Head of Retail & Consumer | Head of Risk Advisory
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In this month's review of trends in the Retail and Consumer sector we look at:
Currently, almost two-thirds of adults in the United Kingdom are spending less on non-essentials amid rising household costs and increasing food prices whilst retail sales volumes have dropped to the lowest level since February 2021 when the effects of the Covid-19 pandemic were in full flow.
However, did the temptation of Black Friday and Cyber Monday bargains upset these trends?
Before the sales began, Marc Pettican, leader of Barclaycard Payments, said: ” The rising cost of essential goods and services has left many households with diminished disposable income, prompting a re-evaluation of spending priorities. While Black Friday has historically been a time for consumers to snag bargains and splurge on discounted items, this year may witness a more strategic and mindful approach to shopping.”
Retailers, in turn, are adapting to this shift in consumer behaviour. Some have acknowledged the prevailing economic challenges and are responding by adjusting their marketing strategies for Black Friday. Rather than solely focusing on large-scale discounts, retailers are emphasising value for money and highlighting essential items that address the practical needs of consumers.”
It is evident now, that the Black Friday period has not lost its appeal, but customers somewhat scaled back on the traditional frenzy of discretionary purchases and adopted a measured focus on value for money and essentials, especially in the build up to Christmas.
SimilarWeb, a data intelligence platform, revealed that Black Friday online traffic in the UK was down 12% on last year and Barclays, which see nearly half of the UK’s population’s debit and credit card transactions, reported a 0.6% decrease in transaction volume compared with Black Friday 2022.
Nonetheless, the shift to online shopping continued as the retail analysts MRI Software said weekly footfall was 12.6% below 2019 levels.
Whilst the cost-of-living crisis will have undeniably caused a shift in consumer priorities, other factors are likely to have played a role in the decline in sales this year:
Given the impact of rising costs on the disposable income of many consumers, retailers must consider strategies to show their value for money and encourage customers to depart with their cash. With customers hunting for cheaper products, the focus may be on further promotions, price cuts or improving customer experience both online and offline.
All eyes will now be on December sales with major retailers Sainsbury’s, Next, and Marks & Spencer all having made positive comments about the upcoming Christmas period. But with the economic backdrop of the cost-of-living crisis, will customers continue to emphasise necessity over indulgence?
UK cosmetics retailer, Lush, has announced they are opening a ‘first-ever’ eco-friendly hair salon in Brighton on 2 December. This expansion of their beauty services will include chemical-free, natural henna hair dyes and promises to recycle 100% of its salon waste, including hair cuttings, citing that that the rubbish produced from the UK hairdressing sector could fill 50 football stadiums a year.
Guided by the mission to “leave the world lusher than we found it”, Lush places a strong emphasis on a green strategy, prioritising sustainability and corporate social responsibility (CSR). This November, they partnered with People v Big Tech to raise awareness of intrusive surveillance and addictive algorithms and just over two years ago Lush left social media to take a stance against harmful content. They exclusively use recyclable or reusable packaging and underscore their commitment to cruelty-free, ethically sourced cosmetic products.
At the end of FY22, Lush had a total of 886 brand stores across 50 countries, with a group turnover of £657 million, a 7.5% increase from the previous year. Meanwhile, Lush upholds that their progress and longevity in the cosmetics sector will not compromise the standards of their business operations, asserting that “a modern form of capitalism can co-exist with profitability”.
Why is this important?
Notably, consumer trends, especially among Generation Z and Millennial shoppers highlight a growing demand for brand sustainability. A survey conducted by ESW revealed that nearly 60% of Gen Z and Millennial shoppers around the world will not purchase from a brand perceived as environmentally unsustainable and more than two-thirds of Millennial shoppers are prepared to pay more on a product because of a brand’s environmental credentials.
Good On You, a fashion sustainability ratings website, recently revealed the paradox: the most profitable fashion brands demonstrate the worst environmental policies. Similarly, both the cosmetics and fashion industries frequently face accusations of greenwashing which ultimately erode customer trust in the product claims.
In response to these challenges, many retailers have pivoted their focus to sustainability. The 2023 European Sustainable Cosmetics Summit stressed to key industry stakeholders and professionals the importance of green ingredients, biodiversity, and their carbon footprint. In a recent initiative, the Perfume Shop has recently launched fragrance refill stations with L’Oreal. In a similar vein, fast-fashion retailer Primark have announced that over 45% of its clothes produced this year were made from recycled or more sustainably sourced materials whilst New Look has become the first major fashion retailer partnered with TrusTrace to gain more visibility throughout their supply chains.
Retailers continue to grapple with meeting CSR goals and improving sustainability. Perhaps Lush’s success presents a blueprint for brands that profitability does not have to be compromised in the pursuit of sustainability and that responsible practice can co-exist with expanding business objectives.
German discount retailer, Aldi, is facing a lawsuit from cider maker Thatchers for infringing the trademark of its Cloudy Lemon Cider, accusing the chain’s Taurus brand of having “copycatted” its product. The firm accused Aldi of gaining an “unfair advantage” by copying the product “in both taste and appearance”.
The High Court trial began on 23 November with an unusual start, with Martin Howe KC, who is representing the Somerset brewer, inviting Judge Melissa Clarke to “conduct a taste test”.
“We suggest that such a test should be conducted as a blind test, so that the court is not swayed by any descriptions provided by either party,” he said.
The West Country brewer has made cider from Myrtle Farm in Somerset since 1904 and released their Cloudy Lemon Cider in February 2020. Mr Howe has urged the court to consider the extensive market analysis, feedback and testing that went into the product, which totals in £3 million between 2020 and 2022. Lawyers for the company claim that the Taurus branding is “likely to misrepresent to consumers some commercial connection to Thatchers”.
It is also claimed that Aldi, who released the Taurus brand in May 2022, are said to have achieved “extraordinarily high” sales of its drink after a “lack both of development investment, or marketing spend”. Thatchers’ skeleton argument states:
“Has there been a benefit to Aldi? Aldi’s sales figures are very large in circumstances where there has been no marketing investment, or investment in a product development process other than simply copying the Thatchers product in both taste and appearance,”
“Thatchers says these large sales figures were achieved by reason of the investment Thatchers had made in the Thatchers product, and that Aldi has exploited, free ridden upon, and taken unfair advantage thereof.”
Aldi has denied infringement and “passing off” its product as one appearing to be from Thatchers. The company’s lawyer, Stephanie Wickenden, has said “The Aldi product is well distinguishable from the Thatchers product by reasons of its different brand name and logo.
“There are key differences in the stylisations of lemons and their leaves, and the words ‘cloudy’, ‘lemon’ and ‘cider’ are in a different order.”
This is the latest in a string of high-profile claims against Aldi- the most recent being in February of this year, where Marks and Spencer accused the supermarket chain of copying its light-up Christmas gin bottles.
The trial continues, we will keep you posted…