• Sparkbox

Updated: Jun 17, 2020

Data from Europe can help retailers prepare to reopen non-essential shops in the UK.

As UK retailers prepare to reopen non-essential shops from 15 June, the industry is eagerly awaiting a first glimpse of the “new normal” for British retail. How will customers return, and what will they be looking for? How will spending habits change, and will those changes last?

This week we’re looking at trading data from Europe, where shops have reopened after lockdown periods, for insights that can help retailers prepare for what’s to come in the UK. For fashion and seasonal businesses, the road to recovery will no doubt be difficult, but we’re cautiously optimistic about the early bounce back our customers have seen.

Key insights:

1. Trade is resuming quickly, and in many cases exceeding expectations

2. Demand is coming from online growth and new parts of the store estate

3. Customers are excited about discounts and sales can boost average order value

4. Customers are still shopping full price - and when they are, they’re spending more

1. Trade is resuming quickly, and in many cases exceeding expectations

Lockdowns and restrictions on non-essential shopping from late March wreaked havoc on the clothing industry in the UK. According to the Office for National Statistics, “volume of clothing sales in April 2020 plummeted by 50.2% when compared with March 2020, which had already fallen by 34.9%”.

Germany was similarly affected, recording a drop in sales of clothing and shoes of more than 70% in April. After retailers were permitted to reopen in early May, UK retailer Superdry said “initial trading had exceeded expectations” in Germany and that sales “moved from being about 70% down to around minus 30%”.

One of our fast-fashion customers has seen even better results since reopening more than 50 stores in Germany - sales volume and revenue are down from normal levels by just 10%. In France, both volume and revenue have quickly exceed expected levels. These results are aided by discounting, but customers are still shopping full price, especially where styles are highly seasonally relevant.

2. Demand is coming from online growth and new parts of the store estate

Lockdowns have accelerated online demand, particularly for retailers who were equipped to handle a sudden channel shift. In the UK, John Lewis, saw an 84% uplift in online sales between mid-March and mid-April. Data from fintech startup Joko shows that in France, 18 – 35 year olds increased spend with digital brands like ASOS and BooHoo and decreased spend with Zara and H&M during the first two weeks of lockdown.

In Europe, we’ve seen 20% - 50% growth in online sales during the lockdown period, and in most cases this trend has continued even after stores reopened. The ongoing pandemic has rapidly accelerated online shopping, even in relatively saturated areas like clothing, and it looks like this change is here to stay.

Customers visiting physical retail locations are choosing where to shop carefully. In Germany, we’ve seen some stores exceed sales expectations by more than +50%, and others fall short of plan by up to 80%. Fast-fashion customers have so far preferred to visit less densely occupied areas – shops further out of large city centres and accessible by street entrance. Since shops reopened, the least favoured have been those inside shopping malls or city centres, and those near international borders.

Retailers in the UK are already responding to this trend – John Lewis has reportedly chosen to prioritise opening locations that are accessible by car. When stores do open, merchandising and allocations teams will need to react to new trading patterns and reserve replenishment for stores with the most (maybe new-found) potential.

3. Customers are excited about discounts and sales can boost average order value

Despite some cancelled orders and realigned stock, most UK retailers are reopening with unprecedented levels of inventory – much of it ageing quickly. It’s no surprise then that they have already started discounting, and customers are expecting mega deals in the coming weeks.

Marks & Spencer acted quickly to bring forward their usual summer clearance sale to mid-May. Dubbed the “Rainbow Sale”, they aim to clear £15b worth of stock and benefit NHS charities with “the sale of the century”. The scope of the sale is a clear sign that M&S is using this opportunity to address problems that persisted long before lockdown.

When it comes to discounting, we recommend retailers focus on their own stock, rather than on following the competition. More than ever, stock positions are highly variable and brands that attempt to match marketing messages risk eroding margin on their most profitable lines.

In Europe, fast-fashion customers appear to be excited about sale and willing to spend more than usual when they visit stores. In Italy, we’ve seen transactions down 15% in some cases, but sales volume and revenue near normal levels – a result attributed to early discounting on some products.

Some retailers are trying to hold back - Primark set expectations earlier this week that despite holding nearly 2x their normal levels of inventory, customers shouldn’t expect “special discounting”. It’s a necessary move for the brand, which can’t afford to get involved in a promotionally driven business model, but they face tougher competition in a deeply discounted market.

4. Customers are still shopping full price - and when they are, they’re spending more

Possibly the most encouraging sign we’ve seen from Europe is that fashion shoppers are still willing to pay full price – and when they do, they’re spending more.

We looked at the top 15 full price items sold by a fast-fashion retailer in France last week and found the average ticket price was double the comparable figure from last year. Ten percent of baskets included at least 1 of the top full price items. Despite significantly increased sale activity, customers splurged on highly relevant seasonal products like basic dresses and shorts, fashion shorts, and fashion tops.

Willingness to spend (and even splurge) is an encouraging sign and a huge opportunity for retailers in the UK, but to maximise margins and effectively clear ageing stock, merchandising teams will have to decide where to place their bets and their markdown spend. It’s a difficult task in the best of times, but with the added complexity of staggered store openings and variable demand, it’s guesswork. In times like this, retailers need to make data-driven decisions with the help of technology like Sparkbox.

Sparkbox uses machine learning to improve sell through and profitability by optimising pricing and merchandising decisions. We help merchandising teams leverage their data to identify trading opportunities and proactively mitigate risks at the product level. Sparkbox has been named “a top global retail tech startup” by Retail Week and is nominated for 5 Retail Systems Awards in 2020, including Artificial Intelligence Project of the Year.

In a recent conversation with Stylus about overcoming overstock, Sparkbox Co-founder Lindsay Fisher said: “Fashion retailers have been making decisions based on intuition, but this week’s trade will not be next week’s trade anymore. There is no baseline anymore – technology must underpin every decision.”

For more information or if we can help your team, please reach us at info@sparkbox.co.

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  • Sparkbox

Updated: Jun 3, 2020

Where do we go from here, and how can technology help?

It’s a time of year retailers usually look forward to: the weather shifts, a long weekend arrives, and Britons turn their attention to spring styles fit for special events. But this year is different. We’re staying at home and we're barely wearing the trousers we already own. As one high street clothing supplier put it: the 2020 “spring/ summer season has been cancelled”.

Fashion and seasonal retailers are evaluating their options – they’re cancelling orders, packing away landed inventory, and bracing for an unprecedented summer sale season.

At Sparkbox, we’re focused on helping our clients make data-driven decisions during these uncertain times. As stores reopen and demand shifts, it’s impossible for merchandising teams to predict what might happen next. We’re using our underlying forecasting technology to model scenarios and anticipate sales by region and channel as the pandemic unfolds.

Today we’re sharing some of our suggestions for pricing in a pandemic, which we hope will be helpful to our retail friends and colleagues as we start to think about emerging from this crisis.

1. Protect your customer

At this time especially, customer needs must inform business decisions. In recent weeks, we’ve seen great examples of retailers working hard to secure supply and deliver food and essentials at a fair price. This isn’t the time for profiteering, it’s the time to build trust by doing the right thing.

2. Cash is king

Focus should now be on converting inventory to cash as quickly as possible. This will be a difficult shift for merchandising teams who are historically goaled on margin. Some great but seasonal product will need to be discounted deeply, and those tough decisions should be made as quickly as possible. Retailers that emerge successfully from this will have prioritised cash generation and returning to seasonally relevant assortments quickly.

3. Don’t race

Except in the provision of essentials, don’t waste time and resources trying to match or follow competitor’s pricing activities. Focus on your own business and on mitigating your own stock risks. More than ever, you don’t know what level of inventory your competitors are trying to clear, so don’t follow them in a price race to the bottom.

4. Avoid guess work

Even under normal trading circumstances, it’s incredibly difficult for humans to process historical data and predict future sales trends. New technology can help – and it’s quicker and easier to deploy than you might think.

Machine learning is good at estimating demand because it can quickly crunch large data sets to understand how customers respond to changes in variables like store openings, stock levels, and promotions. Forecasts generated by machine learning models can be used to evaluate scenarios, allocate inventory regionally, and inform orders and cancellations.

In the coming months, retailers will need to clear lingering inventory while maximising margin on patchy new season stock. Sparkbox can be set up remotely in just a couple of weeks, reacts quickly to trading trends, and provides merchandising insights and advanced visibility to risks.

5. Find the silver lining

In every crisis, there are opportunities. Promotional strategies must usually consider margin goals and long-term impact to customer price perception, but this pandemic presents a chance to clear stock in “one time” offers. Customers will understand there’s good reason for special sales at this time, and these can be used to reset inventory positions without impacting customer expectations for the long term.

Forecasting technology that can inform pricing, promotion, and merchandising decisions now will continue to add value well after the pandemic is over. Going forward, retailers will seek to be leaner than ever, and data-driven merchandising will play a key role in maximising profitability while minimising inventory.

If you have any questions or if we can help with anything at this time, please reach out to our team at info@sparkbox.co.

Updated: Jun 3, 2020

Our team has been recognised in the Class of 2020 (Retail & Ecommerce) as "innovators reinventing the way we shop, online and off"

Today Forbes announced their Under 30 Europe list for 2020 and included two Sparkbox founders - Matt Wong and Lindsay Fisher. Team Sparkbox is thrilled to be part of this group, which "highlights the young visionary leaders brashly reinventing business and society".

Sparkbox is included in the Retail & Ecommerce category. This year's other honourees include founders of consumer brands, fashion labels, sustainability solutions, and blockchain platforms for retailers. We are grateful to have been recognised for our vision of enabling data-driven merchandising and pricing for retailers.

We launched Sparkbox in 2018 and this recognition wouldn't have been possible without the effort of our entire team - which includes additional founders Alex Stemler and Kevin Blackmore who (only just) aged out!

In uncertain times, we hope, as Forbes does, that this list "delivers a much needed dose of optimism" to the retail community in Europe! Thank you for including us!