How Green is the Retail Valley?

I have previously described my dislike for Philip Green, and I have also used the image of the valley above, but I have never combined the two until now. The result is not the finest piece of digital manipulation but neither is the subject matter. A fine bit of digital manipulation, that is.


There is a lot PG has to answer for the problems facing the Arcadia group, but there are other factors that are also affecting other major High Street multiple retailers here and abroad. The internet is one of course, but much has been said about that already . Rents, a singularly U.K. problem is common to both small and big retailers. I believe that the biggies actually have a bigger problem and a lot to answer for .They are part of the problem. If they had not been happy to pay the huge figures involved, during a more buoyant retail environment, and I suspect they were very happy, they would not have created a huge rod for their own back and that of their smaller colleagues. They knew how the landlords borrowing models were constructed and by subconsciously (maybe) funding this model they knew that it would be very difficult to reverse . The consequences have come home to roost.


Debt is how markets work. Without debt, the banking sector, would not exist . No banks no debt, no debt no business. Yet debt is good, bad, bad, good, good, bad there are no half measures. In my opinion it is was what an organisation does with its borrowings. Bad debt is another problem facing many of the big players. Some may say Arcadia’s problems have come about because of the way it has used its debt . That is to say huge dividend payments to the Green family, instead going to a major future investment programme ( ignoring any pension deficits) has left the group struggling. Another different example is that of Boots. They are having a tough time , the entire estate needs a massive investment in virtually every outlet because to me, they look tired and out of date. Yet part of the purchase of Boots by the giant American Walgreen saddled it with an additional £1 billion of debt. Now Boots having tough time, tired old shops, all it can do in the immediate future is close a load down especially where there are two or three in one town. What was that all about. The list is virtually endless Debenhams, House of Fraser and many others laden with debt, and the need to reinvent themselves without the means to do so.

Big Ships

For many years, multiple retailers seemed to think that the way of continuing success was to just open more stores without looking at why was that necessarily the right thing to do. When the sea got a bit rough they found that they did have the resources nor the time to turn these giant ships around before crashing into the rocks. Not only was and is there the question of long expensive leases but the huge costs in redeveloping the stores. The constant quest for ‘world’ or in this case U.K. dominance is more often than not, a cause for eventual failings within the retailers business model . We only have to look at Marks and Spencer’s and Tesco’s as perfect examples. Ironically both organisations sought to expand overseas which was when the problems in the U.K. started to come home to roost .They are not, of course, complete failures but they were both the ‘darlings’ of the High Street both now facing major structural issues. The biggest of ships have to go into dry dock for renovations, there is no dry dock for retailers they have to carry on trading . At the same time they seem to not look at what is going on over their shoulders until it is too late.

The Internet , debt, big ships and rents

I said I would not go over old ground. So I will . The retailer cannot keep complaining about the internet. It has been there long enough . Best part of twenty years, if not a bit longer and it accounts for approximately 20% of total sales . Of course, if you take 20% off any one business it is a huge chunk . Yet there are still many successful High Street multiples eg Next, Uniqlo, Zara, Lidl, Aldi, JD Sports, Dunelm, The Entertainer (toys), and Lush. And the common factors are that they have rents to pay, business rates to pay and there is online competition. As to their debt levels this is slightly more complicated . For example JD Sports has increased theirs over the last 12 months and Dunelm has decreased. But both are considered to be in safe parameters as they generate plenty of cash to cover their relevant ratios. But they are succeeding within the same markets as those who are not. Which is how it has always been.

There was and is a danger of this becoming a bit wordy, convoluted and lacking in detail . Yet I am constantly frustrated at large retailers looking for excuses, when often the reasons are right in front of them, particularly when looking into a mirror. Moreover, their own mistakes, lack of foresight or commercial vanity impact on the small independents. I am not a financial analyst nor am I retail expert but as an interested observer I believe there are certain common factors that make a lot of valleys unsuitable to ‘greening up’ and in this case I mean that in a sense relating to green shoots et al, rather than a particular person who at one stage was hailed as the messiah of entrepreneurial retailing. The really unfortunate feature of this, is that those at the top of these valleys never suffer, at least not financially . Those at the bottom(employees and suppliers) invariably always do.

Lookalikey or knockoffs?

Julia will prostitute her pride for the sake of cheap gin. Yet her home diffuser of choice is set on the other end of the scale being that of Jo Malone. Or so I thought .

On my fortnightly trip down to our local Aldi, to fill up the back of our car with cheap gin, a new item has been added to my Aldi shopping list , no 1, or if out of stock a number 3. So what may these be ? I think a picture tells a thousand stories, but in this case you need just two pictures….

nuff’ said. Nah, think it deserves another two…

I have got to say when the option is …£3.99 or £62.00 , the word option goes out the window. Now I am sure Jo Malone is not that fussed as she carted away her millions, when Estée Lauder bought the company twenty years ago. But Estée maybe.

So what is this ? A knockoff ? A copy ? A counterfeit ? Or just a plain and simple lookalikey. The only definite, is that it isn’t a counterfeit. Or at least I think it isn’t. So how are the rest defined and what if any are the consequences ? I need to be clear that there is a difference in the product . The Aldi version is smaller and carries less liquid scent. It probably doesn’t last quite as long, although we haven’t tested it . But the difference is not a factor of fifteen. Oh yes, the Jo Malone stores are a tad swisher and in more salubrious locations. So maybe we are now up-to fifteen quid RSP. Yep there are development and marketing costs . So maybe at a push another tenner. Now we are at £24. Of course , you are buying into a lifestyle that adds £0 . Still £24. The much higher retail attracts a much higher cash value of vat (at £3.99 inc £0.67 vat , £62 inc £10.33 vat) . Hurrah ! at last a winner….for the exchequer!

The law being doing its usual ‘ as clear as mud impersonation ‘ I don’t know what really defines ‘counterfeit’. One key aspect is the branding or rather brand name, and of course the products above make no reference to the brand name. Seemingly clever stuff. Yet I have some sympathy with the brand. Jo Malone/Estée Lauder will have spent trolley loads of cash developing the product, marketing the brand and maintaining its awareness with their targeted consumer. Aldi pop along with no added costs apart from the product cost and reap the benefits.

Aldi seem to have a bit of a ‘lookalikey’ history . The image below is one of many that suggests that the product development at Aldi is very fond of major brand packaging design (Lidl is not that far behind) or rather that of other major brands

Courtesy of Dean Williams – print to print blog, April 2015.

Dean continues in the blog…

so how have they been allowed to get away with blatant copycat packaging without being sued.?

Intellectual property partner Jeremy Hertzog, of law firm Mishcon de Reya, says: ‘Brands are cautious about taking legal action in situations like this.

The brand would need to prove that the copycat product is deliberately out to confuse the buyer into believing that the similar-looking product is actually connected economically to the original in some way.’

Well blow me down with a pigeons feather. If they are not deliberately out to deceive then if you pick up a bottle of Magnum in Aldi don’t expect it to taste of ice cream.

Within our own market , as with others, we are plagued by ‘fakes’. If major High Street chains are able to get way this practice, and continue they will continue, unless the consumer stops buying them, then we shall all carry on knocking our heads against the proverbial.

Some suppliers have tried their day in court, and some who can’t afford a long legal battle, have protested to no avail . So it is unlikely to stop.

Will I stop filling the spare space in my car with lookalikey smellys ? No, because we save fifty eights squids and more importantly it is legal , at the moment. I comfort my conscience, by thinking we still buy the odd Jo Malone, or rather our daughter does for a pressie on mother’s day.

I would also like to add Julia has forbidden me to prostitute myself in anyway unless it was to accrue considerable revenues, enabling us not to have to visit Aldi anymore for cheap gin et al… So pretty safe ground there .

It’s all a bed of a roses..


Politicians, journalists, independent and multi national retailers suggest believe that is how commercial life is for online operators( image of a sunlight over a green valley, seemed to be somewhat more positive than the images I could find for ‘beds of roses’ they all looked rather funereal) Stick it up on the web and it sells , piece of p……for them, what chance have us High Street retailers got…Special online taxes, a more level playing field are a couple of the more lurid suggestions.

It’s a bit rich coming from retail multiples especially the supermarket chains, who had an equally devastating impact upon the High Street, during the sixties and seventies. Some would argue that their impact was quicker and more devastating . Especially as the demise of the High Street was a direct consequence of their actions, rather than online purchasing being only one of a number of factors having a negative effect .

I approached this subject back in December ’17. Whilst the problems facing online operators that were around then, still exist, there are bigger problems today.

One of those problems, whilst mainly effecting clothing and shoes is consumer expectations. Or rather how the consumer has altered their behaviour because of those expectations. Returns within the shoes and clothing sectors have become such a big problem that it is impacting upon retailers conditions of sale. It is not just about apparel not fitting, or rather it is,but in a skewed manner. Consumers are buying two or three different sizes and only keeping the one that fits. ‘Obs’ you may say. But it is worse because of the increase in purchase by mobile, shopping is sometimes done by a half smashed consumer in a bar, realising 24 hours later they don’t want it. This don’t ‘appen in shops (does it? Please let me know if this is a frequent occurrence in your shop!)

Product returns and exchanges have been the nemesis of the direct-to-consumer industry going back to the mail-order catalog days. For products that are fit and/or fabrication sensitive (think fashion, intimate apparel, shoes) returns often exceed 30%, and rates north of 40% are not unheard of. Back in the good old days, while high return rates were definitely an area of concern, the fact that the customer often paid “shipping & handling” costs helped soften the damage to the bottom line. In fact, for some brands, shipping & handling was actually a profit center.

Today? Well, not so much. Forbes magazine 2018

The next biggie is online fraud.

It is hard to feel sorry for websites. But if you think about them as being a bit like shop owners, it is worth considering that 63 per cent of online merchants are struggling to keep on top of fraud attacks, according to research by payments processing firm Worldpay.

Some have had very public struggles. At the end of 2013, US retail giant Target had 40 million credit and debit card account details stolen by hackers. The upshot was it cost the company $162 million in costs not covered by insurance.

The chart above illustrates the rising rate of e-commerce card fraud in the U.K. upto the end of 2014. The number is now somewhat higher . Some may suggest that Stores suffer from theft. Yet there is a critical difference. Both the online retailer and their customer are victims. Yes, stores factor shrinkage(shoplifting) into their pricing but this is not comparable to the potential losses with online fraud. The additional effect is that the consumer can lose confidence with online purchasing. Most consumers don’t care a toss what is nicked in a shop.

The third problem are counterfeits . However I have posted about this before and I look at again in my next post. But the reality is that whilst all forms of retailing suffers from its effects, online it is insidious and a lot more difficult to monitor and pursue. You only have to read an audit by Apple in 2016 which showed that 90% of Apple accessories sold during that year were counterfeit(of course not all was online but I believe a major chunk was). If Apple struggle with the problem what chance does anyone else have?

The trouble with Beds of Roses and sunny valleys, is that eventually the roses wilt and clouds cover the sun. We have to be very careful how we approach the level playing field that bricks and mortar stores clamour for . The future of retailing lies with good e-commerce and good physical store retailing. With the emphasis on ‘Good’. We can’t go backwards and hope it will work out eventually.