Archive for the ‘The Retail View’ Category

Christmas sales boost contradicted

Sunday, January 17th, 2010

The plethora of good results from the UK retail sector over the Christmas period may not be as good as the figures suggest.

Verdict Research said firms had gained £14bn of extra trade that would have gone to rivals if they had not gone out of business over the past year.

It pointed out that companies such as Woolworths, Zavvi, Principles, and Bay Trading are no longer trading.

Verdict said retailers also benefited from more buying ahead of the VAT rise.

With VAT returning to 17.5% from the temporary 15% on 1 January, it said this gave retailers a one-off lift.

Verdict’s comments come after the British Retail Consortium (BRC) said the UK High Street saw its biggest rise in December trading for eight years.(see the previous blog)

The RBC estimated that like-for-like sales rose 4.2%.

Verdict retail analyst Matthew Piner said: “Big, high-profile collapses such as Woolworths have had all the coverage, but the relentless closure of small stores has done just as much to push up vacancy rates.

“This has freed up extra sales which have been absorbed by the bigger stronger players, lifting their sales.”

Verdict points to other one-off factors behind December’s strong retail showing.

These include the cold weather boosting sales of warm clothing, food price inflation lifting the results of the supermarkets, and less discounting meaning consumers having to pay more.

Looking ahead, Verdict predicts that 2010 will be “tough” on the High Street.

“The extra spend freed up for survivors by casualties is a one-off gain, and we do not predict that there will be as many casualties in 2010 – most of the weakest have already collapsed,” said Verdict’s lead retail analyst Maureen Hinton.

She added that consumers are also concerned about higher taxes and continuing job insecurity.

As a result, Verdict predicts that consumer spending will only grow 1.1% this year, the second lowest rate of growth, after 2009, since its records began in 1966.

You have been warned!

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

Good Christmas and Sales Period but tough 2010?

Sunday, January 10th, 2010

Retailers are facing a “very tough” 2010, despite posting upbeat Christmas sales figures, the head of the British Retail Consortium (BRC) has warned.

BRC director general Stephen Robertson said consumer spending may not grow in the face of tax rises and continuing economic uncertainty.

“There will be tough sales and perhaps no growth,” he said in an interview with the Sunday Telegraph.

Most of the major retailers, whilst reporting generally good Christmas sales, have stated that they expect 2010 to be  tough/difficult/challenging.

It would have been a surprise if retailer sales for the Christmas and Sale period were not up against last year, given the disappointing sales of 2008, the rush to beat the VAT increase and fewer retailers on the high street with loss of Woolworths, Zavvi, Borders and a host of furniture groups.

Another reason given is that consumers have been re-directing some of their disposable income to the High Street with their lower mortgages, cutting back on holidays and not moving home. Should interest rates start to move then this may be reversed and missing out on holidays in 2009 will make them more of a priority for 2010.

For sure, this is going to be a long hard climb to get back to the halcyon days of 2007 and many retailers see the only growth is through increasing market share. i.e at the expence of other retailers.

Another year beckons where you cannot rest on your laurels. It’s going to be tough but those that survive will reap the rewards in future years.

So, as ever, watch those costs and overheads, keep your stock levels tight working to shorter lead times where possible and negotiate hard!

Good Luck

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

Should brands be freely sold on eBay? Part 2

Tuesday, November 10th, 2009

Last month we discussed eBay’s petition on the issue of brands  restricting the sale of their products on the internet. I was totally clear that the public should be able to sell their pre-owned items without restriction but are brands entitled to block the sale of new (genuine) items?

The high profile case which effectively gave the brands control over  distribution of their products was Tesco’s battle with Levi Strauss.

In July 2002 the High Court upheld a ruling in November 2001 that Tesco was not allowed to sell cut price Levi jeans without permission from the US-based clothes giant.

The grocery chain was fighting for the right to import designer goods from around the world and sell them at an even greater discount to UK customers. Under the EU’s trademark rules, any company can import branded goods from another EU country for sale in the UK, even without the manufacturer’s agreement. But the permission of the manufacturer is usually required when importing from a non-EU country.

You can understand that the brands want to protect their valuable image rights and should have some degree of where and how their products are sold to maintain the ‘exclusivity’.

I can sympathise and, in general, agree with this view. If the public want to buy a cheap pair of jeans, Tesco has their own and other brands on sale. There is no cartel whereby jeans manufacturers artificially keep the price high and there is, for all intents and purposes, a free market.

However, if you particularly want to buy a pair of Levi’s jeans, that is your choice and you should be prepared to pay a premium for the marketing and general brand building costs.

So should these products be able to be sold on eBay? Well, yes, providing they have been sourced legitimately.

It is inevitable that the prices will be somewhat cheaper (although with postage costs maybe not appreciably so) as there are not the overheads associated with prime High Street sites and in any event, eBay now takes a sizable chunk of the sale price. However, these same savings are available to any on-line retailer so eBay is not offering any unfair advantage.

If you want to buy branded merchandise from eBay or any other e-commerce outlet then so be it. I don’t believe that it’s unfair competition and wish eBay luck with their fight to get the EU laws changed.

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

Mixed messages on the fate of retailing

Monday, November 2nd, 2009

One in 10 retailers closed their doors between January and September this year according to research released today by the Local Data Company.

Fashion and footwear was one of the worst casualties of the recession with 17.9% of stores in the womenswear and kidswear sectors and 12.4% of menswear stores shutting their doors in the first nine months of this year. Footwear also fared badly with 14.9% of stores closing.

The Times suggest that the independent sector was a casualty of rising rates and limited access to credit during the period, with 15% of independent fashion stores reported to have closed in the nine months.

However on the same day retail landlord Land Securities stated that they will no longer offer retail tenants rent concessions amid signs of increasing demand for space.

Land Securities chief executive Francis Salway told The Times: “The downturn has been tough on property companies and on retailers. There are instances of retailers still asking for concessions, and it can be in our interests to show flexibility in specific areas, and we have led on a number of such initiatives. However, we do not believe across-the-board changes to agreed contracts are appropriate.”

Land Securities is the largest property developer in Britain, and has 1,600 retail tenants.

The revelation came as Land Securities revealed it was offering a new lease that does not penalise tenants for paying monthly instead of quarterly, according to The Times.  It intends to roll it out to its entire portfolio.

The new agreement called the Clearlet lease, will see the landlord scrapping the 1% premium on monthly payments.

Land Securities comments were supported by the British Property Federation. Its chief executive Liz Peace said: “We’ve seen first hand the steps landlords are willing to take to help retailers, from offering monthly rents to working with them to reduce service charges. But the fact everyone needs to understand is that cutting rents too far would undermine the investment value of retail property.”

Rival landlords British Land and Hammerson have also noted an increase in demand for properties from retailers.

So what’s going on?

Well, it appears to be that the strong are getting stronger at the expense of the independent retailers. Relatively good figures coming from the likes of John Lewis, Debenhams, Arcadia Group, River Island and Next show that there is money to be made in the High Street but only if you have the financial muscle. No doubt these large groups have been able to negotiate hard with their suppliers over terms, have areas where costs can be trimmed and have the supply chain management to cope with the tough trading conditions.

However, the independents are fighting to get funding from banks, loss of credit insurance cover leading to curtailment of supplies or pre-paying and very little excess ‘fat’ to trim.

I think that we may see next year’s VAT change and the large business rate increases being the final straw for many independents.

I hope not.

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

Should brands be freely sold on eBay? Part 1

Tuesday, October 6th, 2009

Last month eBay took a petition to the European Union with 3/4 million signatures to ask it to amend EU competition law to stop brands from restricting the sale of their products on the internet.

The petition calls for the EU to halt what it describes as the “abuse” of “selective distribution” agreements which block on-line sales of certain products arguing that the practice unfairly impacts online businesses and entrepreneurs and means the consumer ends up paying more.

It wants greater clarity and support for cross-border internet sales in Europe and wants the way off-line and on-line channels are treated for distribution to be the same.

Most brands oppose selling their products on-line, particularly via eBay, because they feel they lose control of how their products are sold and presented.

Alex von Schirmeister the eBay director general  said: “eBay was built on a simple idea – that it could empower individuals by building a global marketplace where practically anyone could buy or sell practically anything.”

“Unfortunately, that idea is under threat from certain brand owners and manufacturers who are trying to block and restrict unfairly the sale of legitimate products on the internet. Through this on-line petition our community of users is calling on policy-makers to amend European competition law to stop these unfair trade practices.”

There are several aspects to this case which are worth discussing.

Firstly let’s address the question of the re-sale of ‘pre-owned’ branded goods on eBay.

I don’t believe that  the Brands are, in principal, against the re-sale of these items on eBay but I know from bitter experience that some brands make it very hard to list their goods. It is often the case that the brands will instruct eBay to remove listings irrespective of whether they have reason to believe they’re not genuine, and due to the high profile court cases eBay have had with Tiffany’s and LVMH they will be removed (and a ‘strike’ issued against your account). I’ve had several ‘battles’ in my time with my eBay business and the final straw was where a LV suitcase was removed (and a 7 day supsension of eBay trading given) despite there being a photograph of the original sales receipt from LV in Bond Street on the listing!

eBay’s attitude is that you should contact the brand direct, get them to test it, and once authenticity confirmed they should contact eBay to allow the restriction it to be lifted. Well I tried it once with Evisu and, surprise surprise, could not get anyone to even acknowledge my complaint!

So I believe that it is within everyone’s right to be allowed to resell on eBay or through any other channel, any item bought from anywhere in the world without restriction.

I will address the sale of new brands in part 2

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

Consumer market will not pick up until 2011?

Tuesday, September 22nd, 2009

Following on from my last post I’ve just been reading about a survey  commissioned by PR firm Kreab Gavin Anderson, which found many retailers believe the consumer market will not pick up until 2011.

Just over a third of those questioned – 34% – are not anticipating strong growth until 2011 or even later.

Just 13% expected the consumer market to pick up significantly this year. And nearly all – 94% – said they expected a slow recovery as tax rises squeeze shoppers’ disposable income.

Despite fears, two-thirds said they were more positive than seven months ago as fears of economic Armageddon had not emerged.

Retail bosses also warned that Christmas would be flat this year.

So there you have it – rather depressing but perhaps not as bad as it could have been.

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

Primark will become Britain’s “sharpest and most feared” retailer replacing Tesco

Tuesday, September 22nd, 2009

…according to Verdict Research. They also reported that value for money will be the prime focus of any retailer which wants to survive the global downturn as clothing volumes fall.

Verdict senior analyst Daniel Lucht said: “As Tesco’s halo has slipped somewhat in the recession, Ireland’s Primark is set to take up the torch of sharpest and most feared retailer from the British Isles.”

Verdict said that clothing retailers have reacted to the recession with understated fashion ranges, cut backs on inventory and a reliance on sales.

They added that plunging consumer confidence and spending levels sparked by unemployment fears and the credit crunch will lead to “a strong and deep value focus” among retailers over the next five years.

Verdict predicted that European value players such as H&M, Primark and Kiabi will be best placed to prosper.

I was conference with some well respected retailers and successful Venture Capital players. The recurrent theme was that this downturn/recession is here for some time and we wont see ‘normal trading’ returning for another 2-3 years, if at all. In fact BDO Stoy Hayward are predicting the demise of 5,000 retailers next year. An increase on this year!

The other point that all were agreeing on was that value retailing is the only way to go and that doesn’t necessarily mean cheapest but best value for money. So along with H & M and Primark being singled out Zara was highly thought of. Their products are not as cheap as Primark but for the quality and styling they represent good value for money.

It’s been very difficult  predicting anything over the last 18 months but the general thoughts are that Christmas may well be OK, although sales will start (continue?) early putting margins under pressure. Then sales are expected to seriously drop in the New Year as the VAT increase hits. Will retailers pass it on or will they be forced by consumer demand to absorb it?

If you are still trading, congratulations for making it so far. Keep ensuring your stocks are tight, overheads at a minimum (with no detriment to service) and, above all, ensure your products are VALUE FOR MONEY.

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

Credit Insurance Aid Flops

Monday, August 31st, 2009

In April the government pledged to provide up to £5 billion of trade credit insurance to businesses that had suffered reductions in the level of cover provided by credit insurers because of the economic downturn. Firms can buy “top-up” insurance for six months to match the cover still being provided by their insurer.

However only 52 policies, worth a total of £7.1m, have so far been covered  as the scheme’s narrow focus — notably the fact that it excluded firms whose cover was completely withdrawn — has meant that it has been of little use to most firms. Since launching the scheme four months ago the government has changed it twice in an attempt to attract more interest. Two weeks ago it scrapped the lower limit of top-up cover, doubled the upper limit to £2m and reduced the cost of cover from 2% to 1%. The scheme runs to the end of December.

Phil McCabe, a spokesman for the Forum of Private Business, said: “So far the government’s trade credit scheme has clearly been a flop. It has benefited only a handful of struggling firms and extending it in this way will not significantly improve it because the most vulnerable firms, those that have had their credit insurance withdrawn completely, remain exposed. And with late and non-payment on the rise, these firms will continue to suffer.”

I predicted in my article on the credit insurance scheme   that the headlines read well but reality is that few retailers will benefit and, sadly, it’s proved to be correct.

I usually like to end my blog with some positive advice but there’s little that I can add to my previous article so I’ll leave the last words to Stephen Alambritis and Sean Purrington as quoted in The Sunday Times:-

The Federation of Small Businesses is now calling on the credit insurance industry to step in and fill the void to help small firms.

Stephen Alambritis, spokesman for the federation, said: “We think that the credit insurance industry has let itself down and it should do what it is there to do. Small businesses want to deal with the credit insurers themselves rather than through some government scheme.

“This is a crucial time because the recession has bottomed out and if there are any signs of recovery in the economy then businesses will want to be able to say yes to contracts and will need credit insurance in place quickly. Credit insurance is crucial in today’s uncertain world. It has an important role to play for businesses that are trading in risky areas and taking on big contracts. It is a source of reassurance.”

Sean Purrington, regional director of Atradius, one of Britain’s largest credit insurers, said that his firm hoped to start providing more cover towards the end of this year. He said that other credit insurers would be likely to do the same.

“As the economy improves we are starting to extend more trade credit. The taps are being turned on again. We are looking to write more cover as we move into the final quarter of this year.”

However, he also had a warning for small businesses, saying: “I don’t think the industry will be the same as it has been in the past. We will see prices being higher and risk-sharing being greater.”

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

Last year’s cut in VAT has had little or no impact on consumer spending

Friday, August 28th, 2009

Well it sems that my prediction in my blogs last year that the VAT cut was not the best way to boost spending has been proved correct. Here’s what Stephen Coleclough of PricewaterhouseCoopers had to say:-

Last year’s cut in VAT to 15% from 17.5% has had little or no impact on consumer spending, according to a survey by consultants PricewaterhouseCoopers.

The company interviewed 2,000 consumers and found that an overwhelming 88% said that the VAT cut had not prompted them to spend more on goods or services.

The respondents also dismissed the measure as insignificant when compared with other economic factors, citing reduction in income and economic uncertainty as more potent influences on their spending.

Stephen Coleclough, tax partner at PwC, said: “These figures show that, despite it being designed as an economic stimulus, the vast majority of consumers’ spending has been unaffected by the VAT cut.

“The rest of the year will demonstrate whether the cut can still have the desired effect. It will be interesting to see whether consumer spending is affected by retailers potentially bringing forward their new year sales in anticipation of a VAT increase in January.”

Moreover, 5% of those polled by PwC were unaware that there had even been a cut in VAT, which is set to be reversed on 1 January next year. Only 8% of people said they had boosted their spending as a result.

The report stoked renewed criticism of the government’s £12bn VAT cut, made in last November’s pre-budget report by the chancellor, Alistair Darling, which both the Conservatives and the Liberal Democrats ridiculed at the time as ineffective.

“This is yet more evidence that Gordon Brown’s VAT cut was a costly and expensive failure,” said Philip Hammond, Conservative shadow chief secretary to the Treasury.

Jeremy Browne, his Liberal Democrat counterpart, said: “The government’s defence of its wasteful VAT cut continues to unravel. Its benefits have been overstated and most of the money is not helping the poorer households that are struggling in the recession.

“This ineffectual VAT cut is costing £1bn a month. Ministers should scrap it immediately and spend the money on transport and environmental projects which would boost the economy, create new jobs and leave a lasting green legacy for Britain.”

The Treasury, though, has regularly defended the tax cut as putting the equivalent of almost 1% of gross domestic product back into the economy.

Tony Heywood – Gilcrest Services Ltd
Retail Troubleshooter
Business Turnaround and Recovery
07905 848 111

Reduce your carbon emissions and save money

Monday, August 24th, 2009

The Carbon Trust is offering interest free loans to Small and Medium sized businesses/enterprises (SMEs) to make their buildings more energy efficient. You can borrow between £3,000 and £400,000 interest free for up to 4 years with no arrangement fees.

Typical projects that are considered are Air Conditioning, Boilers, Hot Water Tank and controls, Building and/or pipe insulation and lighting.

They claim that a typical small business can save £8,000 in their energy bills a year so you can see that the savings may well cover the loan repayments so that the efficiency upgrades can cost you nothing and you can look forward to savings going straight to your ‘bottom line’ from year 5!

Check out the Carbon Trust Website for more details.

 What have you got to lose????

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