Add some retail magic to beat the gloom

Nobody disputes that it is hard on the high street right now. Just last month, business advisers BDO warned that as many as 26,500 retailers could go bust by 2015 if they fail to adapt to match the “post-credit crunch mindset” of consumers.

For insurance brokers, the business space is equally tough. Competition from direct selling channels and online are combining with pressures on price and margins – and rising lapse rates – to make many brokers feel they have to run faster just to stand still.

For some retailers, however, the economic storm of the past 24 months has been a case of ‘recession, what recession?’. Yes, these companies have worked hard, but is there anything that insurance brokers can learn from the shops that are bucking the gloom?

Asos:?the online success story

Online fashion retailer Asos is having a ‘good’ recession. Sales are up by half, in part because of international growth (up 120%) but also helped by UK sales rising by a quarter.

Verdict Research senior retail analyst Malcolm Pinkerton argues that the key to Asos’s success, and that of other online players such as Amazon, is remembering that service and results are as important as technology.

Pinkerton says: “Asos has focused very much on getting the service element right, as well as the technology, so it has free delivery options and is very flexible, which encourages loyalty.

“With any web-based offering, whether you’re selling insurance or clothing, the key is to combine usability with functionality.”

Vertex senior business consultant Stuart Hayman says the tough climate means that brokers must consider how to make better use of the internet, even using it as a loss leader.

He suggests: “People who have already identified their needs or have simple financial affairs may not need a consultation with a broker. They may only need simplified online advice. Of course, this will not in itself drive revenue for the broker, but it can lead to opportunities to upsell or cross-sell to clients.”

Wilkinson: cheap need not mean nasty

Value chain Wilkinson has opened 17 stores since the start of 2009 and its sales have doubled. This has happened during the worst recession in a generation, so it is not surprising that other businesses are looking on enviously.

Pinkerton says that, like other value store success stories such as Primark and Poundland, Wilkinson’s recipe is a combination of opportunism and recognising that, to consumers, cheap need not mean nasty.

Hayman says: “Wilkinson has had an extremely good recession and has expanded aggressively.

It is noted for snapping up opportunities: for example, capitalising on Woolworths’ demise by moving into many of its sites.

“Wilkinson has also been successful at offering a wide variety of products from the basics upwards. People know it for quality as well as price, which is important. At the moment, people want to save money but they do not want to sacrifice quality.”

Hayman suggests that this is an important lesson for the price-conscious insurance market: “While people are looking to tighten their belts, they still want value.”

Sainsbury’s: focusing on strengths

Despite being in Tesco’s slipstream and suffering a few wobbles in recent years, Sainsbury’s is another retailer having a good recession, especially in recent months, according to Planet Retail analyst David Gray. Last month sales streaked ahead of City expectations and chief executive Justin King says it can become the UK’s second biggest supermarket by overtaking Asda.

Gray suggests Sainsbury’s is focusing on what it does best – quality food and groceries at good value – rather than offering too many non-grocery items. The company is also communicating more clearly with consumers.

Gray says: “Sainsbury’s has been a consistent performer, focusing on its core strengths and putting out clear marketing messages, such as its ‘feed your family for a fiver’ campaign.

“It has invested in the quality of its own-label products, and this has encouraged people to trade down while maintaining value, but then to treat themselves with other items.

“It has been about having a universal appeal, being good across a broad spectrum and being quick to adapt to change.”

Hayman says brokers should note the importance of understanding clients and even anticipating their needs. He says big retailers such as Tesco and Sainsbury’s spend a fortune on amassing customer spending data through loyalty card schemes, and suggests that brokers could gather data in a similar way.

Hayman says: “Insurance brokers have a wealth of information about clients, so now is the time to be approaching people who have secured loans or those at higher risk of public sector redundancies. You should be working with them over the next 12-24 months to mitigate their risk.”

Comet: successful repositioning

Electrical goods retailer Comet unveiled its new branding and began an expensive advertising campaign in September. It focuses on in-store expertise and service when, a few years ago, its reputation was pretty much the opposite.

Verdict Research’s Pinkerton says: “Comet has repositioned itself in terms of service. It has invested in staff development. It has succeeded in renewing itself against the backdrop of quite difficult times.”

Vertex’s Hayman says Comet identified its weak spots and worked on them – and brokers should do likewise. They can focus on keeping current clients as well as attracting new business, for example by tackling lapse rates.

He suggests: “Brokers should be more active on lapse rates, which have been increasing. They have to ensure there is an early warning system for premium renewal failure. It is all about retention as well as winning new business.”

Cath Kidston: the smaller success story

Designer Cath Kidston’s retail chain is known for its floral print designs and has grown through the recession. It is now a global brand, with 32 shops and two concessions in the UK, eight in Japan and one in Kuwait.

BDO head of retail Don Williams says: “This brand understands its place in the market and knows its potential customers. It has worked hard to differentiate itself from other retailers, and has invested heavily in the service side.

“Shoppers now are looking for excitement, innovation and a bit of theatre. Money is tight but people are still happy to spend when they want to. As a good retailer, you don’t just expect them to come to you … you have to be pulling them in.

He adds: “For a smaller business such as an insurance broker, this shows the importance of treating everybody as an individual. When personal recommendation is key, you mustn’t treat people like a wallet. If you do, they will either decide not to spend or walk somewhere else.” IT