Blog

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.

If you want to know more, please get in touch.

What you get

Monthly Archives: July 2017

Promotional Intelligence

2017 Week 30

Non-food retailers on promotion this week 74%
Equivalent for same week last year: 72%
  • Summer Sales have started to turn down, after 4 consecutive weeks at 78%
  • Imported price inflation is having no impact on promotions, with 2017 tracking last year almost exactly

  • Most sectors have seen falls this week, albeit of relatively modest proportions
  • Meanwhile, some notable retailers have gone back on sale this week including John Lewis, Top Man, H&M, Superdry and WH Smith

  • With the vast majority still running Summer Sales the return to full margin has only just begun. For many, it will never happen
  • The very tight correlation with last year is established. The chart above maps out clearly the shape of promotional activity over next 4 weeks. The key sector where promotions will end over the coming weeks is fashion, still up at 75% of retailers on discount

** We track promotions daily by sector and company to support promotional optimisation programmes – for details contact admin@richardtalksretail.co.uk

international – usually a loss strategy

American Eagle (AEO) has announced it is pulling out of the UK. I’m not at all surprised and had severe doubts it could succeed here, writing here at the time. There is a disconnect between perception and reality when it comes to international retailing, and this very fact is at the core of its allure. International retailing in and of itself is regarded as a growth strategy. History actually shows that the overwhelming majority of international retail ventures are in fact a loss strategy.

The record of US retailers coming to Britain and failing is long. The current crop shows little sign of changing this trend. AEO has already announced. Forever 21 is downsizing as fast as it can. JCrew is losing lots of money here and so too is Victoria’s Secret. Banana Republic has said its goodbyes and whether Gap has ever made any money in its almost 30 years in the UK is doubtful. By the way, our record in the USA is no better and very few brands have made it there.

Our market cannot possibly support all the brands it currently has. Anyone new entering has to be truly different and have genuine local market understanding behind it. So retailers like Inditex and H&M both tick these boxes. So too does Fast Fashion’s Uniqlo. And Primark is showing that it is possible to successfully export retail, even though it is actually an Irish business so we can’t really count it anyway. These are exceptions. History shows that international growth is very high risk, and it needs to be viewed as such.

** 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

Is big still beautiful?

Does being bigger bring success? Does it improve the focus and agility increasingly critical in every retail sector today? Well the supermarkets clearly think so. Sainsbury’s bought Argos, Tesco will buy Booker, if the CMA allows it. Sainsbury’s are going for NISA and now Asda is looking at B&M. For how long will Morrisons be able to resist?

Everyone agrees these are the most challenging times we have ever seen. But not everyone agrees about how to respond. The new fashion is acquisitions and I’m far from convinced this is right. Deals are dressed up as having fantastic strategic synergy and if this was true more often, they would work more often. There is very little PR value attached to defence, so “acquisitions driving growth” will generally be the headline. And in the short term, they always look good. Massive costs stripped out improve profits and it always takes a while for the underlying picture to fully emerge. But does getting bigger help sharpen competitiveness?

I think there is strong evidence to show that being bigger has costs attached. Look at the major supermarkets versus the much smaller Aldi and Lidl. Repeated with B&M, Home Bargains, Poundland etc In clothing, M&S and Next have dominated the market but now face growing pressure from smaller, more niche players.

The key to winning is being able to control and drive the top line. This is about understanding your market. I find that bigger companies’ leadership teams are distanced from the front line – from the market and their customers. Most retailers today need to get smaller before they can grow again. They need to refocus on their core customers. Doing this requires fewer, smaller stores and narrower, more edited (and relevant) ranges. B&M is an excellent business and is actually a pretty good fit with Asda. But will it make Asda a better food retailer, because ultimately, that’s what will determine its future.

Promotional Intelligence

2017 Week 29

Non-food retailers on promotion this week 78%
Equivalent for same week last year: 76%
  • The expected move back to full price this week has not materialised, underlining the weakness of demand and consequent failure to clear enough stock
  • Despite better weather, a longer Summer Sale reflects a tightening of trading conditions

  • The headline index does not reflect all sectors. Many department stores (notably John Lewis, Harrods, Liberty and Fortnums) have all returned to full price
  • While the fashion index has ticked up this week (Next launched its Summer Sale – as usual lagging the market), some key players (Joules, H&M and Ted Baker) have all returned to full price

  • How weak is trading and how much Summer stock remains? Last year’s trend is clear and if the Week 30 index remains more or less unchanged again, this will undoubtedly hit profitability down the line

** We track promotions daily by sector and company to support promotional optimisation programmes – for details contact admin@richardtalksretail.co.uk

Promotional Intelligence

2017 Week 28

Non-food retailers on promotion this week 78%
Equivalent for same week last year: 79%
  • In what is likely to be the last week of full-on Summer Sales, the non-foods headline index continues to mirror last year’s

  • Having ended their promos, several retailers have gone back on this week: White Stuff, All Saints and Dunelm are examples
  • Ending their promos this week include New look, Fat face, Boden and George

  • Our data demonstrate a very clear correlation year on year, illustrating how the majority of retailers are under irresistable pressure to deviate from last year’s promo calendar. All too often, immeduate cash flow takes precedence over longer term brand values.
  • Week 29 will see the beginning of the end of Summer sales. Exactly who ends sooner and who feels the need to stay in the game for longer will be a good refelction of the strength/weakness of current trading

** We track promotions daily by sector and company to support promotional optimisation programmes – for details contact admin@richardtalksretail.co.uk

Sign up today for exclusive access to world-leading expertise in the retail sector.