Mintel’s Month in Retail highlights the stories that have made headlines in the European retail markets over the past four weeks, with exclusive analysis from Mintel’s expert retail team on potential implications.

UK: Retail sales surge 6.1% in October

UK retail sales excluding fuel rose 6.1% in October 2016, according to the ONS. This compares to 2.4% growth in September. Food retailers saw a 2.9% increase in sales while non-food retail sales rose 5.4%.

“The BRC figures were good, but these ONS numbers are much better again. Food retailers had an excellent month and clothing retailers, had their best month since September 2015 – a little seasonal weather helped. Household goods were weaker with electricals down, perhaps reflecting people holding off before Black Friday. For us the key factor is that underlying demand remains strong. There is no sign of any adverse impact on prices yet from the strength of sterling (volume sales growth was 1% point more than value growth). Much depends now on the impact of end-of-November discounting, but this is an excellent start to the Christmas season and shows that people are still prepared to go out and spend.”


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UK: Electrical retailers plan price rises in the New Year

According to reports, leading electrical retailers such as Dixons Carphone, AO World and John Lewis, are considering price increases after Christmas. AO World is planning to raise prices between 4-6% in 2017, however Black Friday deals will be unaffected as these were agreed before the Brexit vote.

“With the value of Sterling falling sharply post-Brexit, price rises are somewhat inevitable across the UK retail industry. Electricals is a category that will be particularly hard hit given the high level of imports, and rising supply costs will be passed on to consumers. However given that a majority of the leading players operate some form of price-matching scheme this should help to keep pricing in the market competitive. What this type of news story can do is shift demand, consumers may now be tempted to make any planned big ticket purchases for next year this year before price rises hit. With Black Friday just a few weeks away this would seem the perfect opportunity to capitalise on any demand created by a fear of short term price increases and electricals are big business during Black Friday: some 17% of consumers purchased electrical items during the event in 2015. Therefore we would expect the leading players to once again wholeheartedly engage with Black Friday in 2016.”


UK: Morrisons offers new delivery service through Amazon Prime Now

Morrisons has announced the launch of ‘Morrisons at Amazon’ whereby Amazon Prime customers in certain areas can order a full Morrisons shop online via the Prime Now app. The order will be picked at a local Morrisons store and delivered in a two hour slot for free, or within the hour for £6.99.

“Whilst trying to keeping track of Amazon’s innovations in 2016 is now a full time job, this latest one is worth stopping and pausing for thought over. Firstly this is not a deal that comes under the Amazon Fresh banner, Amazon’s full online grocery offer, which Morrisons serves as the supplier. This is a deal for Amazon’s Prime Now one hour delivery service, which prior to this deal had offered only ambient food and drink products. The real game changer here is that Amazon is offering free delivery within two-hours with a minimum spend of £20. This is market leading and significantly under Amazon Fresh’s own £40 minimum for free delivery. The real question is why work on a deal with Morrisons for Prime Now at the same time as Amazon Fresh? The answer is seemingly two-fold. Firstly Amazon Fresh is the far more fleshed out service – incorporating the deal with Morrisons, local specialists and its own marketplace sellers. This is the service targeted at the main weekly shop and to roll out its complete vision takes time and investment.

Prime Now is Amazon’s distress or top-up based service, its offering is more limited but serves the same purpose a convenience store does and the grouping of products under meal suggestions, along with rapid delivery, allows it to target the same food-for-tonight market that has helped the rise of food-box providers such as Hello Fresh. Also the ability to pick from Morrisons stores allows Amazon to expand its grocery offering much quicker, without needing to put down the infrastructure to launch the full vision of Amazon Fresh. The appeal for both services is, like most of Amazon’s recent innovations, limited to those within the Prime ecosphere but with ‘millions’ of Prime subscribers, Morrisons at Amazon can certainly find a home. Online grocery has always been more suited to the big weekly shop but with Morrisons through Amazon Prime Now, Sainsbury’s new Chop Chop service and same-day delivery becoming commonplace, online grocery is increasingly catching up with the current more fluid and frequent grocery shopping of the wider market.”

For more on online grocery and Amazon, see Mintel’s Online Grocery UK 2016 report.


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Germany: Karstadt to offer space for online retailers in store

The German department store chain wants to provide a more integrated experience for customers, by providing physical space for online pureplays in store, starting with Dress-for-Less. Additionally, more products from Karstadt will be available online.

“An interesting development from a business which has been too close to bankruptcy for too long. We regularly argue that the most effective retail proposition is stores plus online and here we have more online pure players experimenting with adding physical space to their offer. One of the main USPs of an online retailer has to be that it can offer a much wider range than is possible in a store, but having space on the high street is powerful marketing for any retail brand and even if the pure player can only display a sample of its range, it will gain from greater visibility.”


UK: Tesco implements own-brand price pledge

Tesco has vowed to match the price and quality of Aldi and Lidl across at least 60% of its entry-level or ‘good’ own-label brands. This strategy has already been implemented via the Farm brands introduced last year but this is the first time the strategy has been made public.

“This is an important step for Tesco, but crucially the retailer is talking about matching its discount rivals, and Asda, in terms of both quality and price. Aldi and Lidl have not built their success in the UK on simply being the cheapest, they offer outstanding value for money with quality goods at low prices. Margins will certainly be stretched with this new strategy, particularly with the current weakness of Sterling, but this seems the right move to make. Own-brand is already incredibly important, 50% of grocery shoppers think own-brand is the only difference between the big four, and as the market moves to a level of price-uniformity the quality of a retailers own-brand will become increasingly important.”

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Electronics Market

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