1: The Golden Quarter

Following the most challenging period for retail in history, the final quarter run-in to Christmas in 2021 is important in so many ways. Often referred to as ‘The Golden Quarter’ due to the positive impact seasonal trade has on turnover fortunes, it has often ‘rescued’ the fortunes of many retailers. Some retailers achieve 80% of their annual profit during this time, therefore it is essential that retailers get it right this year.

The last few months have shown signs of a positive outlook, as consumer confidence grows post pandemic (can we say post?) Despite this positivity, trading conditions are still difficult, retailers must adopt a flexible approach to managing uncertainty. Variable costs such as: staffing; stock availability and promotions will be under scrutiny,

This will be the most cautious Golden Quarter we’ve seen, there is a genuine chance that we’ll see stock availability issues, specifically with regards to groceries and the most in demand consumer goods. The UK is experiencing a supply chain issue regarding the lack of HGV drivers, many of whom were workers from the EU, who had returned to their home nation due to challenges linked to Brexit and uncertainty caused by COVID-19. Despite this risk, some retailers have implemented proactive plans to ensure, or certainly limit, the effect of being short of stock. John Lewis – arguably the highest profile and ‘important’ retailer during the Christmas period (can you imagine a Christmas without John Lewis?) have chartered additional cargo ships, to ensure that the high volume of consumer goods they have forecasted to sell isn’t held-up in reaching stores in any way. This highlights just how important the Golden Quarter is.

Even before the enforced challenges of the national lockdowns, the retail industry was a difficult environment. Retailers on the high street and in shopping centres were starved of the most important element of physical retail – footfall. Footfall is so important, retailers track this on a store-by-store basis, day by day. Any positive or negative increase in footfall can put huge pressure on the conversion rate. For example, 1000 people enter your store, 150 people make a purchase = a conversion rate of 15%.

You can also work out your sales target from this footfall count if you use your average transaction value as a guide ATV. For example, 150 customers make a purchase, each purchase has a value of £55, this creates a sales projection of £8250. If footfall is UP and CONVERSION is up (20%) this can make a huge impact. For example, 2000 customers enter the store, 400 make a purchase (20%) at £55, then this will generate a sale projection of £22,000. So, if your store is neat, clean, fully stocked and tidy with a good level of service, you should be in a great position to maximise conversion rate. If you have a deficiency in any of the noted areas it will affect your potential conversion rate and sales targets.

 

Footfall and conversion rate can also indicate how engaged your consumer is from a ‘shopping mission’ perspective. The higher the conversion is (regardless of footfall) indicates the consumer’s shopping intent. If your conversion rate is low, it suggests that your consumer can’t find what they want, or they can but they don’t like your prices. This, along with sell through data for each specific product or range, creates actionable data that the retailer can use to maximise sell-through whilst protecting profit.

Christmas 2021 will be different to 2020, significantly so. On December 8th 2020, 90 year old, Margaret Keenan, was the first person to receive the COVID-19 Vaccination – the UK had just come out of the second national lockdown and face masks and social distancing were still mandatory. This impacted on consumer confidence, to go out into physical retail (even if restrictions allowed), meaning that online shopping had to handle the high demand. Over 2021, approximately 68% of the UK population have now been ‘double-jabbed’ and since June, social distancing has been relaxed fully in the majority UK retail locations.

Will we see high street footfall reach the same levels achieved in 2019 before the pandemic hit?

Retailers that have evolved in line with changes in consumer shopping habits will fare well, those who haven’t will struggle. Understanding HOW the consumer WANTS to shop and WHERE, is vitally important.

Last year, consumers were keen to be in physical retail to buy certain goods. Research shows that fashion and footwear, not surprisingly, was the most likely product category to be purchased in a store, but only with a 50% intent, versus 43% online and 7% showing no intent. Gift purchases in store at 39% was marginally ahead of online 35% with 26% showing no intent at all.

During last year’s Black Friday, consumers were 65% more likely to shop online, with 41% via brand websites. After this, the most popular physical retail spaces were department stores with 30% and shopping malls 25%. Does the consumer feel that they didn’t have a ‘proper’ Christmas experience last year due to uncertainty and national restrictions? Will they go all out this year, and we’ll see record footfall and demand?

It’s not getting off to a great start. As of October 22nd the Office for National Statistics have published data that states – in September (total) retail sales down 1.2% versus last year. Online sales for September were high at a 28% share, down from a high in 2021 of 37% in January (lockdown 3). What is causing this? Stock availability due to the HGV labour shortage? Higher prices? Retailers are resistant to pass on costs to the consumer right now, but this may change in November and December when consumers will have less resistance.

The modern Golden Quarter is now made up of three or four trading peaks, depending on how you trade. These are:

Halloween 

Trade in 2019 was £474mio +13% on previous year

Christmas trade 

2019 Christmas trade was £74 Billion (CRR)

Black Friday & Cyber Monday

2020 Black Friday £7.5 Billion. -12% on PY. Online +54% Offline -63%

 

For each of these trading peaks retailers must be set-up to maximise sales through online and offline channels. Current supply chain issues are hurting retailers – they can’t sell what they haven’t got. Retailers know that consumers react negatively to poor stock availability. Grocery retailers are double (sometimes quadruple) facing products and implementing space saver POS devices, even going so far as to print cardboard boxes with photos of fruit and veg’ to create the illusion of being full. By nature, fresh fruit and veg have a higher chance of being out of stock, not necessarily because of the HGV shortage, more to the fact that there are fewer hands to help harvest, pick and pack the produce due to an ongoing labour shortage in agriculture.

Come January, what will be the consequences of a weaker than expected golden quarter?

A likely outcome will be further store closures. As retailers trade out another turbulent year, it will be clear which stores are not delivering from a turnover and profitability level, marking them as potential stores for closure. This has been happening for several years, however in 2022 will this increase? Retailers and brands will review the balance between Online and Offline sales and the continuing need to focus on key cities rather than provincial high streets.

On a more extreme level, we may see a retailer suffer an irreversible decline in profits and turnover, which will result in another falling into administration.

By now – retailers will know how they are faring in this golden quarter and fingers crossed, have reaped the rewards of a consumer starved of a ‘proper’ Christmas last year.

Looking ahead with positivity to 2022, surely this is the year where we’ll start to see further green shoots of consumer confidence in physical retail, as retailers begin to invest in all channels of retail, and we see sustainable quarter to quarter growth.