January is the month of Christmas trading updates, when we get to see how some of the country’s biggest retailers and high street brands performed over the festive season. So far this year we’ve seen a very mixed picture, with some businesses surging ahead in their sales, and others enduring challenging market conditions. Ted Baker CEO Ray Kelvin summed it up neatly when he told the FT: “It is very tough on all fronts. There are going to be winners and losers.”
Besides some of the factors that are shaping the bigger economic picture, it is clear that consumers have become much more discerning in how and where they spend their money. This trend didn’t happen overnight of course – the digital revolution and the explosion of online shopping has transformed consumer behaviour over a number of years – but we’re now at a point where the line between ‘winners and losers’ is more clearly defined than ever before.
It is no coincidence that those brands that performed particularly well over Christmas have invested heavily in understanding and engaging with today’s highly demanding consumers, and have then taken bold, decisive action to meet those needs. Whether it’s a dynamic pricing or promotions strategy, or innovative new services and brand collaborations, these companies have shown willingness to adapt their business models and act with greater flexibility in order to remain relevant to modern consumers.
“It is clear that consumers have become much more discerning in how and where they spend their money”
Delivery services are a great example of this changing competitive landscape. It was once the case that product delivery was a fairly rudimentary service, or something associated with mail order catalogues, but today it is a hugely dynamic arena in which all manner of brands are competing to offer the best services.
Just this week the Co-op confirmed it has agreed a partnership with Deliveroo that will see it trial the delivery of beers, wines, spirits, snacks and confectionery through the online delivery platform. The trial, which is taking place at five stores in the Greater Manchester area, is part of the Co-op’s efforts “to make access to our products and services even easier for consumers”.
Back in 2016 I wrote about the phenomenon of online food delivery and services like Deliveroo and Just Eat, which were really starting to soar at that point. In the relatively short period since then these companies have continued to transform the way we think about food, home cooking and dining out, while growing rapidly in the process. Last November Deliveroo raised an additional £74.3m in new funding to keep its valuation at over $2bn, while Just Eat was promoted to the FTSE 100 with an astonishing £5.5bn valuation.
The convenience offered by these companies has heightened customer expectations to the point where people expect to have virtually anything delivered fast, efficiently and at the touch of a button. The Co-op partnership, for example, shows how Deliveroo is now expanding beyond just takeaways and restaurant meals towards general retail and all kinds of food and drink products. Similarly Diageo last week agreed a partnership with UberEats whereby local convenience retailers will be able to fulfil orders of its beverages via the online delivery platform.
“The convenience offered by these companies has heightened customer expectations to the point where people expect to have virtually anything delivered fast, efficiently and at the touch of a button”
These are hugely innovative collaborations which show that the Co-op and Diageo have identified changing customer behaviours and are starting to adapt their business models accordingly. Other high-profile examples include McDonald’s and Greggs, which launched delivery services last year, and Subway’s plans to launch delivery services in London in 2018.
But getting delivery right requires the right strategy. It was interesting that last year parcel collection service Doddle decided to close a number of its stores in order to focus on developing third-party partnerships, such as its existing tie-up with Morrisons. The company admitted that it had struggled to get people to come into its high street shops, with most consumers choosing to go to click-and-collect kiosks within their preferred retailers.
It’s not just about location either – speed is of the essence now too. Indeed today brands are not just competing on the availability of delivery services, but on the speed with which they can get items to people’s doors. Last year, for example, ecommerce businesses Asos and Feelunique launched same-day delivery services in London, while Sainsbury’s extended its one-hour grocery delivery offer to more postcodes in the capital.
The battle to be the best at delivery is a sign of just how much power today’s consumers wield. As the recent glut of Christmas trading results show, the brands that succeed will be those that show flexibility, act decisively and shape their offer around the increasingly demanding needs of consumers.