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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

Dunelm – change of CEO

Dunelm is a business which generally slips under the radar. Its stores are out of town and never likely to open in the City or West End – the locations which so often represent the commentators’ radar. And homewares is not a market to very often set the pulse racing. Dunelm is actually an outstanding retailer and its consistently good results reflect a very well-run business which knows its market and what it wants. Sales of £730m and a net margin of 15.9% underline its quality. The company also announced that its CEO Nick Wharton is stepping down, having done a great job over the past 4 years or so. It appears that his strategic direction was deemed to be too cautious. He will be replaced by Will Adderley, part of the founding family and himself formerly CEO. He has been Executive Vice Chairman for 4 years.

Intriguingly Will’s father Bill, who founded Dunelm, acquired an equity stake of just over 3% in M&S in October last year. This represented a much needed vote of confidence for Marc Bolland who was under substantial pressure at the time.

Monsoon and branding

Monsoon stores nearly always look good, and a bit different. It retains its slightly quirky, Eastern-influenced boho-style feel. Under the leadership of John Browett performance has returned to its traditional levels after a blip in 2012. For some time I have wondered about the Monsoon brand and the extent to which its highly stylised look still retains its appeal. Recent results certainly suggest it retains a loyal base of customers.

Nevertheless, these customers will age. Will Monsoon age with them, or will it look to attract the next cohort? Either way is a significant challenge to a business with a very unique narrow handwriting with specific appeal.

ShopDirect becomes Very Exclusive

ShopDirect’s launch of VeryExclusive.com is clearly a big development in itself but it has a much greater significance. It marks the first real move away from its traditional big book model that has been successfully migrated online. Until now, the business has focused on addressing a very wide market through the same vehicle, or perhaps several in the shapes of Very, Isme etc. VeryExclusive is narrow and targeted, focusing on 25-35s and carrying premium and luxury brands. ShopDirect has built a dedicated management team to drive the new venture. I expect this to be the first of many more segmented offerings from the business.

Next’s great IR management

Next’s latest results are even more spectacularly good than usual. Throughout the debt crisis the company has been one of the leading retail winners, bucking most performance trends and doing the simple things really well. Importantly, it manages its communications brilliantly too. Obviously it is much easier to do this when reporting great results but even so, the company is ultra cautious and very grounded. It uses reassuring language to articulate its numbers, and what the market should expect. As a result, Next is a business with sky high credibility and trust.  It’s not just the numbers it delivers but the confidence it fosters in what lies behind them.

Capacity soars while demand softens

Over the next 5 years I am forecasting that online growth will add the equivalent of 10% to existing UK selling space. From its earliest days, online retail has been a cannibalistic channel, diverting spend that would otherwise have taken place in physical shops. As online has grown, we have seen space shutting  for the first time, as some businesses could no longer make a living from reduced footfall. Not only has this further to go but I am predicting the next five years will see larger scale closures than the last. The last 5/6 years have see a number of mitigating factors that have masked the hit on space and they will not be repeated.

One of these mitigating factors has been the massive growth of value retailers. Their appetite for still more space will not go on for ever, at least not if they learn anything at all from the established businesses from whom they are so successfully capturing sales. They drove physical growth with little consideration of demand and it has made many of them very vulnerable. A rising tide of shop closurers is on the horizon.

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