Get ready to ride the wave of the future in retail shopping! We're speaking with Lisa Hooker, Head of Consumer Markets at PWC, who's got her finger firmly on the pulse of the industry. Together, we're peeling back the layers of the retail market, and discussing the hurdles some sectors are grappling with. We're also taking a look at online shopping , its effects on traditional brick-and-mortar stores, and how physical stores are evolving to keep up with this shift
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Get ready to ride the wave of the future in retail shopping! We're speaking with Lisa Hooker, Head of Consumer Markets at PWC, who's got her finger firmly on the pulse of the industry. Together, we're peeling back the layers of the retail market, and discussing the hurdles some sectors are grappling with. We're also taking a look at online shopping , its effects on traditional brick-and-mortar stores, and how physical stores are evolving to keep up with this shift
#theproductivityexperts
Register for the Produtivity Forum 2024
Follow us on Twitter @Rethinkp
Connect to Simon on LinkedIn
Follow ReThink on LinkedIn
Welcome to the Productivity Podcast. Today I'm joined by Lisa Hooker, head of consumer markets at PWC. Hi, lisa.
Speaker 2:Hi Simon.
Speaker 1:How are you doing today?
Speaker 2:Yeah, good, the sun's out today.
Speaker 1:The sun's out and the wind's stopped and the rain's disappeared for a bit, so probably the best we can hope for this time of year.
Speaker 2:Exactly.
Speaker 1:Good, so I really appreciate your time today. Thanks for joining us on the podcast. We're going to talk all things retail, consumer but before we dive into those topics, can you just give us a bit of background on yourself, lisa, kind of what you've done, how you've got to be in head of consumer markets at PWC?
Speaker 2:Yeah, sure, so I am what we call a life, as I left university and I've been at PWC ever since, having moved from training in audit and getting my accountancy qualifications to then moving around different areas in terms of deals. But my day job really is doing financial due diligence on retail and leisure deals and through that I've always really been involved with the consumer, so headed up the transaction team and then the deals team and then I've gone firm wide so that, as people know, pwc is divided by lines of service, but we have this overarching structure by industry where we drive our key accounts and keep thought leadership in our community.
Speaker 1:Excellent. So from college through to today, it's a bit like I think. The only other person I could think it was a life was Ryan Giggs, who played for man United from School Boyle all the way through. There's not many people that have completed that journey now, is there?
Speaker 2:I think my generation is quite a few of us, but not in the younger generations I think they say don't need that sort of generation. Zerd is going to have like 12 jobs or something. So I think it's it's changing people's attitudes to careers and jobs.
Speaker 1:Yeah, absolutely, absolutely. So let's get into the fun stuff. Then If we, if we focus on retail, that there's lots we can talk about, so we'll we'll keep quite focused. But from a general retail point, are there any key trends that you're seeing out there at the moment?
Speaker 2:It's a really interesting backdrop at the moment. I always say look across 2023,. The consumer has been incredibly resilient because if you look at like the ONS data, they've grown about 6% a month. Now I know that means that, given inflation, the volume declined by about 2% to 3%, but still there's more money going into the tills. But the outlook and what we've seen is a lot more volatility week on week, responding much more to weather or special events on the positive or negative. So you know the consumer has been resilient, but it's not been easy and there's definitely been winners in terms of growing areas such as grocery, health and beauty, the pets and the children. But I think it's been much tougher for the big ticket furniture, electricals, diy and as we sit here today, I say look, there's some really good reasons to be cheerful in that inflation is coming down, real incomes going above inflation, but there's also reasons to be fearful in terms of the latent impact of interest rates on mortgages and rent and also the job market outlook has softened a little bit.
Speaker 1:Yeah, it's a real mixed bag, isn't it? And every time you kind of shake the pot it settles slightly differently in terms of how you feel about it. I think, from what we've seen, you know that whole conversation is bricks and mortar dead. I never believed it anyway, and I think it'll always be there. I think there's a softening in shift, certainly. I was in London for most of the week last week. You know Oxford Street. There's a big change, isn't there? You've got the old Debenhams that's almost knocked down now the old House of Fraser, that's knocked down. So we've really only got John Lewis is the department store and then and then Selfridges. But further down the street I went into next and that's almost becoming a pseudo department store because we've got gap and we've got jewels and all the other things. So there's this more thing, but also lots more, certainly in that central London bit leisure, hospitality, coffee shops, every three or four kind of shopfronts. So the mix has changed, hasn't it? But actually the physicality is always going to be there.
Speaker 2:Yeah, it's really interesting. We did a consumer reconsidered a couple of years ago and when we asked, do you love stores, it was actually the younger generation that, if they had the time, love them the most. So I don't think you're going to see online continue to grow rapidly. I think it will continue to have an impact, but I think it's going to grow a lot slower. But when you actually?
Speaker 2:We also do some research around net store openings and closures for chain stores and you've seen still a continued shift away from the high street to more retail parts because their viewed as being more convenient you can park, you can grab your click and collect, you can grab your coffee on the drive-through, etc. So stores are definitely here to stay, but where they are is changing and I think there are a number of high streets that are going through a level of regeneration. I always think, when you pick London, regent Street I think has done it really well and partly helped, I think, by a common landlord. But Oxford Street I think is sort of two or three years into what is now a regeneration, given that actually some of the big brands have had to pull out and it's good to see that IKEA is coming in and going to reopen quite a big site on the Oxford Street side.
Speaker 1:Yeah, that'd be interesting. I've seen the face. It looks pretty cool with the kind of. We all know what the IKEA bag looks like and it looks like a giant IKEA bag that they're covering the building where we saw some creative marketing there. One of the big news stories over in the last kind of six weeks has been, I think, the surprise in the jump from national living wage. So we're going up a pound and two pence and we're dropping the threshold down to include under 21s. For some they're above it, so it's a differential pressure. For others it was way more than they were the budgeting for, because I think historically we've done kind of 40 through to 60p. Is that something that lots of your clients are talking to you about and is in their minds of how they get through to April and budget for it? But also the next two, three, four years, with a potential change in government which could mean an increase in this area.
Speaker 2:It's really interesting. We obviously got the autumn statement and I think it did include some areas which were positive for the shopper and the consumer in terms of the national living wage, inflation linked pensions, national insurance reduction so it's positive in that side. The negative side of things is the affordability next year, not just around the living wage but also around the rates increases. So there's quite a lot of cost inflation to come and there's still mixed talk about quite what's going to happen to energy prices next year, whether they might be a little bit more of an increase in those after. We've seen quite a substantial decrease this year. So there's a lot of chat about how do you manage your costs and the cost inflation at the same time as serving the customer in the best way you can and freeing up cash to invest in technology and generative AI is quite a common conversation to have with a number of the market.
Speaker 1:It's tricky to square that circle, isn't it? Because we've seen it before where people have been quite blunt with cost cutting which becomes a short term measuring and then stunts that growth as the economy bounces back. We've seen people go almost full automation, which then for some generations the shoppers is absolutely what they want. For others they still want that human interaction and I still feel you know, certainly maybe some of the bigger supermarkets as well we're still trying to find that balance of manned versus self check out. We seem to have swung in my local ones to 70, 80% self check out, less manned. I'm sure in the future it may swing back, but that's not an easy thing to one start to solve, but two, to have a strategic plan which takes you three or four years when there's so many moving component parts.
Speaker 2:Yes, it's an interesting one is when my cost that colleagues talk to me, they simply talk about taking up bad costs and those costs are really appreciated by your consumer. I'm probably using that money to invest in good costs and good investments, and so there is that sort of permanent pressure to try and eliminate cost that aren't actually driving good business. And when you talk about stores now you know actually consumer wants an omni channel experience. They want to be able to buy whenever they want, where they want, how they want. So they do want the combination of online and, you know, in store, but also like social media and all the other areas and rental and resale type models. So they do want an increasing way Engaging. So which does put pressure on your cost base.
Speaker 2:And I think there will be more technology that we've seen already coming to stores. But it depends on the purpose of the journey. If it's a convenience store, you want to be in and out as quick as possible. Things like self check out, even check out free is really important. But if you're buying a luxury purchase, you want to be engaged. I'm off the staff in the shop. So I think what you're gonna have to do is look at your state and in different places it probably has different purposes, and then you can have to consider how much you have people and people time, these technology.
Speaker 1:Yes, so much more tailored approach to the kind of the format offering or the lens that you're deploying in that local area.
Speaker 2:Yes.
Speaker 1:So cost pressures but also, like, say, some exciting stuff. So you know, there's, as you said, there's the Investment in AI, machine learning, which we've probably only on the cost of our way in terms of some of the things we've seen, and I'm sure, like me, you've kind of had a play with barred or Check GPT and see what it can and can't do. So there's also lots of excitement around hospitality, retail and certainly some of the other areas we work in, manufacturing contact centers, around what the art of the possible is within the boundaries of not kind of turn it turn into kind of a terminator world through AI and machine learning.
Speaker 2:Yeah, I mean it's really interesting. I always think you have to think what is the role of technology, and you can think about it probably in lots of ways, but I think about it in five ways. You know, does it enhance the customer proposition and end to end customer journey? Didn't you know? Do you need it to digitize the operating, operating model, to capture either efficiencies but also unlock effectiveness, particularly in an omnichannel world like unified commerce, intelligent logistics and digital payments? Is it to me, yes you regulations or corporate commitments across the value chain? Is it to evolve the business model with convergence of different models? Do we know? I talked about resale, rental, but there's also, like marketplaces, one that's increasingly really interesting. Really important is how people monetize their tech capabilities and their data assets. You seeing people talk a lot more about B2B plays and I think actually it was in the press with us this morning on this whole monetizing your data.
Speaker 1:Yeah, there was some bits I was reading yesterday in the paper I think it was, that was test goes insane trees about a future world, potentially, where you're almost watching Netflix and they are. There's somebody that's not. Those organizations necessarily sold data and then all of a sudden you're getting tailored Adds within other applications based on your shopping and buying preferences and it's interesting.
Speaker 2:We did some research on how people feel about that. Is it creepy that you're being followed, almost? And the general response to the younger shoppers they don't mind as long as it's useful and it's relevant. What they don't like is when it's not.
Speaker 1:Yeah, and you know you, there's still that debate is no, not? I don't know the answer that you hear people say well, is is face. But listening, because I search golf balls on Amazon and all of a sudden I've got golf ball adverts on Facebook or Instagram, so that there's an element to that. That's happening kind of beneath the waves already. So Taylor in, it feels maybe like a step forward. But yeah, like you say, if it's then a wash with content that's irrelevant, it becomes more dissatisfying than a benefit.
Speaker 2:Yeah, definitely.
Speaker 1:So lots to play for in that area from a cost effectiveness point of view, but also from a consumer point of view as well. I think that there's loads to go out to simplify journeys, to make sure we've got the right data. For those bigger, maybe tech purchases or high-end purchases We've got the right information and we're confident that we're going to spend that money. So I think there's some really exciting stuff to come in there.
Speaker 2:Yeah, because I think the proximity to the customer is going to be more and more important because, as we look into 2024, we are in a low growth environment, not just in the UK but globally, and even potentially might tip into recession in certain countries. So really leveraging the data in terms of getting it right for the customer and the right personalisation, but also for new revenue streams, will be quite important going into 2024.
Speaker 1:Yeah, absolutely, and finishing 2023,. We've had Black Friday. At the time of recording, probably almost a month ago, although it felt this year a bit like Black Friday month. My inbox started filling up with Black Friday offers from the start of November I think, and there's still when you look online. Some organisations have almost carried that sale through. What are your thoughts on Black Friday this year?
Speaker 2:It's really interesting. So Black Friday it now gets called Black November and actually the data does support that. People this year started to promote earlier but were a little bit more selective on how they discount maybe certain ranges where potentially they've got excess stock. But it's interesting, the shopper told us that they were less interested this year, from 61% to 44%, which, if you did the math, would imply quite a drop in spending and actually we're still waiting for some data to come out. But if you actually look at the BRC data, they said in November sales were up 2.7%, but food was up but non food down. So I do think people pulled a little bit back from Black Friday this year and the reason they said they were pulling back a bit was actually it's a more difficult job outlook. They're concerned about the cost of living crisis and the latent impact of interest rate rises. But on the positive, they also wanted to budget so they could prioritise Christmas. So, yes, people are more cautious, but yes, I think Christmas is still very important to them.
Speaker 1:And do you think it kind of pulls forward spend? So it's not really new spend? Is it just people taking advantage of the offers and it becomes oh, I bought X, y and Z their Christmas presents early in the sale, or are people looking for a special deal at that time?
Speaker 2:It's quite interesting what the statistics tell us and what the shopper tells us is.
Speaker 2:This year they were starting their Christmas shopping early to help budget, but still the majority of spend is in the first two to three weeks of December, so we've still got a bit of time to play for and, with Christmas Day being on a Monday, that run up to the week before, I think will be really important.
Speaker 2:When you ask people why do they use Black Friday, actually it's more about the under 45 and men and men prioritise buying for themselves and spending on technology, while women it's more about the family and its technology, but also fashion and the start of Christmas gifting. So I don't think it's a massive Christmas gifting area, but it is now part of the calendar and people are looking for discounts and we've almost got like a double peak up to Christmas, which we didn't have years ago. So you used to, before Black Friday released off in about 2013,. You used to have sales gradually increasing through November into December, with some promotional activity in December. Now you see a bit of a peak in November. Then it comes off and people tend to come off the majority come off promotion and then you go back into motion. So I think it's just part of people's shopping habits and how they budget for the year, but it's not really about Christmas.
Speaker 1:Yeah, yeah, and I think this year more than ever, there's been lots of marketing noise. It's been quite. I've found it as a consumer quite difficult to understand if it's a good deal for Black Friday or if it's just a slightly incremental deal, or actually if it's not a good deal but it's marketed as a Black Friday deal. So I think for me as a consumer it's becoming more difficult to shop it because there's so much more noise. It's less you know people fighting for tellies in the supermarket, more like you say, departmental promotions or flash deals, but difficult to understand the value.
Speaker 2:I always say to people some of the big players who do promotional activity all year round it might not be the best deal, it might just be one of the deals that they do across the year, but you might find it other times. I think when you get to more of the mid-market, which is a lot of what retailers are, I think there are some genuine offers where you'll see 25% off winter coats or you'll see 25% across the board. I think they are genuine discounts. But I'd say, look, it might not be the lowest discount. So if somebody's putting 25% off coats but they're still over stocks in December, that could be the end of December or into January sales that could go to 50%. So I say, look, you don't know if it's the best offer, but I think for majority of the market it is a genuine offer.
Speaker 1:Yeah, yeah, I agree, and a few more organisations opting out this year. So again, more high-end fashion where you know it's a considered purchase and a specialist purchase so they don't necessarily need to discount. But yeah, there seem to be a few more that would, we're kind of saying, not, not for us.
Speaker 2:I think they were. It was interesting. I think it was more of a marketing ploy because you saw a couple talk about green Friday rather than black Friday, talking about maybe secondhand and recycling, and then you did see some brands sort of making a stance. But we actually saw a little bit more of the luxury market than normal engage in black Friday and I think we have seen in the second half of the year quite a slowdown in luxury, in, in particular, aspirational luxury rather than really high-end luxury. So there was actually a few more participating this year than we saw in prior years.
Speaker 1:Interesting and Christmas thoughts and predictions for 2024. Where do you see us heading?
Speaker 2:Well, again, we do quite a lot of research in the Golden Quarter, so we did ask consumers what are you going to spend at Christmas on presents and festivities? And actually last year they spent 23 billion, and this year it looks like they're telling us they're going to spend 20 billion 13% less and so it does sound like people are getting concerned about cost living crisis and they're going to spend less. Having said that, I'm always a little bit more optimistic because, first of all, when we did the survey back in September, 30% said they'd spend less, and now that's dropped to 18%. Last year they said they were going to spend 20 billion but spent 23. I think for a couple of reasons probably inflation, but also it was our first normal Christmas post-COVID, and when people together, they tend to spend more on each other, so I think that could happen again this year.
Speaker 2:So I don't think it'd be as bad as consumers say, because I think they will spend more than they think, particularly because they do tell us they want to prioritise special time with the family. But I don't think we'll see much growth and I do think it will be quite different by different categories. So I think I saw a few articles over the weekend with the grocery chain saying actually they're expecting quite a decent Christmas. But then I saw some others, maybe more big ticket type areas, where they're a little bit more cautious. So I think it's all to play for, even though there's only a couple of more weeks left as we record this podcast. It's all to play for and I do think it'd be better than expected, but I don't think we'll see big growth.
Speaker 1:And ultimately as a consumer, if you can kind of tell in the January sales really you can tell how well people have done or not by the level of stock that's left, the price cuts and the discounts that are given. So it works within both ways almost.
Speaker 2:It does, and I think a lot of retailers have got much more cautious around their stock levels and therefore knowing there's more volatility in the market and managing them better. But there will be some, like some of the online players, possibly got caught out by the fact that online has definitely come back to trend. Rather than keep the COVID wins and some of the big ticket areas, you know they might see a bit more promotional activity to drive that January big ticket purchase.
Speaker 1:And 2024, what are your thoughts as we kind of heading to potentially a changing government? We won't get political, but it seems to be what people think at the time of recording Maybe recessions in different countries around the world. So how do you think it's going to look for us?
Speaker 2:It's interesting because across the globe there's going to be slow growth, so you're going to have to fight very hard for share of wallet or share of stomach, and so it won't be an easy market. And I do slightly worry and I mentioned it last year but we didn't see it about a credit card hangover into January if people do spend a little bit more than they expect. So I think it will be unpredictable and it will be a bit of a fight for those pounds in your tails. So I think it's going to be so important about that proximity to customer that I've already talked to, but maybe more collaboration with your suppliers, given that volatility and you need to have flexibility, and I think people will look very much about how can they build their brand through expansions, through partnerships, product launches or brand resets to really try and engage the consumer. But it's not going to be an easy year, but I think it will be one just of quite low growth overall.
Speaker 1:And typical cost challenges will be prevalent. I assume, Like you said at the kind of start of the podcast, job markets flattening, which may be a consequence of some of those cost pressures, and do you see it being a market of opportunity for kind of consolidation in certain areas or expansion for others?
Speaker 2:Yes, I mean we've seen for a while in the UK a level of consolidation we would never expected years to go by.
Speaker 2:You mentioned Nex at the beginning, but Nex M&S now stock what were traditionally competitor brands and you've seen Nex be quite acquisitive They've just bought Fatface. So I do think you'll see the continuation of the strong players and platforms in the broader sense you know buying into other brands Because actually if you look at retail, retail margins have halved over the last 15 years and therefore retail margins are halved. You really need to make your cost work very hard for you and your infrastructure so you can do that by more consolidation. But as much about consolidation, about collaboration and partnerships. So I think that's been a trend for a while. That will definitely continue and I think at the beginning, while cost savings never go away, you can't keep driving through costs. So I think, even though it's a low gross environment, people will look to and retailers will look to grow sales and look at their pricing and promotions and ranging to try and sort of drive incremental pounds in their tail.
Speaker 1:Yeah, yeah, I think you, you struggle to save your way out of a recession or borderline recession, don't you? Yes, you've got to invest for the future and Really put your stamp on what makes you different. Otherwise you kind of blend into the margins with everybody else. So, yeah, I think, I think it'd be interesting times. I personally, I don't think it's as doom and gloom as maybe the pictures of painting. I think there's opportunity there if, if people are brave and I can invest slightly or think creatively, think differently about their customers, how they serve them or all their uses of technology. So I think you use the phrase all to play for. I think twenty twenty four is one of those all, all to play for years where you know the brave and the strong will will excel. If you may be not as, not as brave and not as strong, it might be more of a struggle.
Speaker 2:Yeah, and you've got to think of where the pockets of growth so capitalizing on. You know consumer behavior in terms of what and how they want to buy, the fact that health and well being is prioritized as well as pets and children. And she say integration, that emerging technology. So there's always pockets of growth and areas to go for, and what you do to the need to continue to invest in those areas.
Speaker 1:Excellent. So what will pause? On that note, at least it's been great to have your time. Thanks for taking the time out to catch up. If people wanna reach out to you, where's the best place to find you?
Speaker 2:I see these is way to find me. I say on linkedin, because it has all my details and people can reach out to me if they want to send me a message and I, if people reach out to link in with me, I am very happy to do so we'll put a link to your profile in the show notes just to make that step a little bit easy.
Speaker 1:But thanks once again. Really appreciate your insights and love catching up.
Speaker 2:Yeah, good speech assignment take care.