further online growth in the Home Improvement sector, and in my view an increasing number of retailers will join the race to dramatically expand their online offer, whilst in store, let’s hope we see the digital opportunity being embraced like never before.
