Archive for September, 2010

2011 and beyond part 2

Monday, September 27th, 2010

The cotton and production shortages of the previous blog takes me to an article in The Sunday Times asking if this spells the end of the £5 dress. It started with a story of Lorna Kenyon and her friends taking the ‘Primark Cocktail Challenge’. This involved buying a cocktail at Claridges (around £17 + tip) and buying an outfit in Primark, Oxford Street, for the same price or less. At the time it was not difficult to pick up a dress, shoes and clutch bag for less than £20.

However, add into the mix the VAT change to 20% in January and retailers are not going to be able to absorb all the increases. The consensus seems to be that retailers will try keep their basics at the same level, either by reducing margins or cutting out details on the products, and try to get it back on the higher margin items. For example if you can keep a basic item at £9.95 the public may still perceive the retailer as ‘value for money’ and be more accepting of a fashion item increase from £24.95 to £29.95.

I’m reminded of a story of a friend who needed to go to a DIY store for a ‘sink plunger’. Any idea how much they cost? No neither did he, as you buy them once every 10 years or so and forget what the last one cost. Was it £1.95, £4.95 or £9.95? Whatever it was, he needed it and was going to buy it. He wasn’t even going to bother going to other DIY stores to price check. Incidentally the prices here  are between £1.46- £17.98.

The point is that, the customer does not know your purchase price, so don’t slavishly apply set mark-ups to all products but apply intelligent pricing for Spring 2011. Just be careful to factor into your gross margins that you will be likely to sell a lot more of the basics at £9.95 than the fashion items at £29.95.

I bet you wish you’d paid more attention in maths lessons now!!!

Tony Heywood – Gilcrest Services Ltd
Retail Troubleshooter
Business Turnaround and Recovery
www.gilcrest.com
www.linkedin.com/in/tonyheywood2

2011 and beyond part 1

Monday, September 27th, 2010

The boom years for retailers are over for the foreseeable future according to the Next Chief Executive, Lord (Simon) Wolfson.

He expects growth of between 2-5% and given that Next also warns that a shortage of manufacturing capacity and a rise in the price of cotton will push up the price of its clothes next year between 5 and 8%, we are looking at unit sales to reduce.

Next are also looking to buy back 4 – 5% of it’s own shares every year as they feel that this will offer a better return to shareholders than expansion. Let’s think about this – they are admitting that the increase in turnover (and profit) achieved by taking more retail space in the next few years will not increase the value of shares as much as giving the money back to shareholders wishing to sell.

What is interesting and highly significant is that Next has publicly put a time horizon of at least three to five years for this period of lower retail growth – and is adjusting its business strategy on that basis. Given that they are probably one of the most professional and consistent performers over the last 2 decades and Lord Wolfson is a Tory peer and advisor to the Government the advice cannot be ignored.

So, what are your plans for the term of this Government?

Tony Heywood – Gilcrest Services Ltd
Retail Troubleshooter
Business Turnaround and Recovery
www.gilcrest.com
www.linkedin.com/in/tonyheywood2

Empty shops on the increase

Friday, September 17th, 2010

The number of empty shops is still increasing albeit at a slower pace. The amount has risen from just over 12% at the end of last year to 13% (or nearly 1 in 7) at the end of June 2010.

However, it will come as no surprise that the situation is far worse in the North than the South. For example Altrincham, Blackpool and Dewsbury have around 30% of retail units currently empty.  Another telling fact is that of the 400 medium sized shopping centres studied,  73 showed signs of improvement however all but 1 (Grantham) of these were in the South.

What can be done about these empty High Streets and shopping centres?  I believe that the planning councils need to take a more flexible view of usages. Yes, it would be nice for the High Street  to have all the traditional A1 trading units but the reality is that the population visits Tescos for their groceries, meat, fish, fruit and veg. They visit the shopping centres  to buy their new outfits and the Retail Parks for their White Goods.

So, if the likes of Costa Coffee and Starbucks, Nandos and Pizza Express want to come into the High Street and can make it vibrant once more then surely it’s better to allow change of use than sitting like King Canute trying to turn back the tide of change.

Interestingly, the Scottish Council of Paisley has had the foresight to not only  agree to ‘discounters’ coming in but have actively welcomed them so that the town centre has become a hub of activity for bargain hunters. It might not be ‘pretty’ but it’s popular and they collect the full Business Rates!

Tony Heywood – Gilcrest Services Ltd
Retail Troubleshooter
Business Turnaround and Recovery
www.gilcrest.com
www.linkedin.com/in/tonyheywood2