VW, Coty, UK economy: Everything that matters this morning

Good morning and welcome to Marketing Week’s round-up of the news that matters in the marketing world today.

UK economy shrinks by a fifth in April

The UK economy shrank by a record 20.4% year on year in April as the full impact of the lockdown caused by the Covid-19 pandemic was felt, according to figures from the Office for National Statistics (ONS).

The decline is the largest monthly contraction on record and three times greater than the decline seen during the whole of the 2008/09 economic recession. For the three months to the end of April, economic output was down 10.4% year on year.

Virtually all areas of the economy have been hit, with pubs, education, health and car sales among the biggest contributors to the record decline. Manufacturing and construction also recorded significant declines – particularly housebuilding and car manufacturing – while there were falls in trade with the rest of the world, particularly in cars, fuels, art and clothing.

“April’s fall in GDP is the biggest the UK has ever seen, more than three times larger than last month and almost 10 times larger than the steepest pre-Covid-19 fall,” says ONS deputy national statistician for economic statistics Jonathan Athow.

“In April, the economy was around 25% smaller than in February.”

Coty launches first direct-to-consumer service

Beauty brand Coty is launching its first direct-to-consumer service as it looks to tap into growing demand for at-home beauty solutions.

The service, called Home Beauty Edit, enables customers to order products from Coty and have them delivered direct to their homes. It will feature ‘bundles’ that will include hair colour, and nail care and colour products from brands including Clairol and Sally Hansen to offer ‘at home’ salon and manicure services.

“We are always looking at ways to make the lives of our shoppers easier. Given the current terms of lockdown in the UK and the challenges our consumers face in getting online deliveries or to the shops safely, it presented a perfect opportunity to try to help. Consumers still want to feel and look their best and we hope this initiative can enable them from the safety of their home” says Coty’s UK & Ireland direct-to-consumer director.

Volkswagen apologises over ‘racist’ ad

Volkswagen has apologised after it posted an ad on its Instagram page that has been widely criticised for being racist, but says it was published because of a lack of cultural sensitivity.

In the ad, a black man is depicted next to a new Volkswagen Golf being pushed around by an oversized white hand – meant to be that of his girlfriend. In the ad, he is then flicked into a building that has the sign ‘Petit Colon’ on it. Petit Colon is a café in Buenos Aires, Argentina, but is also a French term that translates to ‘small settler’.

Volkswagen has now withdrawn the advert and says that while “racist intentions” did not play a role in the ad being made, it was produced to a “lack of sensitivity and procedural errors”. It also pointed out that the ad was part of a series of clips in which a couple play tricks on each other, although it admitted that was not obvious if people had not seen the entire campaign.

“On behalf of the board of management, I would like to formally apologise for hurting people as a result of a lack of intercultural sensitivity,” says Volkswagen’s management board member for integrity and legal affaris, Hiltrud Werner.

Volkswagen has pledged to boost diversity training and improve controls.

Online discounting reaches ‘Black Friday levels’

The proportion of retailers offering discounts online reached “Black Friday levels” during May, according to data from auditing firm PwC.

In its analysis of 110 online retailers, 81% were holding a sale or special promotion during the last weekend in May, which was also a bank holiday. That is close to the level of retailers that hold sales during Black Friday, with 88% discounting last year.

Fashion was the biggest discounter, with 85% cutting prices by an average of between 41% and 60%.

However, PwC believes this means that there may be fewer discounts in-stores when non-essential shops reopen in England on Monday (15 June). Instead, it predicts retailers will wait until the end of the season to try so shift unsold stock.

“It’s likely there won’t be big discounts next week and if queues for recently reopened retailers have shown us anything, it’s possible that pent up consumer demand may in fact lead to good news for retailers trying to preserve margins,” says PwC’s consumer markets leader Lisa Hooker.

“If June trading does not make a big enough dent in stocks, we predict a rush of promotions and sales later in the summer.”

British Gas-owner to cut 5,000 jobs

British Gas-owner Centrica is to cut 5,000 jobs as it looks to simplify its business structure.

The move will see the company remove three layers of management, with more than half the job losses falling on leadership roles. That includes half its 40-strong leadership team, with marketing jobs likely to be among those cut.

The restructure, which will take place in the second half of this year, also includes plans to simplify its employee terms and conditions. The company says its “complex business model” is hindering delivery of its strategy as it faces mounting competition from challenger brands.

“I truly regret that these difficult decisions will have to be made and understand the impact on the colleagues who will leave us. However, the changes we are proposing to make are designed to arrest our decline, allow us to focus on our customers and create a sustainable company,” says CEO Chris O’Shea.

Thursday, 11 June

Amazon bans police use of facial recognition software

Amazon has banned police from using its Rekognition facial recognition software for a year amid concerns about potential racial bias in surveillance tech.

The tech giant urged US lawmakers to use the year moratorium to devise “stronger regulations to govern the ethical use of facial recognition technology”. The technology will, however, still be available to organisations focused on human trafficking.

Rekognition’s artificial intelligence (AI) technology is used by police to quickly match a picture with mugshots on databases that can hold hundreds of thousands of photos. However, studies show facial recognition algorithms are more likely to wrongly identify the faces of black people and other minorities compared to white people.

This week IBM also confirmed it would stop offering its facial recognition software for “mass surveillance or racial profiling”, saying systems used by police officers need to be tested “for bias”. The computer company has pledged to work with the US congress on police reform, the responsible use of tech, and broadening skills and educational opportunities.

Unilever unifies group under single parent company

Unilever is merging its Unilever PLC and Unilever NV businesses to form single parent company Unilever PLC in a bid to create a “simpler company with greater strategic flexibility”.

The FMCG giant says moving to a single parent company will increase its “strategic flexibility for portfolio evolution”, including through acquisitions and de-mergers. The company believes flexibility will be even more important given the Covid-19 pandemic.

Unilever says it remains committed to its long-term growth strategy across its three divisions after beginning an evaluation of its current categories and brands last year, with a view to accelerating the pace of portfolio change.

The company confirmed that the demerger of its tea business is “one potential outcome of the review”, which it says will be easier under a single parent company structure.

Despite shifting to a single parent company, Unilever confirmed there will be no change to operations, locations, activities or staffing levels in either the UK or the Netherlands, nor will there be changes to the manufacture and supply of products.

Unilever also confirmed there will be no “significant changes” to its UK footprint and both the home care and beauty and personal care divisions will continue to be headquartered in Britain.

The headquarters of Unilever’s foods and refreshment division, which generates around 40% of turnover, will remain in Rotterdam. The company has made a commitment to the Dutch government that should it ever list the foods and refreshment division as an independent company, it would be in the Netherlands.

“Unilever’s board believes that unifying the company’s legal structure will create greater strategic flexibility, remove complexity and further improve governance,” says chairman Nils Andersen.

BAME marcomms professionals put under greater strain by Covid-19

Some 42% of marketing professionals from black and minority ethnic backgrounds (BAME) feel their ethnicity is negatively impacting their career prospects during the Covid-19 crisis, compared to 20% of their white counterparts.

The new research released by networking group People Like Us reveals that BAME marcomms professionals are under greater financial and emotional strain than the rest of the industry during the pandemic.

The survey of 219 respondents employed in PR, marketing, advertising and journalism, found BAME employees are having to take deeper pay cuts than average (18%), which threatens to widen the ethnicity pay gap that already stands at 20% in London according to ONS figures.

The research reveals BAME marcomms professionals think diversity and inclusion are now less of a priority due to Covid-19 (37% vs 26% industry average). However, respondents who do think diversity and inclusion are a higher priority for their company since the onset of the pandemic are more likely to work in-house rather than agency side (23% vs 15%).

Some 41% of BAME respondents feel they do not have a good work-life balance in the current environment, compared to 32% of their white peers. Close to half (45%) of in-house BAME marcomms professionals say they don’t feel equipped for the pandemic or have someone to consult at this time, compared to 29% of those working agency side.

“The current pandemic is affecting everyone and the media industry is no exception – but it’s heart breaking to see that at a time when everyone should be pulling together, people of colour seem to be once again pushed down the priority list,” says co-founder of People Like Us, Sheeraz Gulsher.

“With the rise of the culture-defining Black Lives Matter movement, we want to make sure that these important conversations around diversity and inclusion don’t just focus on the justice system, but on society as a whole.”

As the inaugural People Like Us event was postponed due to the coronavirus pandemic, a ‘Virtually People Like Us’ event will be held at 5pm on 25 June, providing BAME marcomms professionals with a platform to share work they are proud to have contributed to. Professionals at all levels in media and marcomms are encouraged to attend.

Zara-owner to close 1,200 stores amid sales slump

Inditex, the owner of Zara, is to close up 1,200 stores worldwide as consumers shift to online shopping during the Covid-19 pandemic.

The company, which also owns fashion chains Bershka, Pull & Bear and Massimo Dutti, has said it will “absorb” 1,000 to 1,200 mainly smaller stores across Asia and Europe. The Guardian reports, however, that Inditex’s 107 UK stores are less likely to be significantly affected.

The firm’s total store count will fall from 7,412 to between 6,700 and 6,900, which includes the opening of 450 new shops.

Group sales fell by 44% to €3.3bn (£2.9bn) between 1 February and 30 April as a result of the pandemic, as Inditex notched up a net loss of €409m (£364.3m) during the first quarter of 2020. However, online sales rose by 50% year-on-year during period, up 95% year-on-year in April alone.

Inditex said its “headcount will remain stable” as staff are offered other roles, such as dispatching online purchases.

Just Eat buys US rival Grubhub for $7.3bn

The Just Eat Takeaway.com group has acquired US food delivery service Grubhub for $7.3bn (£5.7bn), forming the world’s largest food delivery company outside China.

The deal, which takes the European company into the US market for the first time, is built around “the world’s largest profit pools in food delivery: the US, the UK, the Netherlands and Germany”.

Uber Eats had approached Grubhub about a deal in May and after discussions fell apart earlier this week Just Eat Takeaway muscled in with its own offer. This is the company’s second major acquisition in five months given that Just Eat only recently acquired Takeaway.com in January for $7.8bn (£6.1bn).

In a statement, the companies confirmed that during 2019 Just Eat Takeaway generated revenues of €1.5bn (£1.3bn), while Grubhub’s revenues were €1.2bn (£1.06bn). The group has seen order growth rise by 41% across its main markets in April and May due to the Covid-19 pandemic driving a surge in food delivery.

Ocado on hunt to raise £1bn as online deliveries surge

Ocado is hoping to raise more than £1bn from investors in a bid to capitalise on the surge in online shopping caused by the Covid-19 outbreak.

The grocery delivery business is hoping to raise £657m in an equity share placing with institutional and retail investors, as well as borrowing £350m, the Guardian reports.

The company believes consumers will stick with online ordering once the lockdown finally lifts, citing Nielsen data which shows online shopping now represents 13% of the UK grocery market, up from 7% pre-crisis.

Ocado’s founder and chief executive, Tim Steiner, says online grocery is “experiencing an inflection point” and argues that the pandemic is proving a catalyst for “permanent and significant acceleration” in online ordering that will “redraw the landscape for the grocery industry worldwide”.

Steiner believes that the acceleration to online grocery shopping presents the business with “greater opportunities than ever before.”

In September Ocado, which employs more than 15,000 people, will begin to ship 6,000 Marks & Spencer grocery products as part of its £750m joint venture with the high street retailer.

Wednesday, 10 June

Channel 4 launches initiative to help smaller business advertise on TV for the first time

Channel 4 is launching an initiative to help small and medium-sized businesses to advertise on TV.

The 4Sales Greenhouse Fund aims to help business that have never advertised on TV before with match-funded commercial airtime across Channel 4’s portfolio.

The new £3m airtime relief fund is a temporary solution aimed at SMEs seeking growth as the UK begins to emerge from lockdown. In order to qualify, brands will commit to their campaigns being exclusive to Channel 4 for six months.

Channel 4’s director of sales, Matt Salmon, says: “As we start to see the economy opening up again and lockdown easing our new Greenhouse Fund will help small British businesses to embrace the power of TV at a time when audience numbers are spiking and talking to consumers has never been more important.”

Natural energy drink brand Tenzing is the first company to take advantage of the new match-fund offer.

Tenzing founder, Huib Van Bockel, says: “In these challenging times we decided not to hold on to our budget and wait for this to be over, but to keep pushing ahead. We strongly believe all businesses should take responsibility and do everything they can to keep our economy going. For this we were looking for a like-minded media partner and we found that in Channel 4.”

Debenhams to close three more stores

Debenhams is permanently closing a further three department stores after it was unable to agree new rent deals with mall operator Intu.

The close of stores in Milton Keynes, Watford in Hertfordshire, and the Metrocentre, Gateshead will result in 300 redundancies and adds to a total of 20 Debenhams stores that will not be reopening when coronavirus lockdown restrictions are eased.

The closure of the two-year-old Watford store is particularly significant because, with its upmarket beauty hall and gin bar, it had been billed as the retailer’s ‘store of the future’.

A spokesperson says: “Sadly we have been unable to agree terms with the landlord. As a result these stores will not be reopening in line with the rest of the chain. We greatly regret the effect on our colleagues, who have served our customers with commitment and dedication.”

Like other fashion retailers, Debenhams is facing financial turmoil as Covid-19 significantly slows spending. However, these only compounded problems for the retailer which in April went into administration for the second time in a year.

Last month, it said it was shedding 1,000 jobs at its headquarters, as well as in cafes and other services in stores that would not reopen under social distancing rules.

All non-essential shops can open from Monday

All non-essential shops can open from 15 June as retailers begin to plan for recovery after lockdown.

Business secretary Alok Sharma has confirmed that non essential stores will be allowed to reopen as part of the Government’s three-stage plan to ease lockdown measures.

Speaking at the latest daily coronavirus briefing, Sharma said high-street shops, department stores and shopping centres in England can welcome customers back from Monday, if they can follow “strict Covid secure guidelines”.

Companies will have to complete a risk assessment and should also display a notice saying they have done this. If shops have not taken these measures, they could be subject to enforcement notices.

While the retail sector is continuing to get back on track, Sharma went on to say that pubs, restaurants, barbers and hairdressers will not open before 4 July.

Scotland and Wales are set to announce their own plans to open their retail sectors in the coming days.

70,000 jobs could be lost in aviation

The grounding of airlines could result in job losses on the same scale as those seen by the mining industry in the 1980s, according to a new report.

Up to 70,000 jobs could be lost in aviation – including engineering, catering and duty free shopping – before the end of summer in Britain, the New Economics Foundation says.

Compiled in collaboration with the TUC, aviation unions and the climate action charity Possible, the study warned this figure would match the job losses in the coal industry in 1980-81, with thousands of workers in the industry forced to retrain in other areas of the economy.

A wave of redundancies is set to begin as airlines transition away from the furlough scheme as the government gradually reduces the support available from August until the scheme closes at the end of October.

Airlines have been among the biggest beneficiaries of government support, with British Airways, Ryanair and easyJet placing more than 25,000 staff on furlough between them and borrowing £1.5bn using loans from the Bank of England. However, against a backdrop of new quarantine restrictions, reduced passenger demand due to Covid-19, and with fewer planned journeys expected in future, the airlines still plan to make thousands of job cuts this year.

Yorkshire Tea and PG Tips hit back at Black Lives Matter critics

Yorkshire Tea and PG Tips have hit back at Black Lives Matter (BLM) critics.

One twitter user praised Yorkshire Tea for not having voiced support for the movement but the brand quickly replied it had not yet commented on the BLM protests as it had been “taking time to educate” itself. Adding: “Please don’t buy our tea again.”

In recent days, brands across the world have shown their support for Black Lives Matter following the death of George Floyd, the black man who died while being restrained by a Minnesota police officer.

Yorkshire Tea, which is owned by Taylors of Harrogate, wrote: “We stand against racism.”

PG Tips, which is owned by Unilever, soon lent its support to its rival as right-wing commentators urged a boycott on Twitter.

“If you are boycotting teas that stand against racism, you’re going to have to find two new brands now #blacklivesmatter #solidaritea,” the brand tweeted.

It prompted a flurry of support online but there were also others who argue that given the colonial history of tea these brands need to do more.

Tuesday, 9 June

Mulberry to cut a quarter of staff

Mulberry is planning to reduce its global workforce by approximately a quarter as a result of poor sales amid Covid-19.

The majority of Mulberry’s 1,400 staff work in the UK where the luxury British brand has 55 stores. It has launched a consultation with 470 staff.

“Launching a consultation process has been an incredibly difficult decision for us to make but it is necessary for us to respond to these challenging marketing conditions, protect the maximum number of jobs possible and safeguard the future of the business,” says Mulberry’s chief executive, Thierry Andretta.

“We remain confident in the strength of the Mulberry brand and our strategy over the long term.”

Even once stores reopen, Mulberry says social-distancing measures, and reduced tourist and footfall levels will continue to impact its revenue.

“In spite of the good performance of our sector-leading and omnichannel platform, and our global network of digital concessions, the shutting of all our stores has had, and will continue to have, a marked effect on our business,” Andretta says.

BP to cut 10,000 jobs

BP is planning to cut 10,000 jobs as a result of a significantly reduced demand for oil during the coronavirus pandemic.

This is equal to around 15% of its global workforce, with around 2,000 of those cuts expected to be in the UK. The redundancies are more likely to affect office-based staff than retail staff.

In an email to staff, BP’s chief executive, Bernard Looney, says: “The oil price has plunged well below the level we need to turn a profit. We are spending much more than we make – I am talking millions of dollars every day.”

Looney adds: “It was always part of the plan to make BP a leaner, faster-moving and lower carbon company. The Covid-19 pandemic took hold. You are already aware that, beyond the clear human tragedy, there has been widespread economic fallout, along with consequences for our industry and our company.”

Cazoo named new main sponsor of Everton FC

Online car marketplace Cazoo has signed a multi-year deal to become the main partner and shirt sponsor of Everton FC.

Cazoo branding will appear on the shirts of Everton players, throughout the Goodison Park Stadium, on official club merchandise, across the club’s website and on the media backdrops featured on televised football coverage.

“This opportunity will help significantly enhance our brand awareness as we look to make Cazoo a household name,” says Cazoo’s founder and CEO, Alex Chesterman. “We look forward to working closely with the club as part of our mission to provide the best possible car buying experience to consumers across the UK.”

Everton Football Club’s chief finance and commercial officer, Sasha Ryazantsev, adds: “In our search for a new partner, we were hoping to find a dynamic brand with strong growth potential. As a disruptor brand in their industry, Cazoo represents the best of British in terms of innovation and agility, and these values really resonate with Everton and our fans.”

Retail sales struggle through May

Retail sales in May demonstrated yet another month of struggle for retailers across the UK, marking the second worst decline on record since January 1995.

The latest figures from the British Retail Consortium (BRC) show sales decreased by 5.9% on a total basis compared with a 1.9% decline in May 2019. This is above the three-month average decline of 9.4% and below the 12-month average decline of 2.6%.

Retail sales increased by 7.9% on a like-for-like basis from May 2019, when they had decreased 2.2% from the preceding year. The latest like-for-like sales have been measured excluding temporarily closed stores but including online sales, which is why the figure is up.

Over the three months to May, in-store sales of non-food items declined 50.3% on a total basis and 21.9% on a like-for-like basis.

Online non-food sales increased by 60.2% in May compared with 4.4% in May 2019, while non-food online penetration grew form 31.4% in May 2019 to 61.9% this year.

Food sales, meanwhile, increased 5.6% on a total basis and 8.7% on a like-for-like basis over the three months to May, which is higher than the 12-month total average growth of 2.1%.

“While the month showed record growth in online sales, many retailers will be anxious to see whether demand returns to our high streets when non-essential shops reopen from 15 June,” says the BRC’s chief executive, Helen Dickinson.

“Weak consumer confidence and social distancing rules are likely to hold back sales. Furthermore, there are concerns that if government support is withdrawn too quickly, shops and businesses will not survive. Until the situation improves, retailers urgently need support on rents and negotiations with their landlords as high fees could force some physical retailers to shut for good.”

Businesses concerned about impact of ‘track and trace’ on data privacy

Some 42% of businesses are concerned about the negative impact the UK Government’s ‘test, track and trace’ programme could have on consumers’ general willingness to share personal data in future, according to a survey from the Data & Marketing Association.

Many businesses are worried about the impact it will have on long-term consumer trust, specifically trust in how institutions (59%) and brands (43%) use personal data. However, 32% believe this could become a positive outcome if handled correctly.

“Businesses rely on consumer trust and a willingness to share data in order to build sustainable and rewarding relationships with their customers,” says DMA CEO Chris Combemale.

“The long-term effects of the UK Government’s ‘Test, track and trace’ programme on customer trust and public perception could have lasting damage on the data and marketing industry if mismanaged.”

Monday, 8 June

Nike CEO tells staff to get house in order

Nike CEO John Donahoe has emailed staff, telling them more must be done to encourage diversity and inclusion.

The sportswear brand recently announced that it is donating $40m (£31m) over four years to support black community initiatives in the aftermath of George Floyd’s death.

Michael Jordan also revealed that his Jordan brand was donating $100m (£78m) over 10 years.

However, Nike has been criticised in the recent past for its lack of diversity among employees, with just 4.8% of directors and 9.9% of vice-presidents identifying as black or African American.

“We must continue to foster and grow a culture where diversity, inclusion and belonging is valued and is real,” says Donahoe.

“Nike needs to be better than society as a whole. Our aspiration is to be a leader. While we have made some progress over the past couple of years, we have a long way to go.

“We must educate ourselves more deeply on the issues faced by Black communities and understand the enormous suffering and senseless tragedy racial bigotry creates.”

The Athletic to cut staff

Sports journalism subscription service the Athletic is to cut up to 8% of its workforce.

Forty-six employees in editorial and other departments, predominantly in Arizona and South Florida offices, will lose their jobs and a 10% pay cut across all staff is to be introduced.

First launched in 2016, the content platform has been seen as a rare success story in a troubled sector, quickly establishing itself on both sides of the Atlantic, with subscriber numbers reportedly close to 1 million.

Earlier this year, the company raise an extra $50m (£39m) in venture capital funding.

“In order to ensure we can be a viable business for many seasons to come, we have to make decisions that won’t jeopardise our future,” says The Athletic spokesperson Taylor Patterson.

Intu puts administrators on standby

Intu Properties, Britain’s largest owner of shopping centres, is reportedly preparing to call in administrators as it struggles to survive the coronavirus pandemic.

The company, which employs more than 2,000 staff – with a further 102,000 people working in its 17 shopping centres – owns the Trafford Centre in Manchester, the Metrocentre in Gateshead and Lakeside in Essex.

However, it is £4.5bn in debt and has seen its shares on London’s Stock Exchange fall by nearly 90%.

A banking source told Sky News over the weekend that Intu could be declared insolvent within a fortnight if it fails to make sufficient progress in negotiations lenders.

The company, which is run by Matthew Roberts, has requested an 18-month standstill that would grant it relief from covenant tests and payments on debt facility maturities.

UK consumers ready to shop, but reluctant to eat out

Stats collated by GlobalWebIndex suggest that UK consumers are ready to return to stores as soon as coronavirus restrictions are lifted on 15 June.

However, they are also aiming to spend less and are increasingly concerned about sustainability.

And nearly a third say that they are now likely to significantly cut down on eating and drinking out.

Some 59% of respondents are keen to return to the shops as soon as possible, but 38% will be mindful of their budget.

Half of respondents say that they now want companies to behave more sustainably.

GlobalWebIndex’s chief research officer Jason Mander says: “People expect shops to be able to better manage their safety concerns and are yet to be convinced that similarly adequate measures could be put in place in larger venues where crowds would typically be bigger.

“These safety concerns coupled with a need to reduce spending, means many consumers expect to cut back on their out-of-home leisure moments.

“31% think after the outbreak is over they will eat out at restaurants less often, about a third plan to visit bars/pubs less often, and about a fifth think they will visit fast-food outlets or the cinema less frequently.”

Online retail sales hit 12-year high

The latest IMRG Capgemini Online Retail Index, tracking online sales performances of over 200 retailers, has found that online sales are at their highest for 12 years.

Home and garden, electricals and beer, wines and spirits were the three best performing sectors.

Home and garden sales were up 162.6% year on year last month and by 138% for the year to-date.

Electricals were up 102.8% year on year, while beer, wines and spirits were up 94.9% year on year and 78.6% for the year to-date.

Online clothes sales continued to struggle, down 9.8% year on year, with footwear in particular having a tough time, down 16.4% year on year.

Capgemini’s managing consultant of retail insight Lucy Gibbs says: “The demand patterns from April continued through to May, with some product sectors seeing extraordinary sales growth and others still in decline.

“The clothing sector has struggled throughout the lockdown period as shoppers move their focus away from personal fashion, and towards home improvement and home entertainment.”