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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

Black Friday – not a non-event … yet

Last year was effectively our first experience of Black Friday and the vast majority of UK retail embraced it with enthusiasm. Once the dust had settled and the implications became clearer that enthusiasm gave way to pragmatism. Most are doing Black Friday but in a more managed, lower key way. We didn’t see the chaos or mayhem of last year but we also haven’t see the shops attract anything like the footfall expected. Online has taken a much bigger share that expected.

The results of this are not great. Websites still crashed at various times of the day. Stores were over stocked and over staffed. This year’s event will be every bit as economically damaging as last year’s. Higher cost of sales and lower margins from spend brought forward from December. And December sales will be hit – spending is finite.

A year of relentless price promotions, every month in every sector, has resulted in shopper and retailer fatigue. The constant diet of discount noise from shop windows and website landing pages is bound to take its toll, and clearly it has.

Our research shows that 26% of High Street retailers rejected Black Friday. Notably, some retailers simply ignored it – Next and Primark among them. Some ran other kinds of promotions like Asda, Harrods and White Stuff, and others actually promoted the fact that they were opting out – Fat Face and Jigsaw are excellent examples.

Next year I expect Black Friday to arrive again, but the number of retail opt outs will be higher still. Last year will have been its peak and the most barmy US retail import we have made will continue its gradual journey to being a none event.

** Our Promotional Tracker shows who does what, when and how. We also forecast retail sales for Christmas and beyond. For access details -admin@richardtalksretail.co.uk

 

Autumn Statement – no stimulus for retail

Today’s Autumn Statement and Spending Review has been good news for consumers. The axing of planned cuts to tax credits, the pensions increase and expanded apprenticeships will all help to boost household budgets to a degree, albeit modestly.

On the cost side of the equation, the topic of business rates – a key issue for the industry – remains unresolved. The Chancellor will unveil the results of his review in next March’s Budget. Meanwhile, the planned devolution to Local Authorities is discouraging. Their track record in understanding business in general, and shopping in particular is a worry. Meanwhile, no mention of any real change in structure and the methodology by which rates are set.

As well as a mild boost to consumers’ finances here, employment is up at record levels and real wage growth is kicking in. So far, the benefits have passed retail by and I am sure it will stay like that, for the next few years at least. An already oversupplied market is still adding capacity, and this is forcing permanent price deflation. My forecasts for 2016 show still more downward pressure on price, while increased disposable income will continued to be allocated beyond retail. The buyers market marches on – great news for shoppers but less so for retailers.

** We have detailed 2016 forecasts for capacity, demand and margins – get in touch for access details admin@richardtalksretail.co.uk 

 

Christmas giveaway

Ten days ago I blogged about our new non-food Promotional Tracker. We have just analysed our data for week four and the numbers reveal much about the direction of travel. In terms of margins, the direction of travel is South. Right now, less than half of high street non-food retailers are trading at full price.

With 35 days left to Christmas Day, 69% of national retailers have now unveiled their Xmas promotions. Many have supported these by launching very expensive advertising campaigns which these days score more points for aesthetic value than for profitable sales. And here is the problem – a steadily growing number of retailers no longer believe their Christmas offering is strong enough to stand alone without shouting about price cuts to attract attention. Out of the 69% now running their Christmas offers, 44% are running price promotions alongside. Last week it was 32% and the week before, just 17%.

If this wasn’t bad enough, we have Black Friday looming. Christmas will be temporarily suspended while another, even bigger, price promotion is pushed at shoppers. Indeed, Forever21 has already launched Black Friday when there is still a “regular” Friday to come tomorrow. All this adds up to some severe hits to bottom lines. Household budgets are indeed in better shape but an oversupplied retail industry has brought permanent  price  deflation and consumers don’t need to spend more – they simply wait until the next price cut, and they rarely have to wait very long.

Detailed analysis of promotions each week can be found in the premium content of the website. For access details, get in touch at admin@richardtalksretail.co.uk

Christmas ads = a zero sum ego trip?

The past few days have launched the 2015 Christmas ad wars with John Lewis, M&S, Boots, TK Maxx, Curry’s PCWorld, Waitrose, Burberry, Argos, Asda and Very among the retailers involved. It is great to have retailing the focus of debate in the contexts of culture, aesthetics and art forms. And Christmas is a time for giving. But does it generate incremental profitable sales? Or is it an expensive corporate self-indulgence?

Last year John Lewis spent some £7m on its Christmas ad campaign and reported a 4.8% increase in LFL sales over the period. Was this was enough to pay for it? And John Lewis was one of the very best performers. Many of the other big spenders over Christmas last year (Tesco, Sainsbury’s, M&S for example) reported LFL declines. But this year they are all back for more.

A year ago in non-foods, November YOY sales by value rose by 9.0%, the biggest increase by far over the past 15 years. Meanwhile December was up by 3.5% YOY. Sounds not too bad but price deflation was -1.8%. In other words retailers had to sacrifice margin to achieve that number, and at Christmas when they need full margin. Price deflation over Christmas on that scale was last seen on December 2008 when Lehmans had collapsed and people thought the end of the economic world had come!!

These numbers reflect the Black Friday effect and at the eleventh hour, some retailers are suggesting they are “turning down the dial” this year. We’ll see. Most of the industry for most of the rest of the year has found it impossible to jump off the price-promotion bandwagon so how will Black Friday be any different?

** We have detailed forecasts for Black Friday, Christmas 2015 and next year. Get in touch for access at admin@richardtalksretail.co.uk

 

Christmas has arrived

The continued softness of consumer demand, coupled with huge oversupply, has produced the most promotional retail market we have ever seen. Our research shows that right now just 32% of non-food retailers are trading without any promotion whatsoever. What was the norm until a few years back is now increasingly rare. We are launching a weekly Tracker to measure trends in who is doing what, when.

Our new Promotional Tracker shows an upsurge of retailers introducing Christmas sales events right now across non-foods. The last week of October saw 16% of retailers with Christmas promotions. The first week of November we found the number up to 32%. Nevertheless, price promotions remain the dominant message and 50% of retailers are still focusing on price cuts, 6% down on the week before.

A key change comes in fashion. Here, an incredible 58% of stores had price promotions in the final week of October, falling to 45% in the first week of November. A significant number of players have started their Christmas promotions, rising from 12% the previous week up to 22%. Nevertheless, this underlines how the vast majority of the clothing market is keeping Xmas powder dry.

While most of the major department stores have kicked off Christmas, there are some notable exceptions still holding back. Some sectors have also yet to turn to Christmas and remain totally focused on price promotions.

Detailed analysis of promotions each week can be found in the premium content of the website. For access details, get in touch at admin@richardtalksretail.co.uk

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