This is the week people have been forced to confront what has been writ large on the wall for some time. Retail is being squeezed. Everyone is free to believe it’s just a few weak businesses. It’s just a bit of Brexit fall out. They can also think that a little more bank support, some mandatory discounts forced on suppliers and/or some rent reductions, and all will be well again. After all, retail has always been cyclical and here we are again.
The most surprising thing about this week’s retail events is that so many people are so surprised. Relentless capacity growth, flat demand and cost growth (ex product costs) c4% – these are the key things one needs to know about the current market. So, are these fundamentals going to change anytime soon? The answer is a resounding no. The inevitable conclusion is that there will be much of this until trading economics are able to support the remaining players in the market.
Most companies struggling are reaching for traditional remedies, some of which I outlined in my first paragraph. This is papering over cracks. Most retailers I know face a common fundamental issue – they are not selling enough product. One way of another, retailers must strengthen their offers. It’s not about lowering prices – it’s about increasing relevance and attractiveness, both of which are defined by the customer. How well a retailer really understands its customers can be judged by the body language of its offer: the cohesion of its proposition, its brand and price integrity. Across the industry, many would have declining scores on these critical counts.
Surviving and prospering in this ever-tightening market is very achievable, but not without addressing and strengthening retail body language.
** We support retailers and the financial community with strategic advice. If you think we can help, drop me a line firstname.lastname@example.org