Recovering from the 2020 Retail Slump: Three Strategies for Sales Growth in 2021
After a tumultuous year in survival mode, 2021 presents an opportunity for retailers to recover and maximise sales growth. 2020 was a challenging year for retail. Most retailers fell short from their sales targets and had to adjust their financial guidance. After a year of grappling with supply chain disruptions, inventory crisis and discounting ruts, the valuable lessons from 2020 will help retailers chart the path towards sales growth.
However, we are not completely out of the woods yet. Covid-19 still looms in many parts of the world and vaccine deployment might take time. But with a better understanding of foot traffic and shopping patterns during peak Covid season versus slow trade during lockdowns, retailers can approach the following aspects of retail more effectively.
- General retail operations: Get a better grasp on how much to spend on buying budgets, how to manage a cost-effective supply chain and adapt to rapidly shifting consumer trends.
- Physical operations: Roll out social distancing measures in stores to uphold SOPs and avoid distributing the bulk of inventory to Covid-19 hotspots.
- Online operations: Keep central warehouses between online and physical stores to maintain a fluid inventory, develop flexible marketing campaigns in case of unexpected lockdowns, scale online capabilities, channel budgets into more digital touchpoints such as apps and live streams.
Having ramped up these different aspects, businesses can work towards sales growth with strategies that are relevant to the current consumers and market situation.
How to Optimise Sales Growth in 2021
Here are three focus areas businesses can look at to optimise sales growth in 2021.
#1 Bring Out Carryover Inventory
When Covid-19 hit last Spring, a lot of seasonal inventory never made it to the shelves due to the first round of lockdowns. Travel restrictions and factory shutdowns led to delays in both production and shipment from other countries. This narrowed the trading window and left retailers with tons of backed inventory that they could not sell in time
Deep discounts were commonplace at this time to offload seasonal stock but many companies also opted to store the products for future Spring collections.
Retailers should integrate the carryover inventory into their buying budgets and spread the stocks out across several launches. Not only will this strategy prevent overstocking, but retailers can also understand the product attributes driving sell-out before planning their next buy. Avoid discounts and market products as new by refreshing descriptions and promotional visuals. Additionally, err on the side of caution by avoiding restocks until sell-out is proven.
The economic downturn amid the pandemic severely impacted consumer spending, many only purchasing essential items. To appease consumers with tighter budgets, retailers should consider repricing their products to align with current market sentiments. Many retailers registered a drop in median prices last year, particularly in the first half when Covid-19 was at its worst.
Zara had the biggest change in pricing of the three prominent retailers, lowering its median price by 10%. Should another wave of Covid-19 occur, retailers conduct another round of repricing. Retailers often associate bringing prices down with automatic loss in profits but that is not always the case. For instance, Zara was able to improve their sell-out performance after repricing in the first half of 2020.
The retailer enjoyed strong sell-out across most price brackets after lowering its median price. As the retail situation improved by July, Zara increased prices again but was able to sustain high sell-outs.
However, Omnilytics data discovered that there are opportunities in the below $40 and above $70 price range that the retailer has yet to capitalise on. When repricing, it is crucial to understand the market demand in order to maximise margins with the right prices and not miss out on opportunities.
#3 Align with Spring Key Trends
To launch a best-selling assortment, retailers must align with popular spring trends. The increase of remote working and video conferencing amid lockdowns has given rise to waist-up fashion. From the runway to the high street, Zoom trends are all the rage and consumers are demanding for it more than ever.
At the Spring/Summer 2021 runway season, the styling for fashion shows, both virtual and not, placed a huge emphasis on waist-up pieces. Many runway ensembles featured voluminous sleeves, neckline details, graphic logos and statement accessories to fit the focus on our upper half that is still prevalent in several regions.
Another trend influenced by the pandemic is escapism, born out of cabin fever that many of us experienced over months of isolation. Escapism was a focal theme of major fashion houses like Saint Laurent, which hosted its show in the desert, while Gucci and Jacquemes presented their collections on open fields. That said, retailers can expect varying degrees of trend adoption in Europe and the US. While Europe is more open to escapism and bold fashion, the US is content to stick with comfort wear for the time being.
Monitoring trends and validating their performance is the key to minimising risk in the upcoming season. Retailers should bet on trending categories that are in line with Zoom trends like accessories, jewellery and activewear. However, these trends are bound to change as the Covid situation evolves throughout the year. Constantly monitoring trends’ progression over time is essential to quickly spot and act on opportunities.
As the pandemic situation remains uncertain, this leaves businesses with less room for error when expanding market share and achieving sales growth. That said, the quickest path to retailers’ sales target is that using data analytics and aligning with your main goal can go a long way. Over the next few weeks, we’ll dive deeper into the strategies and best practices retailers can take to optimise sales growth, from pricing to trend forecasting backed with data insights. Stay tuned for more.
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