Today’s retail results reflect an economy that is in transition. Those companies that have a blended point of purchase proposition are in a stronger position than others. But the results and are a mixed bag and include companies that have outperformed expectations and those that are about to have difficult conversations with their financiers in the weeks to come.
To paraphrase Gerald Ratner who was interviewed on Radio 5 Live today “Those companies who are in second place are nowhere, those companies that offer a premium brand with a premium propositions are going to win”
So what’s changed from last year when even those who had a great proposition but were in second place were making a profit. It’s an age old belief that is being played here by consumers globally. People only buy from people they know and trust when money is tight. Brands that are succeeding today have a history of value, a proposition that is current and a relationship with the shopper that transcends the rest.
A quick look at the financial papers today confirms who is doing it right and who is playing catch up. M&S, JLP, Next and Sports Direct are the bell weather stocks that are controlling this space. Companies playing catch-up include Game, WHSmith and HMV. Is it time to reduce the foot print on the High Street and to warehouse stock on-line? 20 years ago rents contributed 10% cost for any High Street retailer. Today it’s closer to 20%.
Out of town centres are running at approximately 12% of cost base. The consumer spends less time on the High St and more time on-line. Why would any retailer open up on the High St today? Pop up shops are becoming with the norm in the Mall and on the High St. Why? Because the rents are not competitive and the consumer is letting someone else take the delivery charge.
In a competitive market where sales are at best stagnating controlling the cost base has always been the answer. But that was before the maturing of on-line shopping. It’s important today to understand what percentage of retail is derived from on-line sales, shops and cost control. Now is the time to build a trusted blended proposition that drives success from less on the shelf on-line.