CONSUMER GOODS Archives

06/05/2013by EOS Intelligence EOS Intelligence No Comments

Africa is Ready For You. Are You Ready For Africa?

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For decades, Africa was associated with poverty and helplessness rather than business opportunities and thriving markets. But the reality is evolving, and companies from across industries are increasingly including the African continent in their investment plans. Global FMCG players too have started to set their eyes on this untapped goldmine of opportunities. However, the market is much more complex than its thriving counterparts in Asia and companies must get hold of the market dynamics before entering or they stand the risk of getting their hands burnt.

Some two decades ago, it became apparent to the leading international FMCG companies that many of their core developed markets in the USA and Europe were no longer able to provide sustainable growth, which made them extend their business focus to include developing markets in Asia. While these economies will continue to still generate significant returns for quite some time, many global FMCG giants are already exploring new growth avenues and are turning their eyes towards the African continent. Growing middle class (already accounting for more than one-third of the continent’s total population, it is expected to hit 1 billion people by 2060), paired with accelerating economic growth, large youth population, overall poverty decline, and urbanization trends are the key factors underpinning Africa’s position as the next frontier in the global FMCG arena.

This has already spurred investment activity amongst leading FMCG players. By 2016, Unilever and P&G plan to invest US$113 million and US$175 million, respectively, to expand their manufacturing facilities in the continent. While these facilities are to be developed mostly in South Africa, they are expected to cater to developing markets across eastern and southern regions. Godrej, a relatively smaller India-based company, has taken up the inorganic route to tap this market, by acquiring Darling group, a pan-African hair care company.

Despite luring growth potential offered by the continent, the African markets are much thornier to penetrate than it seems. A shaky political and regulatory environment acts as one of the largest roadblocks. The continent has witnessed 10 coup d’états since 2000 and has been subject to countless changes in business policies resulting from unstable governments. Further, inefficient distribution networks, inadequate business infrastructure, as well as complex and inhomogeneous marketplace housing 53 countries, 2,000 dialects, and countless cultural groups, all cause African consumer markets difficult to navigate through.

Notwithstanding the challenges, the potential offered by the African continent overweighs. Companies, however, must mould their strategies and offerings to the realities of African markets in order to succeed. Here are a few pointers to consider:

Bring affordability and quality to the same side of the coin: Contrary to popular perception, the middle-class African consumer attaches much importance to quality and brands. Companies that have long followed the strategy of selling poor-quality products in this market cannot sustain for long. Having said that, affordability still stays as an important factor for the middle-class Africans. To deal with this, companies can look at offering good quality products in smaller packaging, to ensure low unit price. For several years, African consumers have gotten used to buying smaller quantities that could fit their limited budgets.
Discard the one-size-fits-all approach: On a continent with 53 nations, companies looking to enter African markets with blanket approach are likely to fail. While South Africa is relatively more developed and has slower growth, markets such as Nigeria and Kenya are developing at a rapid pace, and thus their dynamics differ. Consumer shopping behaviors and patterns also vary. Sub-Saharan nations, in comparison to North African consumers, tend to exhibit more brand loyalty and are more conservative in trying new things. North African countries also present stronger desire for international brands. Thus, it is most critical for international players to identify the characteristics of a particular market that they plan to enter.
Locate the right partners: Informal trade dominates African markets making distribution a daunting task. However, this challenge can be turned into an opportunity for companies to improve their competitive edge and bypass the lack of sufficient distribution and retail facilities. In rural areas of Nigeria and Kenya, Unilever has replicated its Indian direct-to-consumer distribution scheme, wherein a host of individuals undertake direct selling to consumers in their communities. Similarly, other companies have posted sales executives with each sub-distributor to manage inventory and brand image. Distribution costs are high in Africa but bearing them is not optional.
Move beyond traditional media: TV and print remain a popular and trusted media for advertising to urban consumers. However, owing to their low penetration in rural regions, they have limited impact on rural consumers. This brings forth the need to reach mass consumers through in-store marketing. Over the coming years, companies can also look into mobile advertising as surveys reveal that the number of Africans having access to mobile phones is already higher than those with access to electricity. Mobile penetration in the Sub-Saharan Africa stood at 57.1% in 2012 and is expected to reach 75.4% in 2016. This promises a gamut of mobile marketing opportunities for consumer companies.
Deal with infrastructural woes and innovate to compensate: Power outages, poor transportation, and limited access to cold storage facilities make public infrastructure undependable for businesses. Thus, companies must be open to invest in own power generators and water tanks. Innovations at the product end may also help overcome infrastructural limitations. For instance, Promasidor, an African food company, uses vegetable fat instead of animal fat to extend its milk powder’s shelf life when stored without refrigeration. While spending on infrastructure heavily increases costs, it can provide companies with a competitive advantage in the longer run.
Invest in personnel management and grow new talent: The fear for personal safety among foreign nationals and lack of skilled professionals within Africa makes recruitment a challenging task, especially for mid- and top-level management. Tapping into African diaspora located throughout the world comes across as a win-win solution. Moreover, providing training and management courses to local graduates allows addressing personnel needs over long term.

The African market can be a goldmine for FMCG players, if entered cautiously. However, the same can become a landmine, if proper investments and planning are not undertaken. Despite the present challenges, increasing number of companies will be looking into Africa, however only few will have the skill set to translate this opportunity into a great success.

22/04/2013by EOS Intelligence EOS Intelligence No Comments

Can ‘Made In China’ Become a Desirable Label in the Luxury World?

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If you type ‘Chinese luxury’ in your search engine, you are very likely to get a plethora of information on China being a hot spot for Western-produced luxury goods, as the demand for luxury is strong and continues to grow. What you are unlikely to find amongst your top searches, is information about recognized and valued China-originated luxury brands. Is this likely to change any time soon?

Over the next 5-7 years, China is expected to move up to become the second largest luxury market in the world, after Japan. Luxury market growth in China is forecast at a healthy 10-15% during 2013, driven by aspirational consumers whose financial position is rapidly improving and who originate from a cultural background where image, social stand, and respect from others are important values. The concept of luxury falls well within Asian cultural context, as luxury goods are a great tool to wordlessly manifest one’s high stand in the society.

Budding Chinese Brands

For several years now, China has been an attractive market for European luxury products, but it is yet to build its own set of valued, recognized luxury brands that can figure alongside the likes of Hermes or Louis Vuitton. While there seems to be some activity on this front, with some truly Chinese brands struggling to up their game and attempting to compete in the luxury market, the question is whether they are capable of succeeding.

Undoubtedly, there are some established high-end labels that have originated from Hong Kong and China, including Shanghai Tang, Ne-Tiger, Longio, Ascot Chang, Qeelin, Shang Xia, or Mary Ching. But for now they are known and appreciated mostly locally, and even in their domestic market, they lag behind the Western luxury brands. Chinese consumers are instinctively patriotic, so those Chinese luxury brands that are able to build associations with status statement are likely to win domestic consumers over period of time. But will these brands become as relevant and influential internationally as the brands in the LVMH portfolio?

Two Great Challenges

The first challenge for aspiring Chinese luxury houses is to develop great quality brands that will represent superior materials, flawless craftsmanship, unique and relevant designs, consistent quality management, and luxury-level service. This might be relatively easy to do, with proliferation of young creative Asian designers, who often gain their experience abroad. With several high-end and luxury European brands having some parts of production located in China, the know-how and skill set is already being transferred. In some regions, e.g. Southern China, manufacturing is shedding its image of low-cost, mass-produced, low-quality manufacturing center.

The second challenge is to change consumer attitudes, both domestically as well as internationally. Fighting the ‘made in China’ image requires revamping consumer perceptions, which oftentimes, once built, are very difficult to alter. For years, China has been associated almost exclusively as the source of cheap, substandard, unoriginal, and mass products. Even in China itself, while the attitudes towards Chinese-made apparel in mid range segment have improved, domestic high-end brands have not gained good recognition and acceptance, and many domestic luxury customers still prefer well known European brands. Local brands simply cannot provide the status that Chinese luxury shoppers look for. At least not yet.

The negative connotations are particularly strong in Western markets, where it will take a very long time before consumers are ready to accept a ‘made in China’ luxury brand. A European aficionado of luxury couture brands such as Louis Vuitton, Hermes, Gucci, Chanel, or Prada is unlikely to be open to trying luxury products originating from China, a land known for counterfeit goods, bad quality and cheap equivalents available for the masses.

Regardless of the geography, majority of purchases of luxury brands are driven by the desire to conspicuously communicate the belonging to the high, rich, and exclusive sphere in the society, and LV or Hermes logo communicates it in a matter of seconds. Purchasing a piece with a logo that is not instantly recognized by others appears pointless and contrary to the very essence of luxury logo display. This is also true (though to somewhat lower extent) for far more sophisticated, mature, and less conspicuous consumption-oriented European luxury consumer, who also value great quality in luxury products (and Chinese-made products are known for lack of it).

Fighting the Stigma

There are some industry voices cheerfully claiming that today ‘made in China’ is perceived differently than 10 years ago, but it appears more of a wishful thinking. As of now, many Chinese brands still need to exhibit some European connection to get through to the luxury customer both in domestic and foreign markets. This might be a finishing touch added to the product in Europe or internationally-recognized celebrity endorsement (e.g. Angelina Jolie ‘being a fan’ of Shanghai Tang luxury brand). But this is far too little to break the stigma of the Chinese label.

Interestingly, some brands opted for a different approach to nurturing their brand culture. Instead of piggybacking the European luxury heritage, they are trying to highlight Chinese roots, rich tradition of great quality going way back to pre ‘made in China’ era as we know it. This might be a good way for brands to start building on, and execute very careful moves when creating brand based on the Chinese ancient heritage when expanding in foreign markets.

It still remains a long term perspective to see Chinese luxury brands becoming as influential as Prada, Gucci, LV, and other big names in the luxury arena. For the time being, most brands are likely to opt for associating their products with European luxury as a less risky way to win customer base. Only a handful of visionary Chinese brands will be able to put long term brand building ahead of short term gains.

It is worth keeping an eye on Chinese luxury brands, striving hard to win market presence internationally, but their path to success will be long and rocky.

28/02/2013by EOS Intelligence EOS Intelligence No Comments

It’s Good the Crisis Happened – How Private Labels Benefit from Global Economic Turmoil

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Stagnating or declining consumption, falling sales, lower financial stability – the economic crisis is in full swing in many geographies. But it is not a bad thing for everyone. Across markets, private labels have witnessed strong growth over the past five years, the upward trend coinciding with the onset of the economic turmoil in 2008. Cash-strapped consumers, worried about their financial security, turn to cheaper options during their everyday shopping, providing the retailers’ own labels with unprecedented opportunity to win consumers’ hearts.

Since the very beginning of the private labels story, retailer-owned products have been typically associated with low quality (to some extent quite rightly as the first private label products were clearly inferior). These concerns over quality made it difficult for the private label market to take off, making it cater predominantly to the least demanding or poor group of consumers. Several retailers started to realize that while many consumers are indeed price-driven, what most of them actually look for is value for money – so value matters to most of them. While changing the private-labelled product quality was relatively easy to do, changing the consumer bias and conviction of these products’ low quality was a more difficult task.

Quality improved, but it was the onset of the economic crisis in 2008 that made many consumers develop a ‘crisis mindset’ that led them to actually try out private labels for the first time. It appears that the crisis gave private labels a unique chance to enter homes of a group of consumers who were very unlikely to try them out before, mainly due to the consumers’ loyalty to branded products, strong unverified perception of poor quality of private labels and lack of financial pressure to even consider cheaper options. With search for cost savings and brand loyalty in decline, many consumers have found private label products quality to be on a par with market leading brands across segments, but at considerably lower price (even up to 40% cheaper than branded equivalents, depending on product category).

Private labels market has been growing across several countries (most of Asia still has a relatively low penetration of modern retail formats thus presence of own labels is largely limited there), but the increased acceptance of private labels is particularly visible in Europe. According to a AC Nielsen report “The Power of Private Label in Europe”, already in 2010, a considerable group of consumers associated private labels with good value – between 82% and 87% of consumers across Spain, France, Belgium, Ireland, the Netherlands, UK and Germany believed that supermarket own brands offer extremely good value for money. This is a significant change of mindset, considering the long period of inferior quality associations. Such opinions have played an integral role in boosting the growth of the European private label segment, and in 2012, the average value share of private label across European markets was estimated at 30%.

Clearly, private labels will continue to benefit from the overall deterioration of the economic climate, not only now (even though private labels are gaining higher share of retailer sales, the overall consumption expenditures are all in all lower), but also after the crisis, when consumption will start to grow again. This will be possible provided that retailers use the current situation to build some sort of loyalty amongst customers. This is the time for retailers to prove to their customers that private label products are not half as bad as generally regarded, and to convince the consumers to stick to private label products even after the crisis.
It is not all nice and easy for private labels yet, as they are faced with a range of challenges, which might question their ability to win customers’ loyalty that would last even in the post-crisis era. Obviously, producers of branded products have also reacted to the deteriorated financial capabilities of their customers, and introduced a range of offers or launched product lines in cheaper segments.

Additionally, we have already seen an increase in private-labelled product prices, resulting in lower cost benefit over reduced-price branded products. Growth in the private label segment is linked to improved product quality and the retailers’ attempts to offset the decline in overall sales as consumption stagnates. This increase might eventually lead the consumers to realizing that they can get an old, beloved brand, that reminds them of pre-crisis security, at just marginally higher cost, especially with branded products now available at discounted rates and in promotional offers.

So, the question really is, whether the private label growth story is just a temporary affair, and most consumers will hop back to the branded cart the minute crisis is over?

18/01/2013by EOS Intelligence EOS Intelligence No Comments

Can Poland Remain A ‘Green Island’ Amid Crisis-struck Europe?

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Since 2008, the economic crisis has been the subject of countless news headlines across the world with numerous economies sliding towards the verge of painful recession. Europe has been severely hit as well, with only one state, Poland, performing considerably better than those once believed to be more stable and better prepared for potential turmoil, resulting in the Polish economy being dubbed the ‘green island’ among weaker, crisis-ridden EU states.

As the economic crisis wave spread across the globe in 2008, it hit virtually all economies. The slowdown was visible in form of declining economic growth rates, which soon changed into negative growth in economies of Europe, USA and Japan. Interestingly, Poland was the only economy in the EU to register a positive growth during 2009, and, despite visible slowdown due to recession hitting its trading partners, Poland has managed to storm though the crisis reasonably well.

Since the onset of the crisis, Poland’s good economic performance has surprised many analysts. Obviously, the country did not remain unaffected, and a look at a trend line of the country’s growth rates over the past decade clearly shows how its performance has mirrored EU’s economic struggles. Nevertheless, the Polish economy managed to grow throughout the crisis, and this year, again, as the EU economy is expected to shrink by 0.3%, Polish economy is expected to expand (though modestly). Poland’s position in terms of GDP per capita increased considerably by 11 percentage points, to 65% of EU’s average in 2011. The economic growth and persistence in defying the crisis is believed to be largely underpinned by strong internal consumption, as Poles took long to believe that the crisis could have an actual impact on them, thus did not cut down on their expenditure (e.g. in 2011, the Polish retail sector enjoyed one of the highest y-o-y growth rates in retail sales during the December holiday season in Europe, second only to Russia). This strong internal consumption, paired with attractiveness for foreign investors in production-oriented sectors, along with postponed entry to the Euro zone (a fact that has helped shield Poland from Euro quakes) and limited household and corporate debt, allowing for greater stability of banking assets – these factors are typically cited as reasons for Poland’s good performance amid the crisis.

However, there seems to be an air of negativity and the country might get its share of the crisis after all. Just in November 2012, the IMF and Morgan Stanley slashed Polish GDP 2013 growth forecasts by almost half, down to 1.75% and 1.5%, respectively, as rather modest export gains are expected to fail to offset weaker consumer spending. Indeed, private consumption boom is likely to significantly cool down, as for an average Polish citizen the situation does not appear bright. The mood amongst Poles seem to no longer reflect the earlier enthusiasm, with opinions that good performance of Polish economy is now more of a government propaganda, since what they see on a daily basis contradicts the positive overtone of analysts’ words. The change in moods has been already captured – in November 2012, the Indicator of Consumer Trust (BWUK) was down by 5.3 percentage points over November 2011.

In reality, Poland’s position in EU’s GDP per capita statistics improved more as a result of a decline of the EU average, rather than actual improvement in Poles’ incomes and standard of living. The accumulated negative impact of adverse situation in the country’s Euro zone-based trading partners, leads to increased cautiousness of firms, who are introducing cost control measures, including layoffs. Rising unemployment (registered unemployment reaching close to 13% overall and as high as 28% amongst graduates in November 2012), together with growing fear of losing jobs, as well as limited credit activity, seem to have put brakes on consumer spending and thus internal consumption, an element once considered as one of the fundamental forces allowing Poland to withstand the pressures of the crisis. The mood is increasingly pessimistic, and the Poles have now started to change their shopping habits – they buy less, think twice, postpone high-value purchases, downgrade to cheaper equivalents and demand higher value for money. Poles are finally increasingly aware of the economic storm going through neighbouring economies, and realize that they do not live on a safe ‘green island’ any more. This fear is escalated by recurring news and discussions filled with warnings of 2013 brining the crisis full-on to Poland. And what is definitely not helping is the opposition leaders’ lack of political will to constructively work with the government in averting the impending crisis.

Many economists urge Poles to remain calm and claim that there is no reason to panic (at least, not yet). Though the slowdown in economic growth is a fact, consumers’ calm approach is definitely recommended, as fear of the future might multiply the slowdown, resembling a self-fulfilling prophecy. But, one has to keep in mind that consumption levels, strongly correlated with consumer sentiments, has no capacity to remain the single force driving economic growth. Several cushions that previously protected the Polish economy slowly cease to exist – continuous, high value public spending, favourable VAT, weak currency that supported Polish exporters and high inflow of EU funds to sponsor infrastructure investments are becoming a story of the past. In this negative scenario, consumers’ wishful thinking, positive attitude and frequent shopping trips might turn out far too weak to lift Poland’s economy as Europe and the Euro zone continue to sink.

It seems that the story of the ‘green island’ may not remain true for long.

20/12/2012by EOS Intelligence EOS Intelligence No Comments

So What’s the Deal with Groupon? 8 Things for Groupon to Work On in Order to Survive

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Over the past few years, Groupon has managed to build a recognizable brand, and currently claims to have attracted 250,000 merchants and over 200 million subscribers globally, with some 40 million active customers (as of November 2012). Undoubtedly, these are valuable assets and such considerable customer and merchant base offers great potential, yet the company’s market cap fell by about 80% since its IPO, from US$16.7 billion in November 2011 down to US$2.8 billion in December 2012. Is Groupon’s heyday over for good?

Recently, there has been discussion around Groupon’s future, triggered by the rather consistent decline in the company’s shares price (from around US$26 on Groupon’s IPO down to US$4.5 in December 2012), increased discontentment on the customer side, and disappointment on the merchant side. Given its declining market cap linked to slowdown in revenue growth, fall in sales volume to existing customers and shrinking sales force, clearly, Groupon is currently not the best target for potential takeovers.

Groupon’s service novelty status that drove the company’s success in the first place, seems to be wearing off for its customers, especially as competition is intensifying, with similar daily-deal websites proliferating thanks to low entry barriers. Nevertheless, Groupon seems to be keeping its head high, trying to introduce more or less successful measures to drive customer interest and retain merchants (e.g. the moderately successful Groupon NOW drive offering nearby deals on demand for use on the same day).

While some of the initiatives might allow Groupon to marginally rebound, it does not seem they will bring the company back to its glory days. Groupon’s executives should revamp several aspects of their business (perhaps previously missed or underestimated) – aspects that currently appear critical for Groupon to survive:

Revisit Groupon’s model key selling points – perhaps Groupon got it a bit wrong in the beginning and conveyed it incorrectly to merchants, luring them with the idea of super-cheap offers turning masses of first-time-consumers into masses of regulars. Some customers will establish long lasting relationship with certain merchants, but such conversions proved to hold only a small share in overall purchases. Therefore, this should not be the main selling proposition to merchants, as this leads to disappointment and merchant expectations are not met.
Understand your customers – consumers are always looking for discounts, but many purchases via Groupon come from customer willingness to try something new once – something that they would typically not be able to afford at full price. For such customers, the assumption of them turning into regular customers after trying a product is flawed, as they are unlikely to continue purchasing at full price. The only conversion rate that might occur here, is the conversion from trying-how-Groupon-works-for-me customer into Groupon-regular customer, which does not bring any benefit to merchants, thus fails to justify merchant’s relationship with Groupon.
Re-orient merchants’ approach and re-shape their expectations – offering mass deals at very slim or zero margin is not going to work for merchants at all, given that only small fraction of customers MIGHT turn into regular customers. Groupon must make sure that merchants see real value in the relationship with Groupon, not just a vague promise of potentially (read: maybe, maybe not) expanding customers base as a way to organically grow merchant’s business.
Indicate the real value proposition to merchants – merchants should be clear about the tangible benefits of working with Groupon:
- For product merchants, Groupon can be a great tool for selling excess or old capacity e.g. during low demand season (discounted winter sports equipment in summer, unsold end-of-line products) or getting rid of old stock before restocking for anticipated rush periods with products that could be sold off-Groupon-route at higher margin. Whatever the reason, merchants must ensure the products offered are original product quality and without defects.
- For service merchants, Groupon can be ideal for filling in off-peak times through discounted restaurant vouchers for weekdays or morning spa sessions. Customers are likely to understand the link between discount and non-peak time, provided that the service level is consistently high with the service they would receive during peak time. This can allow to maintain continuity of orders and utilize the merchant’s resources in times when they are largely idle and generate nothing but costs.
- Regardless of merchant’s business orientation, Groupon can be positioned as a tool for getting quick cash by merchant at times when improving cash liquidity takes priority over generating profits due to temporary operational circumstances.
- Groupon can be used to fuel new product trial for newly launched or novelty products and services, especially expensive ones, where the high full price and unfamiliarity with the offering would normally deter customers from trying the product or service.
Control the number of groupons released on a single product or service at once – with large numbers of vouchers released, the merchant is flooded with more orders than that can be processed without delay or with dozens of consumers wanting to use the service over short span of time right after groupons’ release. Experience shows that this often leads to delays in delivery, giving the first-time-customer wrong impression of the overall level of service, causing disappointment, and reducing the likelihood of first-time-customers converting into regular customers even further.
Ensure that Groupon customers are treated as normal customers by merchants – treating the customer with groupons in their hand as a worse sort of customer is a common sin of merchants (service merchants in particular). They tend to forget that serving such customers is their only chance to showcase the excellence of service and customer care, and create memorably great experience. Instead, customers are reminded that they are getting less as they paid less, which lowers the chance of customers returning to purchase the service at a full price.
Ensure that Groupon deals are real deals – consumers are smart and given the easy access to online tools allowing for price comparison, they are likely to wise up to the so-called original price being inflated, and the discounted price being the actual price. Such discovery by the consumer leads them to feeling tricked, and they lose trust and interest, probably for good.
Keep it clear and play fair – do not discourage consumers with unclear, confusing or hidden statements on limitations in using the groupons. Including such conditions in small grey print at the bottom of the page is not enough. Customers often discover these limitations only after purchasing the groupon, finding themselves feeling disappointed and deceived. The conversion rate for such customers is obviously close to none, with some of them also creating negative word of mouth for such a merchant.

08/11/2012by EOS Intelligence EOS Intelligence No Comments

Will Retailers’ Cash Registers Ring This Holiday Season?

It’s a big moment for retailers as we enter the holiday season, which traditionally has been known to generate sales higher than in any other quarter during the year. But this year again, retailers cannot afford to sit back to enjoy the sweet sound of their cash registers ring. Despite the rebounding US economy and some European economies showing first signs of recovery, the ‘economic crisis’ phrase is still being heard in dozens of languages.

At the outset, the US retail holiday season outlook seems relatively optimistic, with National Retail Federation’s projections indicating a 4.1% increase in 2012 holiday retail sales over the 2011 season, to reach a healthy $586 billion this year. Though moderate, there is a visible increase in optimism compared with 2011, resulting in higher consumer confidence in economic recovery, employment stability, as well as individual and household finances, all of which should bring American retailers a sense of relief and may result in a brighter fiscal year-end.

Online shopping and mobile apps are expected to play an important role during this season in the American market. This, paradoxically, might mean a mixed bag of good and bad news for retailers. Well-informed consumers, empowered by easy access to online tools allowing for quick, on-the-spot price and offer comparisons, are bound to make retailers’ and marketers’ job harder. But, by now, any sane retailer should have realized the world of opportunities lying here, and only these retailers will be able to bite a bigger share of consumer’s holiday budget. Increased penetration of smartphones, in tandem with mobile apps, online shopping and social media, have opened several platforms for retailers to interact with consumers, leading to an increase in conversion rate of consumers from ‘online researchers’ to ‘actual buyers’. According to Deloitte’s research, shoppers using mobile apps are expected to spend 72% more than non-users this year, with the conversion rate for shoppers using dedicated mobile applications being 21% higher than shoppers not using such tools.

Although this data pertains to the American market, it offers a good learning for European retailers too, as for them, the 2012 holiday season outlook appears gloomier than for their American counterparts. They seem to be very much aware of what is at stake, especially remembering 2011, which was hoped to be the turning year for the European economy, but actually witnessed worsening of the retail sector across several European countries. Poor consumer confidence was reinforced with recurring news: “Italy Xmas sales seen down”, “Greece sales plunge”, “Retailers slash prices to clear stocks, hurting margins”. There were some instances of retail sales growth, mainly in Russia, Poland, Romania, and to some extent in the UK, which witnessed faster clearance of holiday stock, but, apart from Russia and Poland, it was far from the good old days of record sales.

Christmas shoppers brought little relief to Europe’s retailers last year, with online sales increasingly cannibalizing in-store purchases. Till date, 2012 has not been much better than 2011 in terms of hinting at better consumer confidence, with most Europeans constrained by lower disposable incomes, higher-than-average inflation, wage cuts, high unemployment and dwindling social benefits, all of which do not promise a very fruitful 2012 holiday season for retailers across Europe. Several European retailers, just like their American fellows, are also turning their eyes to online and mobile-app shopping, especially as 2012 has shown that online retail and mail order are relatively immune to economic volatility and falling consumer confidence (though online sales penetration varies considerably across EU states).

So can European retailers do anything or should they simply wait and watch the holiday season fare badly? While there are no magical solutions, some obvious aspects might help improve retail sales numbers a bit this year:

Christmas is the best time to play on emotions, but this alone will not charm consumers into opening their wallets during these difficult times. Retailers must offer great sale prices and monetary incentives to buy. As the gloomy outlook prolongs, consumers tend to be more perceptive to price cuts than Santa’s friendly image.
Price cuts, discounts and special holidays offers are a decent but rather ancient invention. Any retailer thinking of this being the sole instrument of gaining consumers will have to compete with the sea of price cuts available everywhere. Creating a sense of urgency and exclusivity allows one to stand out and force consumers to decide quickly, such as by offering sharp discounts but for a very short period.
It has never been more important for retailers to stay on their ones toes with excellent customer service. With a battle for consumer’s every euro and dollar, retailers just cannot afford unhappy customers, who are very likely to spread the news about their bad experience.
Offering a delayed payment option might not make the retailer excited, but it might be the best option to secure sales from those consumers who are worried about their liquidity and spending too much now. There might be a willingness to buy gifts, so a delayed payment option might help consumers make some purchase rather than nothing at all.
Retailers, even those who do not offer online shopping options, must make themselves visible online – this is not the right time to neglect social media (but is it ever?).

While the economic situation is slowly improving, consumers will undoubtedly remain cautious, and the 2012 holiday season is unlikely to break any sales record. With this rather mixed outlook, the good old basket of retailer tricks including Christmas special offers, jolly atmosphere and in-store decorations will turn out to be too weak to counterbalance the pressure on the consumer’s wallet and weak confidence. But perhaps the only thing that the European retailers CAN do is to pick from the old tricks basket as smartly as they can, wait out the worst times and just hope for the best.

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