Belfast Telegraph

Saturday 22 November 2014

Dickens of a struggle for retailers in hard times

As the January sales begin to fizzle out, Donald C McFetridge, retail analyst with Ulster Business School at the University of Ulster, examines why businesses fear the future

For many retailers in Northern Ireland, 2009 was a year of mixed blessings: joy and happiness for some, misery for others. Some retailers have reported excellent trading patterns, results and statistics for Christmas past, but many fear for the present and the future. They're not wrong!

Christmas trading was a mixed bag nationally but, yet again, the supermarkets were the real winners. Consumers - keen to have the best Christmas possible - spent more on premium food products such as Sainsbury's Taste the Difference and Tesco's Finest range than in previous years, leading to excellent results for both supermarkets.

Next reported that like-for-like sales in the 22 weeks to December 24 were up 3.2%; Asda stated that it had a "solid" Christmas and Sainsbury's like-for-like sales were up 3.7% (excluding fuel) in the 13 weeks to January 2.

Marks & Spencer's like-for-like sales were up only 0.8% in the three months to December 26 while John Lewis reported revenues of £500.8m in the five weeks to January 2 with like-for-like sales up 12.7%. It's time they were here.

Marks & Spencer failed (overall) to impress. Let's hope that Marc Bolland can turn around its fortunes when he takes up the helm at M&S in the very near future. One thing is certain, he won't be seeing things through 'Rose-tinted' spectacles. The world of retailing is a very tough place in which to operate and only the toughest survive.

In the wider retail arena, retailers like House of Fraser and Primark - both, notably, at opposite ends of the increasingly polarised retail spectrum - traded at maximum levels.

Associated British Foods (ABF) has announced sales at Primark (purveyor of all things disposable) rose an astonishing 19% in the 16 weeks to January 2, which goes to prove that we, as consumers, are increasingly growing to favour throwaway, cheap and cheerful clothing.

In any recession, there are generally three outcomes for retailers.

First, the weak go to the wall. The year 2009 saw the demise of retailers such as Zavvi and Woolworths, but 2010 - at least as far as the trading results so far suggest - appears to have produced fewer of these. This is perhaps due, in part, to retailers procuring or sourcing product more carefully, managing inventories better and retaining lower/optimum stock levels.

As a direct corollary of this there were fewer bargains around for savvy consumers used to "helping out" retailers with too much post-Christmas stock on their shelves in the January sales. Retailers seem to have learned a hard lesson about the importance of maintaining optimum levels of the right stock.

This is simple basic business sense: the right product, at the right price, in the right place at the right time - in the right amounts!

The second outcome of a recession for retailers is that the strong become stronger and more versatile. They streamline operations, trim budgets, address supply chain issues and adjust staffing levels (i.e. get rid of any 'passengers') and make those employed work harder than ever.

They have to be nimble and bold, be ruthless and take radical decisions. We've seen this happen here in Northern Ireland - staff hours being cut, four-day weeks, etc and there may be more of this in 2010. We're not yet out of the woods.

The third outcome is a very pleasing one: new, innovative retailers come to the market. For every empty unit on the high street there is a golden opportunity for the far-sighted entrepreneur with an eye to times when wallets will spring open and credit cards will be proffered more readily over shop counters.

Retailing is not for the weak-hearted. It is for those with a willingness to take risks, predict trends, intuit the public mood. The rewards can be great; for those who do not fulfil all these market expectations, the writing is surely on the wall.

This year is going to be a year of change - in terms of governance (locally, nationally and internationally); it's also going to be a year of higher taxes (eventually), and, it is in this context that retailers must face the future with 'Great Expectations' in what are certainly 'Hard Times' (Dickens).

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