Is the monster on the move …..?

It is very difficult to write about anything to do with Retail without constantly mentioning Amazon. I cannot think of any other phenomena in modern retailing history that has such an impact worldwide.

In my last last post I mentioned that an approach by Amazon had been rebuffed by Waitrose in the U.K. This weeks rumours suggest they maybe looking at Asos and Ocado. They have the resource and they have the motivation .

Whilst most of us are quick to condemn there are some positives attributable to its existence. For starters they have created thousands of wealthy independent entrepreneurs by dint of the marketplace . I can think of no other retailer (with the exception of the likes of eBay and quite possibly Alibaba) that has been a wealth creator for third parties.

It has shaken up the traditional mega retailers, in a way that none of them expected. They have put the consumer at the forefront of their model, offering convenience, breadth of range, access to much product that was only available to a few, highly competitive pricing and above all extraordinary levels of service . All of which has led to a level of consumer confidence that I believe is unprecedented with any other retailer. The opening of a world market to small traders who would not been able to previously, penetrate.

That’s the upside. Amongst its many vices(? What is a vice to one is a virtue to another) have been the enormous turmoil created within retail markets. The likelihood that it has created a net loss of jobs (almost certainly within the retail sector) . The enormous pressure it has put on margins. The enabling of dodgy dealings ( the ease of selling counterfeit product, or less poor quality product). Despite Amazon’s attempts at reducing ‘dodgy dealings’ it is not difficult such product on a daily basis.

As to the future , there will always(well for some time anyway) be an ‘Amazon ‘ or it’s like. We have to live with it and adapt. The difference is that as it was the small retailer being hit hardest it is now the biggies who are most concerned.

Ocado recent success in the USA with it its tie up with Kroger (the world’s third largest retailer) only makes an approach by Amazon more likely. It has the war chest, it has the motivation, and the wherewithal. It may not be Ocado, but I am quite certain their next acquisition will make the major retailers wonder that they have got to do next to defend their status quo , let alone grow and develop.

It is a strange beast that attracts our consumerist psyche yet strikes fear into our commercial psyche. I suppose we can look back at previous monsters …..dragons, King Kong, Frankenstein, orcs et al…..we tend to get the better of them eventually. Meanwhile it is on the move and there will be more casualties before someone in shining armour comes riding in cuts its head off and saves us all, or more likely just creates an alternative.

Shop a lot…or Shop not ?

There are big issues facing our retail High Street. Yet they are not as simple and as straightforward as our much beloved media would have us believe. Should the list of retailers facing closure include the likes of Next, Tesco, John Lewis, as opposed to the likes of Toys r Us and Maplins then there would be greater cause for concern. There is no doubt that even the former are facing tough challenges, loads of people still shop there, spend loads of dough and they make profits.

One of my customers who has outlets in Meadowhall, Sheffield, White Rose, Leeds and the Metro Centre, Gateshead, was recently told by Centre management that there had been a drop in flow of approximately 15%. This could, of course, mean either a drop in the number of visitors or a reduction in the frequency of repeat visits. The biggest fall has been the fall in the number visiting during the evenings. Something that is of much greater relevance to shopping centres as opposed to High Streets. I suspect that among the many possible causes for this drop , this suggests is that the idea of spending an evening wandering around a shopping centre is losing its allure.

I have long been under the impression, for such a small geographical country, that we have long been over represented by retail outlets . There are close to 290,000 retail outlets within the U.K, which equates to one retail outlet for every two hundred people, and there are approximately 2.8 million(nearly 10% of employment) employed within the sector. A crude measurement yet nevertheless gives some form of perspective . As does retail spending which is approximately £360 billion , or nearly twice the spend on healthcare. Even with the present retail closures retail spending since January 2017 has not actually dropped. This chart does include fuel but the only month where there was zero growth was October.

For too many years many of the multiples sought growth through store openings, as opposed to innovation, better offerings and improved experiences. Independents have suffered because of multiples, poor local planning, and lack of investment. Both are suffering from a drop in footfall and lower basket values increasing the cost to serve and reducing margin.

Without wanting to repeat previous posts and stating the blinding obvious, online has had a huge impact but it is not the whole story. Waterstones , the booksellers, one of the first retailer to feel the impact of the likes of Amazon , was on the verge of closure in 2011. Yet they have just posted healthy profits.

The latest twist is the planned merger of Sainsbury’s & Asda. Initially, This was a real surprise but after a bit of thought , it made a lot of sense. There has been some slightly daft comments from some parts of the media about taking on the likes of Tesco, as if they haven’t had their own travails. With Sainsbury’s Argos operations it is much more of an opportunity to expand this in Asda and compete in the future with the likes of Amazon , who are becoming increasingly interested in bricks and mortar stores and food. So much so that it now transpired that at the back end of 2017 that they (Amazon) approached the board of John Lewis with a view to buying Waitrose ! According to the JL board they flatly refused any talks. Whatever was said the signs are there.

High Street retailing is undergoing a massive transformation there are undoubtedly going to be winners and losers. Those at the top rarely loose, those at the bottom ie employees, invariably do. As to what happens will depend upon two components . The entrepreneurial retailer and the consumer. There are retailers,who are creating new and exciting retail outlets , but the U.K. total will continue to decline . That is a given. The other component is the consumer. If the consumer wants to continue to ‘go shopping’ as opposed to ‘surfing for their shopping’, they will have to keep shopping a lot….and stop bemoaning the closure of their local retailer which they like being on there on their High Street , but never go in. Retailers have to attract and consumers be attracted.