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Europe’s Kids and Fashion Markets: Navigating the Retailing Challenges
As every retailer learns, success requires a combination of several prime ingredients:
- Selecting and handling a strong offering of new products
- Stocking shelves and offering products at the right time
- Following product lifecycles while respecting consumer demand
- Avoiding overstocking products
- Offering a good price compared to the competition
European retailers face more challenges and competition than ever as they attempt to address each of those important components. Across industries, consumers’ loyalty to particular products, brands, and categories is waning, and they often change at the very last moment before making a purchase.
Toys: Holiday season crunch time
The Christmas season is, of course, the peak for toy sales; the very last weeks of December, right before Christmas, account for about 30% of annual industry sales in the major European countries. This means a retailer’s success in a single category for a full year depends on just a few weeks’ strong performance.
In 2006, it was all about having the best licenses – such as Dora the Explorer – and some key products on the shelves – Vsmile, Littlest Pet Shop, interactive playmates, and Playmobil topped consumers’ shopping lists. The retailers who won the holiday sales race were those who kept these key names and products on the shelves until the very last moment, attracting the latest holiday purchasers.
Succeeding in such a short window of time is difficult and risky for some toy retailers – especially for the non-specialists who shift their focus away from toys after the holiday season. The ones who finish first are those who experiment with new retailing ideas to maintain or increase performance, including limiting the number of SKUs on the shelves in order to improve performance and rotation per product.
Most French hypermarkets have maintained their plans for stocking store shelves during the season for about the past three years. Some chains, however, attempted to reduce the average number of products per store, focusing instead on stocking the “star” products for the holiday season. In some cases, this plan backfired: when stores tried to improve efficiency and meet consumer needs, the “short offer” of products ended up reducing consumers’ perception of choice, and therefore sales.
and number of SKUs per store, 2005 vs. 2006
Fragrance: sweetening the offer
The challenges are similar in the French fragrance market. In this, the second-largest beauty market in the world, consumers are buying later and later at holiday time. Consumers are not as brand loyal to the category as they have been in the past. And the effects on sales of specific gift-buying occasions, such as Mother’s Day and Valentine’s Day, were weaker in 2006 than they were in 2005 and 2004. Moreover, it seems consumers look more and more for the most attractive promotion, and therefore easily switch from one retailer to another.
How are retailers reacting to these shifts? Their primary goal is to get more traffic into their shops. All major French beauty retailers have developed loyalty cards as incentives to drive consumers into their stores. Chains are now developing price and gift promotions year-round – the main French beauty chains offer at least one promotion per month – and the strategy seems to be working.
Sports: life is short
The sports market’s challenges are different – seasonality is not as important, since products have very short lifecycles in this industry. As in the fashion industry, sports retailers must get new products on the shelves right on time, and clear out declining models that may be past their prime in consumers’ minds. In the past five years, this has been sports retailers’ focus. Sales at discounted and reduced prices have become much more prevalent across Europe; 45% of the athletic footwear market in the five major European countries (U.K., Germany, France, Italy, and Spain), is now sold at a reduced or discounted price, compared to 38% just five years ago.
Reduced Price/Full Price
2002 v 2006
Source: The NPD Group/Sports Tracking Europe
Another challenge for sports retailers is the concentration of the market on a fewer manufacturers: adidas acquired Reebok, Nike acquired Converse, and PPR (a European retail group) has taken shares in Puma. How will this more concentrated brand landscape work to retailers’ advantage or disadvantage as they select and negotiate for products? One possible outcome is that major European retailers who have already developed ranges of private-label products will try to play this angle strongly.
For more NPD insight on the European retail marketplace, contact Isabelle Grenet at Isabelle_Grenet@npd.com.
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