A new digital empire – recovery is emerging

Recovery is emerging
Recovery is emerging

The BRC’s recent total sales figures for February showed a 1.7% rise compared to the 0.7% increase recorded in February 2014.

Dickinson says improving consumer confidence is playing its part as is falling inflation which is, according to predictions by Bank of England Governor Mark Carney, heading towards zero and even into deflationary territory.

“We have seen falling shop prices for the last two years falling by an annual 1.5% to 2%,” she said. “Oil prices have fallen and input costs in the supply chain such as wheat and coffee are also lower.”

She expects prices to continue falling driven by more intense competition in the sector, particularly the major supermarkets trying to regain lost ground to discounters such as Aldi, the general economic environment and supply and demand issues around commodities.

How should retailers best respond to a deflationary environment? Andy Clarke, chief executive of supermarket Asda, recently warned about the long-term effects of short-term ‘money –off coupons’ and other “unprofitable” sales on a business.

“It’s a tricky balance for a retailer,” said Dickinson. “The consumer trend is certainly towards greater visibility over pricing. You can sit at home and go online to do your price-checking. That backdrop of enhanced consumer power is not going anywhere. You have to be as competitive on price as possible.”

That doesn’t mean being cavalier when it comes to slashing prices or offering discounts, she added, offering up FTSE 100 clothing retailer Next as a best practice case.

The group, led by chief executive Lord Wolfson, does hold promotional events but they are targeted and never as a panicky response to discounts offered by rivals.

They remain committed to selling at full price with shoppers attracted to other parts of its offerings such as quality of product and online delivery times.

“You have to combine competitive prices with other parts of your offer to help you differentiate,” Dickinson said. “That could be improving your after-sales service or having the best delivery options. People will take these into account as well when deciding to make a purchase – it won’t just be about price.”

In tomorrow’s instalment of the digital empire series, we explore the importance of building brand loyalty…