JEM Retail Consultants providing services in buying and merchandising, Programme Management, IT services and Logistics & Warehousing.

Sunday, 27 October 2013

Retail Winners and Losers in 2014: JEM Predictions!

The last few weeks has seen some great sound bites from leading politicians such as "Britain is on the path to prosperity" (David Cameron) and more poetically "The sun has started to rise above the hill" (George Osborne) so does this mean retailers can look forward to improving sales in 2014? Not all, I suspect.


According to official figures published in October the economy grew at its fastest rate for 3 years with the result that David Cameron has promised a "recovery for all" shared by every region and all groups. With 15.5% of households in the SE being in the richest 10% compared to 7.6% in the NE and NW this seems about as probable as "an end to boom and bust" but how is retail likely to fair?

The Centre for Retail Research reports that retail sales have improved in 2013 although "price competition is so vicious that there is little retail inspired inflation about". The ONS sales figures for August show that retail sales rose by 2.3% in volume terms and 3.9% by value compared to 2012. They cheerily conclude "Better therefore than we have seen in the last five years, but there are plenty of problems yet to come!"

So what is it going to take to be successful?

First and foremost great product. Being second rate really isn't good enough any more and if you haven't got something that people really desire then they are unlikely to part with their hard earned cash. Next is excellent service  in terms of channels and routes to market supported by appropriate and seamless IT platforms. Increasingly "tech savvy" consumers expect nothing less. Finally first class logistics to ensure that your product is where you want it, when you need it, it the right quantities as well as providing B2C order fulfilment and delivery.

Who is likely to thrive in 2014? I would predict the following groups will do well:

Prestigious designer brands. As these cater to people with a lot of money and social inequality has never been greater they are essentially "austerity proof". Burberry manages to tap into both its luxury and "British" image (despite manufacturing in the Far East!) Then you have the super brands like Chanel and Dior whose customers in this country are largely from overseas. Changing the visa system to make it easier for people from China to visit will inevitably help. Many of these brands also have diffusion brands so regular customers (like me) can buy into the Brand dream.

Aspirational brands. Not designer as such but clearly desirable. These brands benefit from the "Sainsbury's"effect in that wealthier customers are happy to shop there while also being an affordable luxury that provides that essential "feel good" factor. Mulberry would be one example as well as the emergence of premium ranges from those brands who wish to head upwards in terms of price and desirability, like Ted Baker and AllSaints.

Value brands. Britain has become addicted to the "value" market since 2008 and the continuing uncertainty caused by tightly controlled (or non-existent) wage rises and fuel prices means that this isn't going to end any time soon.

More speculatively brands associated with with active leisure or lifestyles such as GOoutdoors. The seemingly endless news items about the obesity "crisis" means that people will become increasingly conscious of the amount of exercise they do and having the right gear is a bit like having a gym membership. You may not use it, but it makes you feel better.

And who will suffer? Any retailer in the middle ground. Those that lack prestige but are too expensive to be regarded as value. Any brand without a clear identity or those that have lost their way such as Jaeger and LK Bennett. Finally those that rely on some of the big department stores, particularly Debenhams, as the service proposition just isn't good enough any more.

These concession based businesses are always in danger of being "de-ranged" (Fenn Wright from John Lewis) as many department stores now seek out brands that are harder to find on the high street. Any brand still in Debenhams is unlikely to find a home in any more upmarket store both in the UK and, increasingly, internationally. Those CEO's whose business relies on someone else for its future will have many more sleepless nights than those who can, to a far greater extent, shape their own destiny.

In summary worry about what you can control, not what you can't. Get the very best people into your team and ensure that you have the right creative talent for your brand, who understand what your customer desires and how to give it to them. Ensure that your customers can get what they want, when they want it however they choose to shop.

Deceptively simple, but it's these factors that will sort out the winners from the rest, not the creation of a great omni-channel strategy document.

Written by Erica Vilkauls: Director JEM Retail Consultants.

No comments:

Post a Comment