Why we need some retail therapy

Why we need some retail therapy

Denise Turner, research & insight director, Newsworks looks at the resilience of retail and how retailers could improve ROI via digital news brands

With Black Friday behind us and Christmas only a few short weeks away, present ideas are being researched, shopping lists are being compiled, money is being spent, and retailers are aiming to cash in at this all-important time of year. 

Given the challenges of this time last year, when the UK was in the middle of the second lockdown and Christmas was effectively cancelled, it’s unsurprising that there are high hopes for this festive season.

Positively, PwC UK say one in four consumers intend to spend more this Christmas, with a total spend of £21 billion expected on presents and celebrations.

Electricals and fashion are topping Christmas shopping lists with new tech products being released rapidly (I’ve got a fancy pizza oven on my list!) and impending real-life celebrations in the diary, hurrah!

Christmas stocking fillers, health & beauty and homewares are next in line, with food & drink expected to do particularly well, as friends and families make up for lost time.

Overall, we’ve seen a huge variation in how different categories have been affected by the pandemic.

Retail has been remarkably resilient. One explanation may be the rise of the ‘at-home’ economy.

As people spent more time at home than ever before, whether working, being with family, cooking, gardening, and so on, spend on associated items rose. Yoga mats, beard trimmers and, of course, loungewear sales soared in 2020. 

Looking at post-pandemic trends, research shows that relative to pre-Covid norms, consumers will continue to prioritise spending on areas such as cooking from scratch, eating at home, shopping online and consuming digital services.

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This supports the view that the Covid-19 pandemic has been the ‘great accelerator’ of digital transformation. The huge impact of the virus, and the lockdowns, has undoubtedly acted as a catalyst: speeding up consumers digital adoption and introducing new trends at a rate few could have predicted. And that is perhaps truest for the retail category.

According to the Centre of Retail Research UK, consumers are buying more goods online than ever. By the end of 2021, online sales will make up almost a third (30.2%) of overall retail spending. This is 11% more than the share in 2019, pre-pandemic, so it is truly a bricks and clicks category. 

Just as with consumer spending, advertising spending is increasingly online. In 2020, according to SMI, retail ad spend in digital display, video and search was at 40%, up from 21% in 2011, and up 10 percentage points since 2015.

At Newsworks, our recently released effectiveness study ‘The Bottom Line’ shows that retailers could significantly improve their profit return on investment (ROI) by optimising spend in digital news brands.

At the moment, current investment levels are fairly low at just 1.7%, but even so, deliver a ROI of £2.31 to overall campaign profitability. If retailers were to increase their investment to 3.7%, they’d enjoy a total profit ROI of £2.43 per £1 spent.

When it comes to print news brands, the average proportion of total investment for the retail category is just over 14%. If retailers were to increase this to 17%, overall profitability would increase to £2.17 per £1 spent.

Positively, ‘The Bottom Line’ study shows that brands in the retail category have benefitted from an additional £93 million profit ROI since 2017 by optimising their ad spend in news brands. 

But the opportunity for advertisers to maximise profits is still there.

There is an additional £43 million of profit from advertising in news brands up for grabs in 2021 alone and a lot of that will come in the next few weeks.

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