What's on the cards for the retail sector?
Whether it's Clinton Cards, Marks -amp; Spencer or HMV, the retail trade is under pressure as never before. Donald McFetridge reports
Recent events in the retail sector would suggest that the outlook is still bleak, with little evidence of any sign of recovery. In fact, there's little light on the horizon.
When big name retailers like Aquascutum enter administration (only to be saved at the last minute by a Hong Kong investor), other mid-market operators (such as Marks -amp; Spencer and Next) are understandably nervous.
Recent casualties include Game Group and Clinton Cards, with the obvious resultant store closures pending and fears of massive job losses.
The big question on everyone's mind is: what went wrong? And why did no one see it coming?
Clinton Cards (which incorporates the Birthdays greetings card chain) was last week plunged into administration. The principal problem with this chain is that they have over-extended their retail operations on the High Street and left themselves little, or no, headroom with the banks.
Their stores are also out-of-date and in much need of refurbishment. Their product offering is too diverse. As a result, too little attention has been paid to their core business: cards. Even their store fascia looks jaded.
What Clinton Cards, and others like them in a similar situation, need to do is streamline and provide more customer focus within the product range which they are currently offering.
Some towns (for example Coleraine) have a Clintons Cards and a Birthdays outlet; they must ask themselves if that makes good business sense. I would suggest they are cannibalising their own markets - never a good thing for niche retailers.
They have, of course, been undergoing a major period of restructuring, but, unfortunately, without the backing of the banks and with credit terms currently being reduced from 90 to 30 days, they have little chance of maintaining the status quo. They must change - and change radically.
In the food sector, the supermarkets are cutting each other's throats for market share in a market which is gradually slowing. Marks -amp; Spencer has introduced a limited number of 'value' lines under the label Simple Food and Tesco has re-branded its value products Everyday Value.
Marc Bolland, CEO of Marks -amp; Spencer, is expected to announce to the City that his plans for growing the M-amp;S brand have not been realised and will be forced to admit that they have become over-reliant on the 55+ female shopper for around two-thirds of their business. This is a very worrying situation and one which needs to be addressed.
In the entertainment sector, HMV believes it will 'come good' in the next financial year as a result of the size and nature of some forthcoming CD and DVD releases.
Many argue that this is a foolhardy strategy and fear that sooner rather than later the banks will come calling, looking for their money, and things could go very badly wrong for the store group.
A recent online shopping survey has found that UK online spending has shrunk by only 1% during the past year - unlike the rest of the retail sector in the bricks and mortar world of the High Street.
Online retailers know that 8.40pm is the peak online shopping time in the UK and have been bombarding online shoppers with offers, vouchers and special promotions at peak times. Why can't High Street retailers do the same?
The electrical sector, too, has had its ups and downs, with many consumers waiting for special promotion campaigns before they purchase big-ticket items. This sector remains volatile and subject to consumer demand, whimsy and caprice.
Likewise, furniture, carpets and flooring have been floundering during the recession due, in no small measure, to the downturn in the housing market.
However, there has been some good news for the sector, as there appears to be an upsurge in spending on new furniture and carpets due to the fact that many people have been unable to sell their homes and have decided, instead, to re-decorate.
However, the future remains bleak and we are likely to see a period of further store closures, job losses and store rationalisation in many of the multiple chains, which have over-extended their presence on the High Street.
During the remainder of 2012, we are likely to see more streamlined retail operations. Only the fittest will survive; the weak will go to the wall.
Consumers, in all age groups and in all socio-economic groupings, have changed irrevocably. Many are cutting back (some of necessity, others through choice), trying to save more, shopping around and price-comparing to a greater extent than ever before.
Many are shopping online at work, instead of hitting the High Street at lunchtime, or after work. Some are still treating themselves to luxury goods, but these are becoming smaller in value and purchased less frequently than before.
It's extremely difficult to predict what's around the corner, a case in point being that few knew what was on the cards for Clintons a week ago.
The old adage 'when the going gets tough, the tough go shopping' needs to be substantially revised to describe modern-day consumer behaviour.
In 2012, it could more accurately be rendered 'when the going gets tough, the tough stop shopping' - a major concern for chancellors of exchequers and ministers of finance not just here, but globally.