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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: April 2017

Promotions cut?

This is the 17th trading week of 2017 and it marks the lowest promotional activity we have so far recorded. Only 50% of non-food retailers are running discounts this week – the previous 16 weeks averaged 65%. So, does herald the tipping point, when retail starts to really hit consumers with the fall out from a devalued pound?

ONS data suggest price inflation is picking up and some price increases are certainly being passed on. Our tracker reveals particular falls in the fashion and footwear sectors, both posting weekly falls in numbers promoting 2x those of the overall non-food sector. Department stores fell, but at a more modest rate. Meanwhile home markets (furnishings, DIY and electrical) remained steady.

In reading the trends, the timing of Easter is key. Last year’s post-Easter promo trend saw a sharp fall too and some of this year’s decline will certainly be a repeat of the 2016 pattern, just occurring later. Nevertheless, this year’s fall is steeper and suggests some passing on of higher costs is percolating through.

Interestingly, it is among premium retailers that the biggest fall in discounting has been recorded.  Given their positioning, it is remarkable that premium retailers have been indexing at 30% or more on sale most weeks. This week’s number is 19%, the lowest we have registered since January 2016.

We expect our headline non-foods promotional index to fall below 50% in the coming weeks but don’t expect a significant move back to full price retailing. Competition is too tight, capacity too great, and demand too soft. Watch this space.

  • We track retailers’ promotions daily, at sector and company level. We will be reporting on the headline, generic numbers regularly. For further details contact us at admin@richardtalksretail.co.uk

Retail and selling

So far, 2017 is delivering everything I expected, and more. Trade is tough, and getting more so. Price inflation is filtering through but nothing like enough to suggest that consumers will be picking up most of the tab for a devalued sterling. And how are our retailers responding? Badly, I would say. The common thread is a tendency to forget what their true raison d’etre is – serving customers by adding value.

There is a growing short termism that will be coming back to bite in the next few years. Take staff for instance. The rise of the internet means that a steadily growing proportion of retail sales is made with little or no human role. Not surprisingly, this is diluting margins because most added value in this industry is delivered by people. The growing response to margin dilution across multi-channel retailers is to cut staff. This will lead to store sales dilution. Look at department stores for example – the area they all seem to be doing best in is highly serviced beauty, where trained staff (invariable employed by the brand owner) actually sell. They are doing less well in areas where there are fewer staff on the sales floor. Retail is above everything else about selling. If you diminish the main means to achieve this, the consequences are obvious.

Another key area is product. It’s fundamental – lowering your bought-in costs has to be less important than optimising the relevance/attractiveness of your product. M&S clearly thinks renewing the Lindsay’s sourcing contract (where the imperative is cost reduction) is more important than restoring some of the quality and appeal to make the offer more relevant.

I have talked about whether retail is good enough at retailing for a while. During this period, the industry has become progressively less good and is more vulnerable as a consequence.

** We advise retailers on strategy and analytics. We also track promotional activity across the UK’s key retailers. Get in touch for details admin@richardtalksretail.co.uk

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