Undaunted by the big beast….

James Daunt , formerly one of societies ‘ pariahs’ (investment banker) decided in 1990(aged twenty seven, I think) to open a book shop in central London. He opened not one but five. He loved books and he loved bookshops even more.

In 2011, the ailing High Street book shop chain Waterstones , on the verge of bankruptcy, was bought out by an investor who asked Daunt to be come MD. He took the chain from the verge of bankruptcy to a vibrant and highly profitable portfolio of over two hundred and ninety stores. Furthermore his methods are, I believe, worth considering by many multiple and independent retailers.

‘It was a strong culture, born of the [former owners] HMV and WH Smith mindset, and to my mind it was utterly bonkers,’ he says. ‘You were trying to run the same bookshop up and down the land; it was centralised. Coming in as an outsider, I thought, “How do you change that, and then change it without breaking it?”

These two former owners tell their own story ie one has gone bust and the other whilst profitable, it is with little thanks to their High Street stores . However that was part of the problem and he needed to change that.

‘I came from an independent bookseller in a world of chains, and I loathed chain retailing. I needed to survive as an independent in a Waterstones world. And you rely on quality and creating shops customers want to be in.’

Being a bit on the lazy I shall continue to quote Daunt himself . In this case it is not only easier but his words tell the story better than I can .

‘Staff are now in control of their own shops. Hopefully they’re enjoying their work more. They’re creating something very different in each store. We have a lot of different markets.’ In what way? ‘Much as Asda sells different things to Waitrose. If you pile up the latest celebrity thing in Hampstead for 1p, it ain’t going to sell. And if you pile up an esoteric history in Gateshead, it isn’t going to shift. We have different books on display in Harrogate than we do in Kensington, for blindingly obvious reasons. There’s a different economy outside London. In Middlesbrough half the high street is vacant and there isn’t a lot of money. It’s a town that’s in big trouble, but our shop has reinvented itself there; it’s got rocking horses and pretty much all day long pre-school kids are sploshing about with paint. It’s not the most profitable shop, but it’s got spirit.’

In the Kensington branch they sell a lot of Scrabble and Monopoly. In St Pancras it’s novellas that you might finish on your journey: ‘Those sell in huge quantities.’ In Trafalgar Square it’s Union Jacks; in Walthamstow, they shift ‘a ton’ of camera-lens mugs (left). Huh? ‘It’s a mug with a lens on it. We sell billions.’

 

He got rid of centralised buying and created regional buying which immediately reduced returns(unsold books are returned to publishers) from 25% to 4%. This lead to a huge reduction in shelf space not being taken up by product that was not selling .

A particular favourite of mine is that he stopped stores having tables at the front with ‘bestsellers’. An especially brave move as they accounted for the best part of £27 million in revenue. However, their bottom line contribution was minimal and ‘best sellers’ in any product category (apart, maybe, from food) is often a very artificial construct.

His view of Amazon is of interest and once again I shall use his own words …..he is talking specifically about Jeff Bezos…..

……..driving the most enormous beast of a company that is getting bigger and dominating the world. In that crude sense, it is extraordinarily impressive. Just unbelievable. The drive, the quest for perfection, the sheer audacity of it, the chutzpah.

He goes on to explain that whilst Amazon accounts for 30% of book sales in the U.K. they are not booksellers. They are, essentially, a platform for selling books to people who know what they want .

But, and there is a biggish ‘but’ ,can this be done with other retailers ? I think it can and what’s more , I think if High Street multiples are to survive they have got to embrace localisation. Or at very least create innovative and interesting environments that actually make the act of shopping pleasurable, informative ,interesting and above all profitable.Product areas such as food are more difficult, yet I have already posted about a small convenience store chain that started in the financial crisis and has developed into a highly successful chain by focusing on an extreme form of localisation.

James Daunt has succeeded in an era which is very hostile to the very existence of a ‘shop’. He has rejuvenated an ailing retailer in a period of financial instability and in-spite of the world’s newest and most potent online behemoth. I think the model is worth looking at , albeit will need adapting for different product areas.

He may not physically (there again he may for all I know) climb rocks however in terms of retailing, what he has achieved makes climbing Everest seem like a walk in the park.

Clicks opening bricks…..

Well known online brands are opening shops! Well at least they are in the USA. Most of us will be aware of Amazon’s grocery stores and their newly launched Book stores, and will not know of the likes of Fabletics, Bonobos and Warby & Parker, as they are American online retailers who have started opening stores within shopping malls as a way of developing their brands in a more cost effective way in the face of the extremely high costs that are associated with web site marketing.

Will it cross the Pond? I can’t see why not. I go further and say it is inevitable. Despite politicians constantly rabbiting on about Online operators not paying any taxes and having unfair advantages over High Street retailers, apart from a handful of giant operators, they are oblivious to extraordinarily high costs involved in getting to ‘market’ and worse still staying there.

What this illustrates is that consumers like going to shops . For the online retailer it gives them brand exposure at a lower cost , and ‘real’ contact with their customers. Whilst I suggest it is not scientific yet in their analysis, initial findings by the US retailers that have pursued this route are very positive. Those selling clothing have reduced their returns, increased their exposure and found unexpected benefits, such as customers coming into store ordering more that than would have done through the web site , because they have seen, touched and tried on product in addition to being delighted as they don’t have to cart the stuff home (apparently particularly true of men).

Recent news over the Christmas period of the failure of the likes of HMV,and the relative success of Next only go to reinforce this potential trend . Both retailers have ( or had as with HMV) stores and both have online operations . With HMV both were poor , as opposed to Next , who with long experience of ‘Distance Selling’ with their catalogue understand who their customer is, what they wanted and the way  they would buy it , sadly HMV didn’t. I digress slightly, but only slightly. I believe the Next is or about to change their free returns policy. If you want to return FOC, you have to take it back to a store. This not only reduces a cost but gets the consumer back into a store where they are more likely to make a further purchase.

Amazon(it’s that name again) have also announced that they are planning to open more food stores in the US. And this indirectly, is another reason why Etailers are having to look a different routes to market. Because the constantly increasing influence of Amazon, and many sellers who use Amazon as their main route to market are aware that they must be looking for additional solutions. And here is another frightening statistic 40% of new sellers on Amazon Europe are based in China (and Hong Kong) . source:ECommerce news Europe.

The image below is not great but the picture is clear (the blue portion is the Chinese share)

china_share_amazon_europe-740x207

What is also striking is the similarity in percentages.

So are clicks and bricks becoming one ? Not entirely but of all the Online operators I know there is not one that is not looking at different routes to market .They are all looking at improving and developing their own web sites but they are all aware of the huge costs involved and know that this is cannot be the only alternative.

Hackneyed a phrase it maybe, but all forms of retail are undergoing change at a rapid rate. Change is not new , in the 14th century there were nearly one hundred and forty shops on the original London Bridge and eight hundred years later not even the bridge exists. Which goes to show absolutely nothing, but I just like the fact ! I am not sure even the most knowledgeable of retail analysts or retailers themselves know how retail will develop in the next eight years let alone eight hundred. Yet , I am absolutely sure there will be ‘shops’ but perhaps not quite as we know them .

 

 

Choice…is too much?..too much of a problem?

choice

It is very difficult to talk about ‘choice’ without considering that there are large chunks of the world where people have little choice and  for the most part those people would welcome the problems that would come with ‘Choice’.

In the seventies the Band ‘Earth, Wind & Fire’ wrote the lyrics..

You got the freedom of choice
You got to hold on and speak with your voice
You got the freedom of choice
You got to hold on and speak with your voice

At that point in time we had three tv stations, various newspapers( actually loads of them) and the radio as our prime source of information (not forgetting the old geezer in the pub). Now we have less newspapers but countless tv outlets, vast numbers of digital and internet radio stations, web sites, apps and social media, email , text, Whatsapp , the geezer in the pub (invariably its a man)and many other variations too numerous to mention.

In the UK if we wanted eat in or out, there were Indian and chinese restaurants and takeaways , burger chains (Macdonald’s opened their first in 1974 and Pizza Hut in 1973) from there on the eating revolution exploded. In 2018 you can be faced with multi page menu’s containing a world cuisine starting with Chinese, through India to Italy, Britain, Turkey, Mexico and beyond (on one menu).

When it comes to shopping for anything, the choice is literally or as near as dammit endless. Type ‘Shirt’ into Ebay and you will get 25 million results. Anything can be bought from anywhere. In 1970 virtually nobody travelled to Asia( for a holiday). There was still a war in Vietnam and China was ruled by Mao Zedong. Now nearly seven million visit Vietnam every year and in China the figure is found about sixty million.

Yet does inexhaustible choice make life any better ? Choice is, without doubt good, but we are reaching the level of choice that starts to create problems. Today’s retailers or service providers face huge choice issues and they ain’t all good.

Pre-internet they were all faced with similar problems, but now they know their online competitors can offer a vastly greater choice and without necessarily carrying the stock. I am as guilty as the next person. If I was buying a shirt and went into a store and saw maybe a dozen different styles, I may have gone to one other store and seen another dozen, but now I won’t waste my time . I’ll go online and look at, maybe, several hundred….

Herein, lies another anathema. I have done this and then thought there is too much to look at, so delaying the purchase, completely. I am convinced that there are now many consumer purchases that are delayed or even nullified by being overwhelmed by choice. A recent conversation with someone who had returned from living in a somewhat less ‘sophisticated’ retail society , walked out of her local supermarket not buying anything as she was overwhelmed by too much choice.

How many of us go beyond the second or third page on Amazon or EBay? Yet many product searches will display twenty plus pages. How many of us go into a multi paged menu restaurant and just gaze at the pages ?Why do Apple launch three new phones that all do exactly the same thing except the basic expensive new one doesn’t quite take as good a photo as the next two even more expensive phones ? How many have walked into a coffee shop and left with their head spinning having been presented with thirty five variations of …Coffee ?

But it’s not about just buying stuff. It’s how we live . What job we choose, what we eat every day, how we communicate with each other, what faith (if any) we follow. How many kids we have . What school they go to. Where we live . Where we get our information from. Where do we go on holiday. How we travel . What we look like. What diet to follow. What exercise regime to follow. Which piece of latest medical research is correct. Even within our own society such choices are not available to many. Overall, I am not convinced that the explosion of choice is doing us any favours .

To paraphrase a Times journalist discussing his in ability to work out the number remotes he has to operate his tv, skybox, and internet..

The tyranny of choice, is just that ….when we had a limited choice of tv stations we all accepted what there was to watch….now there are thousands of options, we just complain there’s nothing to watch …

Ironically, the one area of choice that appears to be reducing is that of politics. In most democracies it would appear the choices are funnelled into a decreasing number of directions . Many are being left with little or no choice, as political offerings are generally pretty binary and offer little in the way of any sort of choice. Currently, in the U.K., it could be said there is no choice as nobody knows what any of them actually stands for.

It is easy for those of us with loads of choice to sit back and pontificate on how negative a plethora of choice is, whilst those , not so fortunate, would love to have the associated problems. However, it is as it is. And we need to take care with how we ‘choose our choices’ . ‘cos as with anything, too much is not always a good thing. Rather, it usually isn’t …a good thing.

The French have a saying

Trop de choix tue le choix”

Translating to Too much choice kills the choice

A man has free choice to the extent that he is rational.

Thomas Aquinas

Too much choice makes us irrational

Me

When you give people too many choices it makes them hesitate and not buy stuff.~ Guy Kawasaki-who was one  of the original senior marketing executives at Apple.

The freedom of choice is to be cherished. Yet with too much choice we have ensure it does not become less a freedom more a restriction .

Where’s Woolly ?

Print

Or rather where are the old  Woolworth stores now ? I try to avoid plagiarism (or at least most of the time) but I noticed a short article on the BBC web site that I felt was of interest and by copying pasting told a story without any unneccesary embellishments.

wooloworthsblog

It is sort of good news , in that we readily assume that when a chain such as Woolworths folds, it leaves big holes in the High Street. However , with the likes of BHS and the same will be true with the House of Fraser, there will be larger holes that will not be filled or unlikely to be filled with retailers. It does make you smile, when so-called retail analysts refer to the likes of Woolworths as being much ‘loved’. It’s because they weren’t much-loved that they failed.

I think that what it does illustrate is that Retail environments will continue to evolve. What we see today is very different to ten years ago, as it is was ten years before that and so on. My own little shopping parade of about twenty retail outlets (suburban London) , has gone from losing an original Sainsbury’s to now having a Sainburys local with a thirty-five year gap. The loss of a small department store over thirty years ago , eventually replaced with an electrical store, a beauty salon and a bank (the only bank after having had three).  The last five years having had a lean period where there have been failed restaurants, a closed post office , an iffy wine shop, to now having a very smart deli, two very succesful turkish restaurants, and quite possibly a M&S foodhall.

It’s a bit like the extreme electrical storms that hit the African bush and create huge wild fires. It burns off the old scrub and allows for new growth. Regrettably, our storms, whilst not electric, are rather longer lasting , and do not have the benefit of new growth created by nature. Nonetheless, change happens and there will always be casualties. It is the ability to foresee those changes, adapt and work with the opportunities those changes create. Easier said than done? Sure, but I don’t think you’ll find any successful retailers, in the entire history of ‘shops’ that would say it had been easy .

Brexit Update….(perhaps most overused title in the U.K. media )

Firstly, let me repeat that I am a remainer, who voted remain, accepted the result and just wants to move on.

Secondly, I have said before that there is really no such thing as a Brexit update as it meaningless and still nobody has a clue . I would go further and say, that with every day that passes everyone has even less of a clue.

Thirdly, it’s my version of an ‘update’ relating to a particular situation that is determinable (as determined by me).

Over the last twelve months various customers have said that Brexit had effected spending within their stores. For a while I doubted this , feeling that there were other factor’s in play. However, recent discussions with various retailers , there has been a common thread, paraphrased as follows …

Many of my customers that come into my store,have said that due to their concerns about Brexit, they are not going to spend as much…

So there you go, it’s not scientific, but is being repeated too often to be ignored . My Brexit update is that it is effecting consumer spending, or at very least , with my customers.

That’s it , short, concise and to the point. Factors that do not apply to anything else connected to ‘Brexit ‘. Gotta to be a first.

Sorry , one last thing, an itch I have wanted to scratch for the last twenty four hours. Perhaps the most brilliant and innovative political thought that has occurred since the Greeks came up the idea of Democracy . Bozzo’s idea of a Minister of ‘a no deal Brexit ‘.

When someone is appointed as a Minister, they may have an interest but little knowledge about the area over which they preside. The Minister is able to function (?) because they are supported by a group of civil servants , who have some experience and a level of knowledge . So ‘Mop Head’ is proposing a Ministry , where not only will the Minister have no idea is happening, nor will the civil servants. Then, they can issue daily updates on how nobody knows anything about anything to people who already know they don’t know, so everybody can be as unprepared as everyone else. Brilliant and flawless!

Tears for Sears !

sears21

Whenever major commercial organisations collapse, those that suffer the most are, invariably, those that can least afford it, the majority of its employees. In 2005, through a merger with Kmart, there were 3500 stores. When it filed for bankruptcy several days ago it was down to under 900. Another retailer collapses only to illustrate that the problem is not confined to the U.K. High Street.

Galeria Kaufhof, is a German chain of mid market department stores. There were over one hundred stores in the chain . In 2015 it was purchased by the Canadian organisation ‘The Hudson Bay Co ‘. In September of 2018 , it merged with Karstadt another German mid market department store. Immediately, five thousand employees lost their jobs. Why has this happened? For very similar reasons to that of Sears in the USA and House of Fraser in the U.K.

What are these reasons ? Senior management of all of these organisations lays the blame fair and squarely on the changing habits of the consumer and the increasing level of purchasing from online operators.

I believe that hides an underlying laziness and negligence on behalf of these organisation’s senior executives. I am quietly confident that they were well rewarded through the good and not so good years and the consequences of their actions (or inaction) is rather less than those on the shop floor.

Whilst online competition, increasing costs, and a changing consumer, undoubtedly, has an impact , the question has to be asked ‘what is the purpose of a department store ?’.

The simple answer would probably be they offer a variety of product and brands all under one roof. Yes they do. However,  the variety and the extent of each brand’s range is very generally very limited. And what does today’s consumer want ‘ Choice ‘ .

Could the executives of these organisations have done anything about it?

Sears

It beggars the question as to what the Directors of both Kmart and Sears were thinking back in 2005. The former was a chain of discount stores and Sears a mid market department store. It’s a bit like merging John Lewis and Lidl. It just didn’t make sense. The merger meant an immediate loss of jobs and the consequences are even more job losses.

Kaufhof & Karstadt

This all makes a little more sense , they are similar operations and a lot of synergies, but the question has to be asked , if Department store Shopping is falling out of fashion in Germany, why do two mid-sized chain think they will be anymore successful as a giant chain? Karstadt was bought out of insolvency in 2009 and Kaufhof were saved by HBC (Hudson Bay-who in turn are owned by Metro AG).

House of Fraser et al

By ‘et al’ I mean the likes of Debenhams, John Lewis is a little different even though it has not had a good financial start to the year. Debenhams has just announced nearly half a billion in losses and plans to close fifty stores over the next three to five years. The question facing both the House of Fraser and Debenhams, is are they wanted by the consumer and what have the boards of both companies been planning over the last ten years. Initially, it seemed that opening more stores was the option of choice. But I wonder whether these were project vanity or project growth . Many of the stores of both chains looked like they had not had a lick of paint since the millennium. In my opinion they sought growth above investment within their existing estate. Perhaps, what is more to the point is that over recent years they have both undergone various management changes , ensuring lack of continuity or long-term planning , but no lack of senior executives with ever-growing bank accounts.

The over arching question is there a future for this type of store ? I think the reality is with the exception of a few speciality aspirational stores like Harrods and Selfridge in the UK and maybe Neiman Marcus and Macy’s in the US, not really. They try to sell lots of product, but with not with any range or any level of service and invariably not especially competitive. Could the management have done anything to change this , in my opinion ‘yes’ . But it should have been done ages ago. Instead of constantly look for growth through more stores, they could have invested in a far smaller number of existing  stores making them special places to shop, a truly destination store, a place to spend time and money and have an ‘experience’ , not just a big place selling the  same as everyone else. They should have invested in staff and staff training and finally invested heavily in their  online offering, which is generally poor and too late.

Apart from the loss of jobs by employees and creditors , the biggest effect of these type of store closures is the impact they have on local independents. Despite the drop in footfall in the likes of House of Fraser they still bring shoppers into that High Street or shopping centre.  When they are gone it frequently leaves a gaping hole and the remaining independents are made to struggle even more . There are, also, quite literally structural problems as ween a Department closes down the property stays idle for a long time. They are large, usually over more than one floor and because of the layout cost an arm and a leg to reconstruct so that it can be re-let.

Retailing ain’t easy, never has been, never will be . The old cliché is that if it was that easy everyone would be doing. I, sort, of think that is what happened in the early 2000’s . Loads of big retailers thought they could make money just by opening new stores. They were wrong but those who made those decisions generally did not pay the price…..

any amount of political meddling, central or local,whatever form of taxation , no matter how well intended will not have had any impact upon these retailers past present our future. Much of what has happened has been down to poor and short-sighted management . I repeat a figure I posted a few weeks ago…Amazon’s budget for R&D for 2019 is well over £20 billion. I am not sure whether any of the above have had a R&D budget of any amount in any year !

 

 

 

 

Master plan to revive the High street!

Politicians of all shapes and sizes ,in most democracies, are hypocritical, back stabbing, truth bending , vain egotists. As much of my political information comes , in some form or other , via those sources and I really don’t think my political opinion is worth diddly squat. However , I was somewhat taken aback the UK’s ‘esteemed’ labour party on their recent five point policy  announcement on restoring the High Street. Point by point:

  1. Free pass passes for the under 25’s. Wow, that’s a cracker. Here’s a scenario

Hi Guys, how’s about this for an idea now we have free Bus passes ? Before we go clubbing on Saturday night, we all shoot down to the High Street (‘what’s that’ is the cry?) and whip into the Co-op for little snacks and then off to WH Smith, to buy a couple of magazines (What are they? someone whispers at the back of the group) . Oh and maybe get a bottle of pop! (‘Amaze balls’ they all scream!)

2. Free wi-fi on the High Street.  Would be really good if you ignore that virtually every cafe now has wi-fi as have the majority of high street multiples. I suppose if the plan is to get the youth to congregate in former wifi black spots away from the shops then there might be a point as they could all gather in a dark alley and download porn together (ps. A lot of high streets have street Wi-fi and it makes absolutely no difference – not to porn loading, that I know of, but the number of people visiting.)

3. Ban ATM charges , Bank & Post Office closures. Perhaps not a bad idea if it was done five years ago. And how would they propose that they legislate that a private organisation such as a bank has to have a branch in a certain location and which bank would be in which town . What is the definition of a High Street ? Do they all have to be in all towns ? What if your bank is not represented ? Scenario 2. Banning ATM charges, great idea except there will be less of them and with the continued decline in the use of cash, unlikely to be a winner.

Elsie, there’s a new post office opened up in the High Street shall we go there to collect our pensions (yes I know that doesn’t happen more !) shall we get the mobility out and pop down collect our cash then spend it on some new clothes from that Countryside Clothing Store.

Nah, George, that closed last year and anyway the range was old-fashioned and didn’t change much . And its raining! Sod ’em , I’ll get what I want from Amazon….

4. Registry  of landlords. This is working on the assumption that High Street  landlords are trying to hide the properties they have to let. Methinks they probably would like to let them. And me also thinks that if you want to lease a shop you might have an idea where to start looking . If you don’t you ain’t going to make it as a retailer .

5. Business rates. A good idea !! Not the rates but getting them lowered .

So I suppose one out of five is a start but not an auspicious one. Maybe its ‘blue sky’ thinking and not understanding that most of the time the U.K. doesn’t have blue skies. Oh, sorry can’t be blue must be red . That’s even less auspicious if we are thinking morning is when shops open . The really unfortunate thing is that if this is the best her majesty’s opposition can come up with, then retailers are going to have to continue to rely on their own wit, as no politician has come up with any response to the problem that is remotely helpful .

I would go further and suggest that part of the problem with the High Street is that politicians of every variety , both local and central have a lot to answer for over a number of decades. Piss poor planning, seduced by major operators allowing land banking by the ‘biggies’ to stop competition, ill thought out parking schemes, and a total lack of understanding to the locals needs as opposed what incoming developers, with fat wallets, think they need.

Politically, it has to be think ‘Local’. Central Government will always have a role to play but the real answers will have to come from Local Authorities and even then it has to be micro managed. Cardiff is not the same as Caerphilly, Coventry is not the same as Whitley, Carlisle is not the same as Dalston, Chelmsford is not the same as Maldon. Each pair of towns share a metropolitan authority which makes decisions based on the seat of the local government. It, rarely, takes notice of the smaller urban locations within its remit and invariably ignores their specific needs. Regrettably, I think this is a bit ‘pie in the sky’. Yet with the rapid change that’s occurring Local authorities have got to get to grips with what’s going on. Central Government can have an influence but whatever it does will only ever be broad-based. That will never be enough to rejuvenate the thousands of High streets that are at risk.

So here’s some simple suggestions….

1. Local (and that means very local) must talk to, but above all, listen to their good local independents and potential entrepreneurs

2. Good local independents & potential entrepreneurs must insist on talking to their local authorities.

3. Central Government, apart from broad intelligent policy and a favourable taxation climate steer clear.

Fat chance of any of this happening. Nottinghamshire Council has just announced plans to develop a ‘super council’. Super doesn’t mean ‘great’ , it means ‘giant’. They want to scrap district and borough councils .

Politicians , rarely, have any good ideas. They ,never, have any great ideas.

So, Retailers don’t rely on a politician coming to your rescue anytime soon.

Jack and Jeff….2 new guys with new ideas on the High Street ?

See the source image

Jack and Jeff, Jeff and Jack , whatever, they are not really new, actually one is quite old and dead the other not so old and nowhere near dead. Jack is the new Tesco discount chain, named after its founder Jack Cohen and Jeff is none other than Jeff Bezos, the richest man in the world (in cash terms anyway , but whose counting ?). What is new are their plans for the future.

The latter has announced the possibility of opening 3000 cashier free stores by 2021. The concept is not new for Amazon has they opened their first Amazon Go store in January of this year. If this comes to pass its impact (USA only to start) will have as big if not bigger impact on US retailing as Amazon online. Bricks and mortar Stores are not new to them, as they currently have 500 Whole Food stores and 20 Amazon Book stores.

To quote…..

This move would be both astonishing in its effects on communities and potentially a neutron bomb to everything from existing convenience chains like 7-Eleven to quick-service food stores like Subway and even entrepreneur-owned restaurants and taco trucks.

Digital Trends

and in context (within the USA)

Opening 3,000 stores of any model would put Amazon head to head with some of the largest brands in the world. By comparison, Kroger operates about 2,500 stores under a variety of brands that generate sales of over $100 billion. There are a little over 3,500 Walmart locations but they’re mostly located in suburbs, away from the dense urban areas and affluent customers that Amazon is targeting with Amazon Go.

The impact goes way beyond other retailers, it will impact socially, in terms of both consumer behaviour and future retail employment such as eliminating a whole sector of workers within every store eg cashiers. If there are any chinks of light , the concept will be focused on urban centres and it illustrates the Bricks and mortar store is not going away soon, albeit it may look a little different.

Back to dead old Jack and the UK. Jack Cohen and his baby Tesco, could be seen to be , or rather was most probably the biggest retail innovator in the UK ,of his time. He learnt much about a supermarket concept, from visiting self-service stores in the US. Over recent years the chain has suffered both sales and profits from the grocery discounters. Strangely Aldi and Lidl were not the first in the UK as in 1957 Kwik Save was founded and was very succesful during the seventies and eighties but went pop in 2007. Yet as they disappeared so came the Continentals and carved themselves a healthy piece of the pie. Jacks is apparently the answer.

It maybe, but I am not so sure .Rather, let me qualify that. Jack’s may serve as a succesful defensive tactic but it is hardly revolutionary and may  only divert some business away from the mother ship.  Not having been in one yet(Jacks that is not a mother ship, though I can lay claim to having been in a Tesco’s once or twice ) the images suggest a discount store, as it should, but the consumer will  also see it as Discount store that belongs to Tesco.  I am not sure this a very innovative approach from our leading High street retailer ,partcularly when the Retail High Street is facing a rapidly changing future. If I were to compare the two approaches , Jeff is looking to build Retail space stations and Jack’s (aka Tesco) is to stride into the future based  on the founder’s original concept of a permanent market stall.

Jacks idea of the future  ??

Or Jeffs ??

Image result for amazon cashierless store

Whilst Amazon looks globally, Tesco focuses on its home territory, at least recently as it has had to hold back on its global ambitions not achieving the success it craved . Therein, lies part of the problem with Jacks. I see a twofold problem facing many retailers both big and small.

1. The online operators are seen as alternative retailers. Of course, on one level they are. Yet many especially the likes of Amazon are not just retailers. Retailing is just one aspect of their model. They are at worst disrupters, at best enablers. By disrupting they have completely caught major retailers napping, and they really don’t know how to respond. By enabling they have created many entrepreneurs to create businesses and consequent wealth by using the structures and facilities that have been created by the likes of Amazon. It is a much more complex model than that of a retailer, but I will probably come back to that at a later date. What is relevant is that traditional Retailers only seem to know how to respond with traditional retail techniques, which to me seems like building straw sea walls.

2. Being big and thinking small, can at times, within retail, can be a virtue. By that I mean big is not always beautiful. But being big and thinking small , in a parochial fashion , is a retailing vice. It leans towards being reactive rather than proactive. In this situation it is Tesco reacting to the offensive by discounters by opening discount shops . It may work in the short term but it is not a long term answer. It is most definitely not a vision of the future (retailing future, that is ).

Where would I put my money. Well, let’s put it this way , if Jack was alive today , apart from seeing his name on the door , I don’t think he would be over impressed with what was behind the door. I suspect he would be thinking “is that the best they could come up with…”

Stick Vat up on online operators….that’ll sort the High Street….Not!

A report has just been published suggesting that the government should raise VAT to 22.5% for online sales and 15% for High Street retailers. The author of said report is a company called Collier International. For those who don’t know who they are , and I didn’t, they are a very large Canadian Real Estate company with property interests worldwide including the U.K. where they are especially prominent in shopping centres. Well no surprise there then. Another report suggests a 1% online tax would generate £5 billion which would enable a 17.5% decrease in business rates. All this and much more besides would even up the playing field. No it wouldn’t. They all miss the point and don’t seem to understand the basic mechanics of what is actually happening out there.

Let’s first of all put aside Amazon. It’s difficult because of their impact but we all know they are big enough and smart enough to tackle any reasonable obstacles that come their way. Incidentally, they are budgeting £26 billion for R&D in 2019 .Many multiple retailers don’t even have a budget for research.

There is a huge assumption that online operators succeed because they have the advantage of lower costs of operation. Well if they are operating from their bedroom they might. Every other operator tells a very different story. I speak to some  form of online operation most days. So I think I get a broad view of what the issues facing them are .

First of let’s look at what they don’t have…loads of costly leases. As they don’t have several trading locations, neither do they tend to have crippling business rates associated with multiple outlets. Because they, generally,don’t have a shop or shops, they don’t have a building shouting their name to their potential customers 24/7/365 . They constantly have to pay(in various ways) to ensure their brand is consistently uppermost in the mind of  their targeted consumer. This cost alone, to the small and medium size operator can be crippling on its own.

What they do have are large costly warehouses, huge stock holdings, constant pressure to keep their IT systems up to date, aggressive pricing pressures, sometimes this is quite literally minute by minute, shipping costs, much higher rates of returns , the continuous drive for even more rapid deliveries and free deliveries. Unless they are working from the bedroom , they have business rates just like anyone else. Few operators make little or no profit in their early years as they have re-invest  to survive .

Politicians, advisors and research bodies seem to rarely pay heed to the results from unintended consequences. If the Government were to heed the advice of Collier International and the policy did indeed re-invigorate the High Street, then more product would be purchased at 15% than at 22.5% or even 20% creating a vast revenue shortfall for the Treasury. Anyway it wouldn’t have the desired effect and it would only make matters worse for all forms of Retailer as well as the Treasury.

Furthermore it is  a discriminatory policy as there are now sectors of society who rely on online purchases. Those living in remote rural areas, the disabled , especially those with mobility issues. Just because a consumer wants to buy a product that shops don’t want to stock should they be penalised with a VAT rate increase? If a consumer buys a product through a High Street Retailers web site and collects it in the store, which rate of VAT would be charged?  The idea is completely bonkers but more importantly misses the point.

On  a micro level business rates need to be reformed and  local bureaucracy needs to be challenged . At the macro level Government(s) need to reassess major organisations ability to legally avoid fair and equitable taxation . Not just the Giants , such as Apple and Amazon, there are those a lot closer to home who seem to escape the Taxation limelight ( the likes of Phillip Green . the Barclay Brothers and the Richard Bransons of this world -my pet tax avoiding dislikes amongst many others within the UK).

The point they seem to be missing is that the Retail landscape is and will continue to change . You can’t nudge it backwards. That benefits no one. Imaginative policy and structures have to be created to accommodate change and not rail against it. The High Street will always  change . Unfortunately, there will be those who suffer but that has never been any different from the advent of the first Supermarket chain, the first shopping centre and shopping malls, the introduction of mail order shopping and even something more structurally basic as when the newspaper industry decided to supply Supermarkets and the consequent closure of many High Street newsagents. I did not see any Government intervention then. Yet I fail to see any overall strategy and understanding as to what has been going on for donkeys years, apart from knee jerk reactions that invariably make the problem worse.

 

Is this the future of Shopping Centres ?

The High Street maybe dying, Shopping Centres struggling but there others who think differently. And thinking differently being the operative phrase.

Emaar Properties and Dubai Holdings have announced plans for an 8 million square foot of leasable Retail space in none other than Dubai. It will be the largest retail complex in the world . Much of it will be ‘Dubai’ like with water parks, ski slopes and artificial moon landings (joke) , theatres, and numerous entertainment centres. It is, however, the technological retail dimension that I believe could have a bigger impact on shopping centres worldwide.

The plan is to develop the retail environment using very cutting edge technology, including radio frequency identification (for checkouts), specifically designed apps, latest bar code scanning techniques, ability to purchase through desktop pc’s , mobiles and run of the mill checkouts.

Do I think this will be emulated in the U.K.? Do I think the Metro centre and Meadowhall in Sheffield are going to reinvent themselves and suddenly deter tourists from flocking to the Middle East ? No, ‘cos Sheffield and Gateshead ain’t figured out the sun and sand bit yet. However, much like the High Street but for slightly different reasons Shopping Centres will have to reinvent themselves.

There are signs that this has started to happen, as many have cinemas, numerous restaurants and in some cases casinos and hotels. Yet, I don’t think this is enough and the developers will have to be a lot more inventive to curb the current decline. As Department Stores are closing down at a rapid rate , the Centres are loosing their corner stones. For many years the attraction for many retailers looking to lease in a shopping centre is who are the anchors eg John Lewis, Debenhams,House of Fraser etc. much of the problem with shoppping centres is they have often been a reflection of a Department store trying to be many things to many people and in the end not really offering anything that anyone wants.

Shopping centres face further challenges to that of the High Street. The issue of high rents is, as I understand, underpinned by the Landlord and its investors. The financing of the Centre is based on the rent returns based on historic high values. Until this changes there is going to be no reapraisal of rentals anytime soon. Consequently they are going to have look at what they offer . For the foreseeable future there are not going to be more Retail stores, or certainly not in their current format. Hence they will need to attract new revenue streams from the entertainment and leisure markets.

There is, currently, one example in the U.K. which maybe gives a hint of what is to come . I am not sure they have got the mix right plus it is a bit of bolt on job to existing facilities but at the NEC near Birmingham, you,now, have an exhibition centre, entertainment centre , retail shopping centre, casino and this year Merlin entertainments have added the Bear Grylls adventure park. Because of its bolt on , ad hoc development nature of the NEC, it is all a bit higgledy piggedly. But nevertheless, it is an interesting direction of travel.

Another issue they face is that there is a fundamental structural problem, which is, perhaps a far bigger wall to climb, and that is their Structure. They are huge great monolithic beasts. It is like turning an oil tanker on a ‘sixpence’ (look it up if you don’t know what that is- and shame on you). In their present format there is little that could be done to adapt them for the next thirty years apart from knocking them down. In a way they are much like their historic cornerstones, the Department Store. They tried to be all things to all people and for a long time and whilst there was no alternative it worked. The alternatives are here and they are beginning to not work (Shopping Centres that is). Or certainly not as much the owners would like.

It maybe that some will be completely redeveloped. It is more likely that they will have to be more like the Dubai model. They will have to be cutting edge in terms of the experiences they offer and far more in tune with tomorrow’s retailers. Currently they can do neither. Redevelopment alone will be not enough for most . If the Meadowhall’s and Metro Centres of the future are to be successful and last another thirty plus years they will have to be completely rethought

If zip lining from the car park to Primark, having your purchases delivered to your home on your return, dining at a vast variety of international cuisine, losing fifty quid at the black jack tables , followed by a virtual concert of Elvis Presley, Aretha Franklin and David Bowie and returned via a completely dry water Shute to your electric auto thing, does not float your boat. Then you’ll probably have to stick with shopping at your local Amazon store.