Bespoke tailors, haute-couture fashion, brand names and fashion accessories could become retail habits and passions of the past, apart from very high net-worth individuals, and developing economies in China, Asia and Africa.
Retail culture in the UK, and to some degree the US, has changed dramatically in the past 5 years – and not enough major retail organisations have either picked up on it or adapted ‘their coats according to the cloth’ available from consumers.
With some qualification, younger consumers are less likely to spend money on an expensive wardrobe with all the latest brands – they have less disposable income and, by necessity if nothing else, are more attuned to a bargain.
They have transferred the emphasis of their spending power to entertainment, enjoyment and frequent holidays.
Recent data released by Barclaycard shows non-food sales rose 5.3% in January – but that still fell short of the 8% growth booked in digital sales during the same month a year earlier. In store, those sales fell 2.9% on a total basis in the three months to January, and 3.6% like-for-like. However, evenings out with family and friends in January 2018 drove a double-digit rise in pubs and restaurants – up 12.8% and 10.5%, respectively.
In the past four years investing in many retail companies, which are household names on both sides of the pond, has been far from rewarding (though there are some notable exceptions). Why is this the case? Both the US and the UK are reliant on retail sales to contribute between 60% and 70% to their respective GDPs.
In the UK wage inflation has been dangerously benign resulting in consumers having less disposable income. Therefore, they are much more discerning and price conscious than they were a decade ago. In the US it is a little different. Online sales became more significant rather more quickly than here in the UK, because of the prodigious distances.
Also, the one-stop-shop manifested itself in the form of Walmart and to a slightly lesser degree Target. In the case of Walmart, but for a 10% drop in its share price in February, costing $25 billion in valuation, its performance would have been measured as good, rather than adequate.
So, it just goes to show how imperative it is for the well-known US retailers such as Abercrombie & Fitch, Nordstrom and Macy’s to stay up with the pace, being aware of what the consumer wants to buy and at what price and more to the point refocus more on internet sales, even though it may mean fewer shops and significant redundancies.
The table below illustrates the various anomalies. TJ Max, thanks to its zany individualistic role and Best Buy, due to this electronic gadget titan’s prowess on-line have been stars. Dollar General is cheap and cheerful pandering to the discerning consumer’s requirement.
One must only look at Amazon’s share price to know that retail in the US is alive and well. In the last four years it has rallied from $374 in March 2014 to today’s level of $1578.79.
In the UK retail is so competitive – falling incomes and affordable fashions are probably more fundamental than ‘online’ business. The likes of M&S and NEXT are neither ‘fish nor fowl.’ Their general merchandising is neither cheap or expensive. However, the over-riding factor is that consumers perceive their fashions to be dowdy.
The market has great faith in the new chairman of M&S Archie Norman; but to pull this operation around will be a task of Herculean proportions. There is surely a case for a merger with someone like Next. It would free up property and cut costs, which would likely trigger a recovery.
Toys R Us and Maplin have gone to the wall costing 5500 jobs. Other operations such as New Look, Debenhams and House of Fraser are also struggling manfully against the odds. The cost of maintaining a high street presence seems to be slowly delivering many retailers into penury. I fear that the UK’s high streets may look very different in a couple of years, unless fashionable clothes are produced at the right price.
The competition is fierce. On a positive note, the likes of Boohoo, Primark (AB Foods) and Ted Baker have got the message and the future looks bright – cheap and cheerful with great websites. Even Hennes & Mauritz, which has blazed the trail in Europe for the past decade is under the cosh in attracting the level of custom it is used to and Spain’s Inditex, good though Zara and other brands are, are finding the going tough. To perform well retailers must know what their customers want at the price and with easy access.
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