Retail has always been a highly dynamic industry, intensely competitive and fighting for a share of the wider consumer spending pot. This is an industry used to dealing with a constant diet of change. However, the change we are seeing today is far more profound than anything the past has thrown up. We are now seeing by far the most challenging period in retail history. A reshaping of the industry’s structure and economics is unfolding, and most of the real change is yet to happen.

Richardtalksretail is focused on analysing this change, anticipating the implications, and mapping how the key players across the various sectors are dealing with it. The regular Blogs in this public section of the site are a taster of the much more detailed analysis and forecasts in the premium section, reserved for subscribers.

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Monthly Archives: March 2015

Deflation – been in store for ages

The CPI (Consumer Price Index) registering 0.0% has confirmed to the City and Westminster that  we now have deflation, or at least a lack of inflation!  There are certainly a number of non-retail factors in the numbers: low petrol and raw materials prices among them. Nevertheless, year-on-year prices across the retail sector have been negative for 9 months now and for 6 months at more than -4%. The writing has been on the wall for some time.

Retail is the single largest component of the UK economy outside the public sector. It alone accounts for 20% of total GDP – around twice the size of our manufacturing base and our financial services sector. So it is a critical indicator of what is happening and likely to happen. Deflation in retail is certainly  most pronounced on food but it has been a feature of our non food sectors for virtually all of last year and some of 2012 too.

Retail price deflation is primarily structural. And that’s why it isn’t going away anytime soon. Both our food and non food retail sectors are hugely oversupplied with players and capacity. It will take quite some time for market forces to force the inevitable shake out. Contrary to the concensus of economists’ thinking, I believe deflation will be with us for more than just a few months.


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Retail – must get better at retailing

Last week came the John Lewis results for the year ended January 2015. Thursday this week it will be the turn of Next and its prelims. Much was made of the lower JLP bonus announced. Next’s results will not be nearly as strong as those of recent years either. I predicted last year that 2015 would be a significantly tougher year for retail and these results from two of the industry’s winners will be far stronger than the majority which follow from their peers. Moreover, they really reflect much more 2014 than 2015. They underline the implications of a vastly tougher trading climate unfolding right now.

It is structural change which is making life so much tougher. I have analysed this in detail and generated forecasts in the premium sections of Here, I can say briefly that there is huge oversupply in the market – too much space, too many stores, and too many mouths to feed. This is the key cause of price deflation which has become a permanent feature of every sector. With year-on-year prices down by 4% and more every month, customers are quickly learning that generally, it is no longer necessary to buy at full price.  This is not just margin-dilutive but brand-dilutive too. It fundamentally impacts your relationship with your customers.

It became very clear halfway through 2014 that what seemed like a retail recovery had no steam left. The writing was on the wall. Last week’s otherwise excellent Retail Week Live Conference barely mentioned sales ie selling stuff. After a period of frenetic cost reduction the industry is lean but not very mean. In fact it is having to be increasingly generous to generate sales. Retail needs to get much better at selling and this is about better understanding of customers, about relevance, about editing ranges so you do not confuse genuine choice with product proliferation. But beware businesses chasing sales at any cost.

** For more detailed discussion and forecasts of demand, margins and capacity visit the premium content of

BHS – going … going…

…gone. Well not quite yet. Today’s announcement has had analysts and journalists alike trawling the web and calling one another in the hope of establishing some kind of potentially relevant background among the group of individuals who have become the new owners of BHS. The relevance is clearly nowhere close to retailing but looks more likely to be in corporate finance and financial engineering.

My take on the context of this deal goes something like this. Exiting BHS will have been as close to painful for Philip as any business decision will ever be. His purchase of the brand was a master stroke. He saw value and restructuring potential which allowed him to go on and buy Arcadia and try to buy M&S too. The point here is that after wringing the very most out of the business he clearly believes he has reached the point of no return, metaphorically and literally. The business has been losing market share and racking up losses. It also has a £100m pension liability. So with all his skill and nous, he has thrown in the towel. It is not a matter of finding someone with more money and management skills than Philip. This is not a turnaround. Its natural constituency no longer exists. Primark does it much cheaper, Bonmarche has a more relevant model and M&S has a stronger brand (everything being relative).

Can the new owners run a leaner operation than Philip? This is as inconceivable as the idea that BHS can start to win back market share. There will have been a sizeable dowry on the table and this will have been the carrot. This deal is the next stage in the closure of the business. I have been warning for some time about oversupply and casualties across the market. BHS’s departure will be a little protracted but it will go, and there will be quite a few more to follow.

** For more discussion of clothing, capacity and casualties, visit the premium content of

Clothing -room for newcomers?

Last week’s news that George Davies is returning to the UK market follows the news of the first Pep&Co unit to open in a few month’s in Kettering. The market they are entering is getting tougher by the month. 2014 was very much a game of two halves – H1 saw yoy sales growth of 4.1% but following an amazingly warm September and October, H2 produced just 2.0% growth. Clearly, the weather was a major factor but it would be very short-sighted to ignore the underlying picture. The UK clothing sector is hugely over supplied and cannot support the existing players fighting for share.

The clue is in price deflation. Clearly the unfavourable weather delayed sales and many had to mark down to shift stock. Mark downs featured in the run to Christmas on a scale I have never seen before and the myopic might attribute all of this to the weather too. However, the telling trend is the scale of discounting seen in 2015 and out there right now. This is a sector where demand is flaky and lowering prices is not always making any difference.

Does this mean George and Pep&Co will fail? Not necessarily. I believe George to be THE outstanding retailer of his generation, ahead of everyone. No one else has started 3 successful brands as he has. And Pepkor have assembled a heavyweight team underlining how serious they are. Nevertheless, whatever numbers they were both working with before, the market is far tougher now than when they were all last players. It will be X% smaller and tighter as this year unfolds. The barriers to success will be huge.

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