Recession or evolution?

Costa CoffeeIt’s an odd thing this downturn/recession/slowdown. There are plenty of retailers who are suffering but many who are thriving.

The experts predicted that the public would cut out the unnecessary expenditure from their budget such as the £2 Latte. Well, surprise surprise, Costa announced like for like sales up 6.7% this week (total sales up 23.3% and underlying profits a whopping 41.8%) and meanwhile a medium Latte is now £2.45.

Ah, say the experts, we’ve cut down on the expensive luxuries and kept the little treats. Perhaps it’s just that Costa (although it pains me to say it) have got it right. They provide a good cup of coffee in a pleasant environment, comfortable for meeting with friends, working on your laptop or just a guilty pleasure.

Meanwhile Argos, a supposed bellwether of the retail trade suffered a 9% drop in sales in the last quarter. Well, I have news for you Mr Home Retail Group, perhaps life has turned a circle and bit you back. 10 years ago they were the scourge of traditional retailers who resented customers looking at their products using the advice and knowledge of the salesmen and then going to Argos who could sell it cheaper as they had no qualified personnel or expensive retail space given over to displaying products. Just a large warehouse and a counter where the cashiers knowledge of the item was whether it was collection point A, B C or D. The internet, mate, has turned the tables.

Meanwhile the electronic and white goods retailers are having a torrid time. Dixons sales down 10%, Comet owners allegedly offering up to £200m to a white knight to take it off their hands and Best Buy looking to retreat back to the USA with it’s tail between it’s legs.

It is cited that there are few new, must-have products to make the consumer part with their cash. Well yes, maybe, but also every time I replace my laptop (usually after 3 years) the price has dropped another £200 or so (unless you’re an Apple lover). So they need to keep selling more laptops every year just to stand still. Also, reliability has increased, particularly on white goods. How often do you need to replace your washing machine or tumble drier and fridges only seem to get bought when you move house. I’m not sure these retailers would be faring any better even if the economy was in good shape.

It’s all doom and gloom in the High Street with the number of boarded up shops. But is that due to the economy or just the fact that councils have been increasing business rates, putting up the cost of street parking (233% in my area) and employing more vigilant parking wardens eager to write out tickets. It’s far more pleasant to drive to a shopping centre with easy (often free) parking, temperature controlled environment and a vast selection of shops and restaurants (and Costas!).

Perhaps it’s just the natural order of life and a Darwinian evolution is more responsible for the retail turmoil than the recession?

Tony Heywood – Gilcrest Services Ltd
Retail Troubleshooter
Business Turnaround and Recovery

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