What does 2015 hold for retailers, towns, retail parks and shopping centres?
Happy New Year! The christmas period has been a fascinating one in terms of retail. It all started with the online frenzy days of Black Friday, Cyber Monday and White Saturday. It was reported that Amazon alone shipped 11 million items in the UK on those two days alone! Websites crashed, froze, set up queuing systems and others reverted to the message of ‘essential maintenance- please try again later’! Added to this Yodel declared that it could not keep up with demand and then we have recently seen the demise of CityLink! The perfect storm had happened and without any of the snow of 2013! Imagine if the weather had added to the mix!!
From the outset of the year I had said that 2014 would be the year that bricks met clicks and I am happy to say that I believe I was proved right. Click and collect is the cornerstone of this balance of power. E-Consultancy (www.econsultancy.com) publish some great stats on this and one that struck me was that – Halfords introduced click-and-collect three years ago and now 86% of all its sales are for in-store collection. This is reinforced by the wider stat that since 2012 click and collect use has risen from 40% to 79%! John Lewis, whilst seeing a dip in sales of 1.4% over Christmas saw a 30% rise in the use of click and collect. The impact of these ‘online days’ was enormous in 2014. The Daily Telegraph reported that according to IMRG and Experian, consumers spent £666m online on Manic Monday which was less than expected and far below the £810m spent on Black Friday. All in all significant uplifts to normal spend patterns!
So is this good news? Yes if you are a consumer as we see low inflation, low interest rates and a gradual increase in earnings. For most retailers I would suggest the answer is no! This is because consumers are savvier than ever before, have the price tracking tools we dreamed of and are relishing the bloodbath between retailers as they discount to the bottom. The only large retailer who has watched from the sidelines is Next that issued a profits warning pre Christmas (warm weather impacting winter ranges) but showing an increase in full price sales of 2.9% over Christmas. The hardest stat to extract from the numbers is real profitability and this is what will be the defining characteristic for many retailers in 2015. Those who cannot maintain a healthy margin are likely to experience serious difficulties or even worse failure. The pressure in this regard is especially strong on the quoted companies such as M&S, Next, Tesco, Morrisons, Sainsburys, Poundland and many others – some new to the market in 2014.
This leads me onto the much discussed topic of food retailing and its future. Aldi and Lidl have made their mark both in terms of growth of stores and their marketing positioning. No longer are they sitting on the fringe hoping to attract market share. They are actively going after the supermarkets – again in both their location strategy and their marketing. Between them they now have over 1,100 stores which is more than double the Morrisons stores and equal to the supermarket estates of Tesco and Sainsbury’s according to LDC data. Of significance and to be covered separately is which supermarkets have been targeted by the roll out of the discounters? Lets not forget the rise of Poundland, 99p Stores, B&M Bargains and Iceland in this space. Even Philip Green (Arcadia) is seriously looking into this market!
An interview in the Daily Telegraph with Andy Clarke , CEO Asda (Walmart UK), last week talked of consolidation in the grocery sector in 2015. He is confident with the Asda strategy and believes that Tesco will bounce back which therefore begs the question of is he alluding to this consolidation being either Morrisons or Sainsburys? A number of senior industry players and commentators have said that they believe there is a high chance that one of the BIG FOUR will go under in the next five years! That is quite a sobering thought to start the New Year and for my first blog of 2015!
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