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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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Asda joins the club

four to have remained outside has finally succumbed. Qualification for membership is based around negative yoy like-for-like sales and Asda has now joined Tesco, Sainsburys and Morrisons. It reinforces the scale and depth of turmoil the grocery sector is now in.

I continue to believe that among the four majors, Asda is the least uncomfortable in this trading climate. Price and value are core strengths and EDLP is in the company’s DNA. The other three are grappling with an agenda being set by Aldi and Lidl. While this latest statement demonstrates that Asda is being hit too, the fact that it has gained share over the period says everything.

When looking at trading statements right across the retail industry it is important to judge them in the right context. Few businesses will produce numbers that are better than their historical performance. This market is all about peer group relativity, or market share in old money. Gaining ground on your competitors is an investment in future performance and far more meaningful than short term margin gains.

Personalisation

Personalisation is one of the current buzz words in retail. This is a subject about which much more is said than done. And what is done, is virtually all around technology. Now there is no question whatsoever that tech has transformed our ability to do all sorts of things so much better, often on the back of enhanced information. But it does have its limits.

Being able to reach people with a communication of some kind presupposes the recipient want to receive it. In theory each of us will soon be bombarded with hundreds of communications every hour. This is fast evolving into a major zero sum game. Technology is often merely the messenger. While it is true that it can be a powerful enabler, it only gets you in front of the customer. Only the message can be truly personal, and if the message is not relevant, it will erode the brand relationship, not enhance it.

Sales: still THE key performance metric

The retail recovery is already losing momentum, helped by falling prices in grocery and record high temperatures hitting sales in clothing. Everyone’s results are going to reflect a dampening down of demand.

Against this backdrop it is important that a retailer’s performance is not compared against its own recent numbers – it will invariably look poor. This market is one in which it is all about relative performance versus peers. When the going gets tough the key is to strengthen your competitive position, and gaining market share should be seen as an investment in future performance.

This year has seen the strongest growth we have seen since 2008. The business to have enjoyed the lion’s share of this growth have been the retailers who have strengthened their competitive positions over previous years. As growth begins to slow now, the businesses able to invest in growing share will be the winners when demand improves. So this is a period where relative sales performance will be the key indicator.

Tesco’s Main Board

So Tesco has appointed two new non-execs. And one is a former Ikea CEO. The fact that he will be the only retailer on the company’s Main Board is surely fundamental? While the media attention has recently focused on the financials, the underlying issues faced by the company are retail ones. They have to do with a business which has lost its empathy with customers and forgotten how to sell to them. This is the background to the financial errors of judgement.

Whatever mea culpa might emerge from the various investigations, Tesco needs to wrest back control of its own destiny and this is all about retailing. Does it have the skills to do this? The huge decline in its share price doesn’t just hurt institutional shareholders. It makes senior executive retention and recruitment much harder. I suspect that just one retailer on the Main Board will not be enough

M&S Baby is born

Marks launching M&S Baby is an interesting one. The idea of pulling all its baby-related products maybe sound on paper but does it sync with footfall and the way people shop? The company’s core customers have aged over time and are now in Grandparent territory. Will they represent sufficient demand on their own to justify a separate, dedicated Baby department? I very much doubt it.

I suspect that in order to work M&S Baby will have to attract material footfall from the core market: existing Mums of young kids and Mums to be. There will be very little existing footfall from this group to build on. The numbers will be extremely challenging. Given pressure on sales and margins right now, I would have thought the opportunity costs of this initiative would have been quite off-putting.

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