Mobile has changed everything for all businesses, Nicola Mendelsohn, vice president of Facebook, said early last month.
After a quarter in which her company had increased its ad sales by 57% to $5.38bn, she obviously feels on the right side of that change.
She was announcing a new service for big advertisers like Cadbury’s owner Mondelez International, which could now use the social media service to target people when they were experiencing “moments of joy”.
Who knows where this will lead? But it is part of a pattern that is hitting confidence in bricks and mortar retailing of stuff as people increasingly spend more money on “experiences”.
The shuttering of My Local, which faced headwinds in a cooling convenience market, and Netto, which Sainsbury’s killed off at a cost of £30m because it couldn’t afford to invest in building scale quickly enough to challenge Aldi and Lidl, may be confirmation of this.
These closures fit with a pattern described by The Economist in June as “high noon on the high street”.
The opinion forming weekly visited the Hard Rock Café in London, which has traded from the same spot since 1971. Restaurant sales doing fine, retail “soggy”, the manager told it. It noted that by May 989 stores has shut in the UK, more than for the whole of 2015. And stores keep on closing.
Part of the reason for this is the success of the discounters. Tesco, in order to compete, has cut the selling price of its range by 3.4% over the past 12 months. While this has helped it to raise like-for-like volume sales by 2.2%, the net result is a miserly 0.3% rise in money in the till.
At the top level it has replaced couponing, down 38%, and multibuys, down 42%, by investing in price. The outcome will be a long-term reduction in its margin, which will squeeze the margin of all its competitors, including the large wholesalers that supply the independent trade.
The first thing you need to do is the maths, and work out which parts of your shop are delivering the profits
And on top of that there is also the growth in online shopping, especially for the big weekly shop. Put these factors together and add in the context provided by the IGD as reported in the last issue of Retail Express, when its senior retail analyst said there was a supermarket “fight back” as they attempted to make their stores suitable for a top-up shop, and you get pause for thought.
What to do? The first thing you need to do is the maths, and work out which parts of your shop are delivering the profits. Work out the rate of sale and squeeze out under-performing stock.
The second thing to do is to focus even more on the shopper and what their experience is of your store. Not every idea is right for every location. But you have to keep on trying new things and new products; only be ruthless about getting rid of the failures.
Booker says that more than nine out of 10 new products fail. This is not a reason not to try new things. It just tells you that you need to keep on top of product innovation.
Don’t worry about Cadbury spreading the love to your customers on social media if you have not worked out how to share the joy every time they visit. The big groups are finding it harder to make scale count in convenience.
Invest your time in improving your offer, always with a focus on growing profits.