Dan’s Retail Recap

Back in December of last year, Dan Knight, our FashionTech Lead, delivered an insightful talk in our London office to Minders and clients alike.

The consensus was that the talk was interesting, honest, transparent and useful, especially in a turbulent time for many businesses in the ecommerce space where transparency can often be lacking. It’s no secret with financial reports and economic news that the economy is struggling right now, which, of course, has had detrimental effects on many businesses, with the retail and ecommerce industry especially hit hard. Sales in clothing and retail are declining a little, and paid marketing effectiveness is decreasing, especially in competitive segments like clothing.

Read on to find out the full summary of Dan’s talk on ecommerce industry trends in 2023, and a look at ecommerce in 2024.

2023 Business Challenges

As referenced in an article on the BBC, 2023 was on course to see the highest number of company failures since the financial crisis of 2009. Let’s look at that in more depth:

• Retail and consumer goods made the largest and second-largest number of redundancies respectively in 2023 compared to any other industries.
• A 2.4% decrease in clothing and footwear spend, which was the largest seasonally adjusted drop in UK consumer spending quarter on quarter to Q2 of any segment.
• A 25% increase in UK firms in critical financial distress from August to October 2023.
• A report from April of last year highlighted how 26% of UK organisations stated they were likely to make redundancies, with half surveyed stating they were expecting to cut costs and reduce recruitment efforts.
• A 54% in the number of redundancies year-on-year to August 2023.
• 64% of businesses are still recovering from the negative impacts of COVID.

Why was 2023 so challenging for businesses?

2023 presented a unique set of challenges for UK businesses. It can be difficult to accurately summarise and explain all the nuances as to why 2023 was particularly hard without stating the obvious point: inflation has reduced consumer spending and driven up costs. But this by itself doesn’t adequately explain why businesses struggled.

We need to consider the other macroeconomic factors at play:

• Some businesses sales are declining due to a loss of market share competition
• Some businesses are growing but below targets, perhaps due to forecasting
• Most retail businesses' profitability has fallen due to rising costs due to geopolitical and socioeconomic pressures. Costs of debt, shipping, marketing, engineering, and software are all rising
• Due to factors like Covid, online ecommerce platforms like Shopify are booming, meaning more businesses are selling directly to consumers which definitely has a knock on effect on high street brands and multi brand and marketplace businesses.
• Barriers to trade brought about by Brexit are predicted to cost UK ecommerce firms £5bn a year
• The cost of Pay Per Click (PPC) has risen, but its effectiveness is decreasing due to privacy changes and depending on the industry

Fashion & Inflation

Dan commented:

“Businesses who have adopted new privacy rules the quickest have been hurt the most, which is a shame to see. Business size plays a massive role in this due to the costs of fines for not complying with new data and privacy regulations. This can put small businesses at a disadvantage.”

What about the 2024 landscape?

As much as we’d like it to be so, hope is not a strategy when it comes to business operations. 2024 has already seen eCommerce based businesses harder hit as customers switch back to physical retail, as outlined in the Office For National Statistics January 2024 report. In Dan’s presentation, he dived into what surviving businesses all have in common, i.e. the commonalities of those that weathered 2023 by breaking it down into three main areas: marketing, technology, and strategy.

Marketing

For businesses to stay ahead of the curve when it comes to marketing in 2024, it requires an understanding of customer needs, key trends and evolving algorithms. Businesses that ruthlessly track and target users are at an advantage.

Dan points to having greater ownership of customer communication and more focus on relationships, this will come from great customer comms, fostering a loyalty mindset with the potential use of loyalty programs, private shopping, and social media playing a larger role via 3rd party micro influences.

With updates like the EEAT from Google, brands need to prioritise offering valuable information with educational content to build trust and promote their values clearly to customers who resonate with these. Authenticity and transparency are two further areas that are increasingly sought after by potential customers and younger generations.

Technology

With the current market volatility, businesses need to focus on reducing costs and getting a solid return on investment from new work and projects. Here’s what Dan identified as commonalities of businesses who weathered 2023 well:

• Fewer but more highly and cross-skilled people
• Smart use of cheaper labour markets
• More use of SaaS that has usage-based fees and/or a greater focus on procurement
• Staying clear of overinvestment in cutting-edge technology like AI

Strategy

Investor risk aversion, Dan notes, will lead to more realistic and successful strategies. He notes the following areas as wise strategy for businesses to consider for 2024:

• Abandoning “growth at any cost”
• Market profitability before expansion
• Avoid the hire and fire cycle (cautious hiring)
• Do fewer things but better

Wrapping up

To conclude, our Retail Recap fashion event in London saw FashionTech Lead Dan Knight dive into 2023 macroeconomic challenges as well as business guidance for 2024. We’d like to extend a massive thank you to Dan, the Minders who helped set up, as well as all the attendees for engaging in insightful debates and discussions surrounding the talk.

If you’re worried about your cost rises being disproportionate to other businesses in your sector, come have a chat with Dan & the team on software benchmarking costs and optimisation or wider technology strategy, no obligation.