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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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What you get

Selfridges – long live the department store

In this world of never-ending retail negativity it’s a real pleasure to see a set of results from a retailer that is not just surviving, but thriving. Is Selfridges the best department store in the world? I certainly don’t know of one that even comes very close. The more important point is that there are a number of important lessons here.

The first is about generic judgements. We all know about HoF, and Debenhams is very close to the edge. John Lewis has reported massively diminished profits. Each of these businesses is different and sector-wide judgements are very likely to lead to poor decisions. It’s not what you do (ie being a department store) but it’s how you do it. What we are seeing is the death of mediocre retailing.

Why is Selfridges so successful? Every winning retailer has one core thing in common – customer focus. Many say they are customer centric, but very few actually are. That’s why they are on sale most of the time. Why they are cutting jobs and it’s why their revenues are static and their profits are falling. Selfridges has a programme of constant refreshment – every couple of weeks there is a new department, a new event, a new brand or two, a new service or two. This dynamism helps to make Selfridges special – there is a vast chasm between talking about experiential shopping and actually delivering it. This is retail innovation – constant newness. And the excitement crossing the threshold is palpable.

The retail lessons of Selfridges are about great retailing through true customer focus, and constant change and improvement.  There are also lessons for landlords. Selfridges is a very carefully assembled collection of brands where the sum of the parts is greater than its separate values. This is what truly pro-active management looks like. In the future, landlords need to think and act much more like retailers.

Selfridges thrives because it hits the spot with its target market. No one can match what it delivers. And neither can any offer online. This is about differentiation. The gaps between the retail winners and also rans are widening. It’s all about execution – the way you do it, and Selfridges continues to do it brilliantly.

** We support retailers and stakeholders with strategic advice. If you think we can help, drop me a line richard@richardtalksretail.co.uk

More entrepreneurs wanted

Most people find change uncomfortable. It’s so much easier to continue following the same course. For generations, steady state continuity delivered retail trading performance that was good enough. We had economic growth, easy credit and you could open c10% more space annually to drive results. Against that background, the industry gravitated to technocrats as leaders. Steady managers to maintain course and avoid risk.

This market is over and not returning in the foreseeable future. One of the issues we have today is many leaders are simply not equipped to deal with this market. They are unable to deal with change, and manage risk. We are seeing the consequences of this in growing corporate distress. The body language of retail businesses says everything. How do they present themselves to customers? How are they reacting to pressure on their trading economics? Is there any investment going on and to what extent is it really focused on their ability to drive sales?

Onerous costs is code for “we don’t sell enough product”. Optimizing costs is a given in business. Cutting them often is not. Retail needs to get better at retailing. This means better customer engagement and usually, this means people. It means investing in better people too.

Leaders need to truly understand the core strengths of their business. What are its fundamental values and what makes it unique? Core DNA is not defined in head office nor even in stores. It’s defined by customers. Strategic plans need to embody this and investment directed at making these traits as strong as possible. Stakeholders need to understand that simply cutting costs will not be enough to survive.

All this is about risk. Ploughing the same furrow is no longer an option – the furrow has gone. You must set your own agenda, often embrace the counter-intuitive, and spend rather than save. You need vision, belief and courage to take your team and colleagues with you. Retail will be a smaller, tighter and less profitable industry but there will certainly be winners able to make very respectable returns. We have a dearth of leaders up to the task but winning will be a prize well worth having.

** We support retailers and stakeholders with strategic advice. If you think we can help, drop me a line richard@richardtalksretail.co.uk

Reactive retailing

The problems around HoF have finally woken people up to what has been clear for a very long time. Structural issues are not so difficult to forecast and everything that is now beginning to unfold has been predictable, at sector and company level.

The differences between being reactive and proactive are life and death. Many are papering over cracks when they need major surgery. And surgery cannot be about simply shutting some stores. This will not make a retailer better at retailing. And this is the non-negotiable pre-requisite of surviving what will be a period of turmoil lasting 3-5 years. Will HoF survive post CVA? There is nothing I can see that will increase its sales, even in a significantly smaller lower cost business.

Too many retail businesses have chased scale at any price. With a market flat at best, and costs and capacity expanding steadily, this additional scale is looking increasingly marginal. It is in stores (too many), footage (oversized units) and customers (proliferated ranges). And all this makes for weak retailing.

Trading pressure is impacting everyone, but not to the same degree. Retailers like Aldi, Primark, B&M, Selfridges, Ted Baker, Home Bargains, Asos and Zara are all trading very well, even if each is having to run faster. They all are 100% clear who they target and that knowledge defines everything they do. It sounds so simple and obvious, but it’s what most of the industry has lost sight of.

A report from Colliers this weekend says 11.6m square feet of retail space has been “lost” in administrations etc. I can forecast with total certainty that many times this figure will go over the coming years. Structural change is not hard to predict. In order to survive, retail leadership teams need to understand what is coming and plan accordingly. Reaction is far too late.

** We support retailers and stakeholders with strategic advice. If you think we can help, drop me a line richard@richardtalksretail.co.uk

HoF CVA part 2

My initial Blog on this topic was posted on May 3rd. There I said if the CVA was successful, we’d soon know how much genuine belief the owners have in the future of the business. We now know the CVA will involve 31 store closures, and 10 rent reductions. So far, there is no sign of a Plan B – a plan designed to increase sales from a smaller but more robust core store estate. This is what will determine whether there is a viable future for HoF.

There is talk of new money coming in post CVA but given the black hole that is department store retailing, it looks like a drop in the ocean even if it does materialise. HoF has very little retail experience in its top leadership, most of which is very new to the industry as well as to the business itself. In this market, seasoned retail leaders are struggling to deal with increasing trading pressures. Having a response that is only financial (addresses costs but not sales) will fail eventually.

Will the CVA get voted through? Probably, but it would be very naïve for anyone to regard it as a vote of confidence in HoF’s prospects. The word “support” would be extremely loose. In any case, most of the voting creditors will be suppliers with arguably greater exposure and far less choice. HoF is telling us that it cannot any longer trade profitably in Central London (Oxford Street and Victoria), Birmingham, Edinburgh, Cardiff and Milton Keynes among others. It cannot find enough of its target customers here. This speaks volumes about its own level of confidence and about whatever plans it may have.

** We support retailers and stakeholders with strategic advice. If you think we can help, drop me a line richard@richardtalksretail.co.uk

M&S further down the cul-de-sac

All very predictable from M&S this morning. This was once a wholly exceptional retailer – these days it is entirely ordinary. Shutting stores is fine, as far it goes. Virtually everyone has too many stores so adding to the planned closures is probably sensible. However, it misses the point.

So much of retail is run on the “build it and they will come” principal. The fact that they (aka customers) have been progressively not turning up has so far failed to change the majority of retail mindsets. So, the reaction is to lower costs. And that is top of Marks’ agenda. They believe that if they can lower prices, “they” will buy more. They wont.

The costs of a business must be defined by its offer, not the other way round. How many stores Marks has, how big and where they are located needs to be governed by the nature of what it sells, and its target market. This simply does not work in reverse, especially in the zero growth market we have today and for the foreseeable future.  The pursuit of lower prices has progressively diminished styling and product quality, eroding relevance and brand values. Evaporating loyalty is the growing price being paid for continuing down this cul-de-sac.

Huge changes among the senior team leaves the business with thin experience and a diluted culture. Where are the M&S cultural values that made it special? Words are cheap but the daily body language of the company’s stores is discouraging. Billions of pounds in lost sales weighs heavily on the big 4 grocers, chasing price instead of defending their own added value in the market. M&S is doing exactly the same in clothing, chasing Primark and others lower. Very few retailers can afford to keep disappointing their customers, and Marks’ wrong direction is consistently doing just that.

 ** We support retailers and stakeholders with strategic advice. If you think we can help, drop me a line richard@richardtalksretail.co.uk

 

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