Letting the tills ring out

1 The impact of the VAT increase

Trying to predict how customers will react to the new year VAT increase is causing retailers one of their biggest headaches this year. With a 2.5 percentage point rise coming into force on January 4, they need to not only plan their promotional strategy for the period but also predict how it will affect demand and adjust their store, staff and stock planning accordingly.

For big-ticket retailers, the effect is obvious but lower-ticket items are also set to benefit from increased footfall. “It’s likely that UK shoppers will be making additional purchases ahead of the VAT rate rise, especially on bigger-ticket items, and we’ve anticipated this extra demand in our planning for the festive season,” says a Marks & Spencer spokesperson.

Jason Kemp, managing director of store operations specialist Envision Retail, says businesses need only look at the 2.6% rise in like-for-like spending in December that happened in Germany when a similar rise was introduced in January 2007. It was followed by a 5.1% slump. “The yearly challenge for retailers will be compounded by identifying which stock is going to be in demand in the run-up to Christmas but not having large volumes of overstock into the new year, as this may not sell following the VAT rise,” says Kemp.

Many retailers believe Christmas will come late, but Boots UK head of trading operations and planning Mark Taylor believes his stores are prepared.

“We’re confident this Christmas will be an operational success, especially as many of our customers may well leave their shopping late,” he says. “Our store operations team is prepared for the VAT increase and we’re confident the change will be implemented smoothly, with minimal impact on our customers.”

2 Boxing Day falling on a Sunday

The shift from Christmas to Sale is always a challenge for retailers but this year it will be exacerbated by the fact that Boxing Day falls on a Sunday, with the shorter trading hours that allows.

Retailers are also going to be faced with a more concentrated rush of shoppers in the tighter trading hours - especially if shoppers do hit stores ahead of the VAT rise. “In our bigger stores the shorter Sunday trading hours for the first day of Sale may cause some challenges, but we’re confident we have planned for these,” says Taylor.

Kemp warns that the impact will extend into the week, too, and could hit internet deliveries. “As the Monday and Tuesday are now bank holidays, it could mean that internet deliveries may not be processed, dispatched and delivered until Friday or Saturday. This may reverse the trend of last year of an increase in internet shopping on Boxing Day and instead fuel a rise in click-and-collect services,” he says.

However, M&S claims that this will not be a problem. “Orders placed on Boxing Day on our website will be valid and processed as normal,” says the spokesperson.

3 Predicting temporary staff requirements

Assessing demand in such challenging times - when customer service is going to be key - means that predicting temporary staffing levels is a huge challenge in itself. Most retailers won’t announce seasonal recruitment plans until the end of this month or early October. For many the onus is on the people who know their stores best - the store managers.

“Seasonal demand can be difficult to predict so our focus is on a flexible approach to peak trading season recruitment, which involves decision-making at store level,” says Argos store operational support manager Will Jary. “Our store managers are in a position to increase or decrease manning as and when required.”

A similar approach is taken at The Perfume Shop. “We have a well-honed method of forecasting our temporary staff requirement by store, based on previous daily sales patterns and the day of the week on which Christmas falls,” says The Perfume Shop marketing director Matt Walburn. “It’s a key part of our store manager’s Christmas planning to get this level spot-on and the plan for each store is continually reviewed as we move through this key selling period.”

But Top Gear Recruitment operations manager James Mallick says operations teams need to be mobilising their staff now. “Poorly briefed, badly trained and unproductive temporary workers can cause problems,” he warns. “To ensure you get high-calibre, well-trained temporary staff, there must be enough time to follow the process correctly.”

Kemp suggests retailers introduce low-commitment or zero-hour contracts, which allow them to flex staffing as required.

4 Converting nervous customers in the store

Marketing is going to be key in the battle for hearts and minds this Christmas but, with customers clearly nervous, converting them to shop will rely on getting the basics right. “As ever, our customers’ time will be a precious commodity this Christmas and we will be working hard to ensure they can find the product they came in for and that it is in stock,” says Taylor.

“It’s about offering a compelling product range and consistently high levels of product availability, combined with outstanding prices and great customer service,” says Walburn. “It’s about making sure every customer is acknowledged and made welcome on entering our stores, then personally helping them find the fragrance that is right for them in a positive, non-pushy manner.”

At M&S the priorities are the same. “We feel that the close attention we pay to stock availability, customer demand and seasonal recruitment means customers can rely on us for their Christmas purchases,” says the spokesperson.

5 Managing the rise in click-and-collect services

This Christmas will see a huge increase in retailers offering and customers making use of click-and-collect services. But, although such services offer huge benefits for the shopper and allow some certainty of demand for retailers, they can also cause their own headaches.

For those retailers that run click-and-reserve services there can be the challenge of not only ensuring there is adequate stock to meet such demand but also the possibility that stock may be tied up by customers reserving to ensure availability but then simply taking product off the shelf instead.

Some retailers have also been hit by rivals forcing out-of-stocks in local stores by reserving but not collecting stock with bogus customer calls.

“Click-and-collect is a challenge, because if it’s sitting out back with a customer’s name on it, you need to make sure the order is collected as quickly as possible. It’s about being more proactive, so maybe phoning or emailing the customer to check they are collecting the item, particularly for in-demand items,” says Kemp.

He believes retailers need either to tighten their reservation windows or, like Boots, ensure shoppers pay for the items first.

Argos, which pioneered online in-store reservation in the UK, claims that both methods are as quick as each other. “This channel is growing by 36% for the second financial year in a row,” says Argos multichannel programme and operations manager David Tarbuck.

“The staff hours needed to serve a reservation customer are no more than those required to serve a non-reserving customer. For both channels a pick ticket is created and the stockroom balance is decremented automatically by our system. Having all available stock in the same place and on the same inventory system allows us to ensure our products are available for the customer to collect by whichever channel they choose,” he says.

At Boots it has become an integral part of the offer. “It is no longer seen as an additional task to perform by stores but rather as a vital tool that unlocks an extended inventory to ensure customers leave the store with the products they came in for,” says Taylor.

The Perfume Shop is to trial a store-to-door online service next year and also plans a click-and-collect strategy, but Walburn says the retailer recognises the challenges. “As well as the necessary IT development to ringfence online-ordered product in-store, to deliver this service at a best-in-market level requires watertight operations processes to ensure orders are easily identifiable in the collection store,” says Walburn.

At M&S the retailer’s Shop Your Way service has rolled out to more than 300 UK stores and more than 130 Simply Food stores. “With dedicated collection points, which are staffed according to customer demand, customers can be confident that they’ll be able to pick up exactly what they’ve ordered in a swift and efficient manner,” says the M&S spokesperson.