- Posted January 21, 2014 by
Retail sales changed the way we now shop
Retailing has become a great deal more complicated. Never was this more evident that over the festive season when so much money was spent on the high street. As is the case almost every year, the message in the build-up to the season was dismal.
It was a judgement based on the fact that so many shopping chains, including Marks & Spencer, put products on sale before Boxing Day — as was the case historically.
Indeed, of all the main chains only Next, run by Lord Wolfson, scion of one Anglo-Jewry’s best known commercial families, had the courage to hold its prices until after the holidays when it went on sale at cost price.
The reality is that, as the official data is compiled, we will find that the recent holiday season was record breaking in terms of the sums taken over the counter and the Net.
This should not be that surprising. Employment in the UK is at record high levels, the British economy (with the exception of the United States) is the fastest growing in the advanced world and the credit squeeze that followed the financial crisis of 2007-2009 has loosened. Credit card, bank overdraft and other consumer credit limits have been lifted.
Several longer-term trends made a difference to which retailers were successful in the final months of last year, when most income is earned, and which chains failed.
Ed Miliband’s cost-of-living squeeze has also been important. It has produced a bifurcation with the discounters, particularly in the food area, doing well. German-owned chains Lidl and Aldi saw sales rise in leaps and bounds.
Despite the bad publicity arising from its bank, the Co-operative Group managed a one per cent lift in sales. Imagine how much better it would do if it lifted its boycott of Israeli goods originating from the West Bank.
Top-end food retailers Waitrose and Marks & Spencer also did well. Waitrose had its most successful holiday season on record with same store sales up a whopping 4.1 per cent. Last month it took £51 million in one day, the highest sum ever taken by the business in a single day.
The march of the discount and the high end retailers has taken its toll on the middle with Tesco suffering, despite its near 30 per cent market share, and J Sainsbury doing less well than in the recent past. Its sales in the third quarter of its financial year were up 0.2 per cent against 2 per cent in the previous quarter. Nevertheless, this was a better outcome than had been expected.
The even more significant trend to affect retail outcomes has been the march of on-line shopping.
Retailers, such as M&S, that are still struggling to provide all singing and dancing websites and the logistics to go with them, increasingly are left behind. The pace at which British shoppers have taken to the internet is remarkable. Oxford Street crowds are no longer an attraction.
Some 20 per cent of purchases in the festive season were made online, up five per cent on 2012.
Not surprisingly it is the companies with the best online offerings that walked off with the cream.
Ocado, which is run by Tim Steiner, recorded a 6.5 per cent lift in sales; Sainsbury had a 4.5 per cent lift and Argos – that moved from catalogue selling tablets in the blink of an eye – also did well.
The Next directory that comprises the company’s old catalogue offering and on online leapt by 21 per cent. The big selling point was ‘Next day’ delivery to stores if ordered before noon.
The winners are those companies that have focused on the logistics as well as the websites.
It is no use having a wonderful website if customers are left fuming because parcels fail to arrive. Aside from its ability to deliver, Next, like Argos, is benefitting from speedy ‘click and collect’ services.
The much known and loved John Lewis lost out because “click and collect” is clunky and leaves shoppers queuing and anxious for service.
Heritage plays a part in this. Both Argos and Next have long been catalogue businesses so know the importance of logistics.
Argos at long last seems to be benefitting from refits in what in the past have been some of the most miserable stores in the land.
Getting fashion right and focusing on old fashioned customer service also helps. Debenhams, and to a lesser extent, M&S have struggled with the core womenswear offering and suffered accordingly.
At Debenhams, the finance director Simon Herrick resigned after a shock profit warning. Investors don’t like surprises.
Dixons has turned itself around by concentrating on the British market and improved technical advice in the stores. It is not brain science.
But in the pile-it-high, sell-it-cheap era service was largely forgotten.