Blog

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.

If you want to know more, please get in touch.

What you get

Next, the stock market and trust

Amazing to see retail taking such a beating on the stock market today. All triggered by Next’s results which in themselves were not unexpected. More than any other quoted retailer, Simon Wolfson carefully manages market expectations to ensure no great surprises. Clearly, even he cannot force the market to take what he says about the trading outlook at face value. And equally clearly, the market has failed to do so.

This is by the toughest retail climate seen in modern times. Taking this observation to be gloomy is simply delusional. I know of no retailer out there that isn’t having to run much faster and many excellent brands are feeling the heat. The symptoms are there to see across the industry in physical and digital channels. And in responses. Most retailers have store closure programmes. Most retailers are culling people. Dealing with the cost line is all very well but it fails to address the core problem – weak sales.

A diet of discounting is only going to undermine brand perceptions and make sales weaker still. It is extremely difficult to communicate and added value message while discounting. Some leaders tell me that its different customers…that some only buy on mark down. I’m not convinced this is sustainable. Too many retailers try to please too many customers simultaneously and as a result, don’t really please anybody. Have confidence in your offering. Don’t discount outside seasonal clearance. Without this you cannot have genuine brand and price integrity aka trust. And without trust you are not going to be a player in this market for too long.

** We advise retailers on strategy and analytics. We also track promotional activity across the UK’s key retailers. Get in touch for details admin@richardtalksretail.co.uk

Raising interest rates = shooting ourselves in the foot

Those that apparently know these things tell us that interest rates will go up next week. This should be worrying, not simply in and of itself but because of what it says about how out of touch with reality so many elements influencing and running our economy really are.  First, the consumer economy is far more fragile than seems to be believed. Recent months have seen many case of ONS data being wrong across the economy. I have been warning about dodgy retail sales data from the ONS for far longer. These data paint a picture of buoyant spending which I have yet to see reflected in either results or anecdotal evidence from leading companies.

Only theoreticians could think “…one quarter of a percentage point wont make any impact on household budgets”. The public react on an emotional, not a statistical, level. Many consumers with debt today only know rock bottom interest rates and their already fragile confidence will certainly be impacted. They may be able to trade down to avoid inflation in shops but doing this with their debt is another matter.

Interest rates are usually increased when economies are overheating, when demand is rising and helping to increase inflation. Our economy is slowing. The worst of inflation will be falling out of the equation in the coming months. Real incomes remain weak, hence so too is demand. Hitting already wafer thin confidence with a message of further squeezes on household budgets is guaranteed to adversely impact retail sales.

** We advise retailers on strategy and analytics. We also track promotional activity across the UK’s key retailers. Get in touch for details admin@richardtalksretail.co.uk

Promotions and Black Friday looming

2017 Week 42

Non-food retailers on promotion this week 61%
Equivalent for same week last year: 64%
  • This is the 3rd week of flatlining in the headline index

  • Most sectors have remained unchanged
  • In fashion, among stores moving to full price this week are Reiss and Mango, and at the more value-driven end, Bon Marche and New Look
  • Going on sale this week are Fat face, White Stuff and Pep&co

  • This year’s promotional profile has very closely followed last year’s. The current level around 60% will continue next week before falling over weeks 44 and 45
  • On the horizon is Black Friday, falling in Week 46 last year. This year (because of week numbering) it will fall one week later

** We track promotions daily by sector and company to support promotional optimisation programmes – for details contact admin@richardtalksretail.co.uk

Christmas shaping up?

Last week saw the first announcement of Christmas on Oxford Street bunting. Selfridges launched its Christmas shop back in July – 147 before the Day itself. So what will trade be like this year? Everything is measured year-on-year so one has to look at 2016 to start.

The ONS says Christmas 2016 boomed. Year-on-year sales by value were up a massive 6.8% (just 0.1% inflation) to give the best Christmas increase for a generation. Don’t worry if this sounds seriously at odds with your own company’s experience – I don’t believe the figures either! The ONS retail sales data are often at odds with reality, or anecdotal evidence. What is clear however is that last year followed a particularly weak 2015 which in turn followed an unspectacular 2014. So while the reality is that records were not close to being broken in 2016, the comparatives were very weak and last year was probably up 3.00 – 3.50%.

ONS data shows 2017 year-to-date sales by value averaging 4.6%, or 2.5% once inflation is stripped out. Again, best treated with a large pinch of salt. However, interest rates are likely to be on the rise finally and although the increase will be very modest, I’m not sure the impact on sentiment will be. Many younger consumers have only lived with minuscule interest rates and have taken on quite a bit of very cheap debt. Brittle consumer confidence coupled with almost unprecedented political uncertainty encourage caution.

Last year’s demanding comparatives will make this Christmas very tough, with little genuine growth around. Last year, Christmas week saw 88% of non-food retailers on sale. With sales growth thinner on the ground it is hard to see this not being repeated. Christmas will certainly not be cancelled, but with rising rates, falling confidence and discounts almost everywhere, it will disappoint many retailers.

** We advise retailers on strategy and analytics. We also track promotional activity across the UK’s key retailers. Get in touch for details admin@richardtalksretail.co.uk

Promotional Intelligence

2017 Week 40

Non-food retailers on promotion this week 60%
Equivalent for same week last year: 67%
  • More retailers went on sale this week, driving the headline non-foods promo index up to 60%, from 57% last week.

  • Most sectors post lower YoY promotions this week. Exceptions are personal care and footwear, both with higher promotional activity.
  • Among retailers going back on sale this week are John Lewis, TopShop, River Island and Whistles

  • The next few weeks are critical, leading up to Week 46 and Black Friday.
  • Last year 86% of non-food retail was on sale for Black Friday, pulling forward Christmas business and ensuring a heavily discounted Xmas trading season simply to shift stock.

**  We have detailed data by sector and company over the past two years. For more information get in touch at admin@richardtalksretail.co.uk

Sign up today for exclusive access to world-leading expertise in the retail sector.