Interesting times for the retail sector

Things are destined to get pretty tough.

The expression “may you live in interesting times” is seen by the Chinese as a curse; interesting is not seen as a positive but, rather, is equated with disorder, problems and trouble. Such a sentiment will probably ring true with retailers next year: as fascinating as the market is from an analytical point of view, there is no denying that things are set to get pretty tough.

This view reflects several a numbers of current and upcoming challenges which are stacked against the retail sector.

Foremost among them will be a complete absence of overall real sales growth. While official headline figures may continue to profess to a market that is growing, albeit anaemically, all of that growth will likely be driven by inflation; by the time this is removed, retail volumes will shrink strongly. In other words, we will all be buying less which means the spoils of consumer spending will be spread more thinly.

In many ways retail sales will be a symptom of the underlying issues, they will reflect the fact that the whole economy will remain in stasis, that consumers will continue to lack the confidence to go out and spend, and that unemployment and poor wage growth will have left many household budgets more squeezed than they have been in decades.

In addition to the above, more specific factors like fuel prices - which have come down from their record high but are likely to remain elevated – will unhelpfully change the way we shop: reducing visit frequency and deterring some from driving long distances to out-of-town centres. Equally, it is difficult to foresee an uptick in the housing market which will likely continue to remain depressed, dampening demand for DIY, furnishings and floorcoverings.  As transient as these things may yet prove to be, they will remain decidedly unhelpful to a struggling retail sector in 2012.

As demand slows, the room retailers have for manoeuvre becomes narrower. For example, many would like to increase prices to make up for hikes in the cost of doing business, but most simply won’t for fear of losing custom and share in a market that will remain increasingly price sensitive.  As a result, quite a number of players will continue to report squeezed margins and profits.

While all of this makes for gloomy reading, the truth is that these austere circumstances will reshape the retail sector and the process of reconfiguration is a painful one. The current shape of the sector – the number of shops, the amount of space, the way retailers do business – is one that was created to reflect the demands and needs of the last ten years. Things have now changed and a more muted demand environment means a new shape is required. Some of the things retailers need to be thinking about, include:

  • Rebalancing and optimising their store portfolios for the multichannel world; thinking about how many stores are really needed to reach customer and what those stores are there to do (inspire, act as a point of transaction or collection, etc.) is critical.
  • Adding value to the retail offer to ensure that customers are given compelling reasons to buy; lacklustre offers will increasingly be forced to compete on price, which is a poor differentiator and will serve only to erode margins.
  • Keeping close to customers in order to engage them and win their loyalty; with many shoppers buying less frequently, it is important for retailers to keep themselves foremost of mind.
  • Marketing through emotion and excitement; it is increasingly important for retailers to connect with consumers on an emotional and not just a functional level – consumers need to be cajoled and convinced into buying things, and emotion sells.
  • Personalising the offer and the experience; this means that retailers really need to understand consumers’ needs and desires and then translate this into all aspects of their proposition, especially within the online selling environment.

So in many ways 2012 will be a year of evolution. And just like evolution, the process of change will create casualties – some retailers have already died out, others will follow – but, longer term, it creates winners too. Those that adapt will survive and could even come out of the process stronger as a result. Some retailers have already started on this journey which is why, among the gloomy trading updates, there are occasionally chinks of light.

What do these players do to stand out? Quite simply they think, they innovate and they respond. In other words, they have interesting responses to our interesting times.

Neil Saunders is Retail Director for Canadean and Managing Director of Conlumino.

Photograph: Getty Images

 Managing Director of Conlumino

Chris Hondros/Getty Images
Show Hide image

Low fat, full fat: why the diet industry keeps changing its mind

A new report illustrates just how disillusioned the diet industry has become, at the expense of everyone else.

Another year, another wave of dietary fads. Most seem to surface in the summer, when new nutritional advice claims to provide the panacea to everyone’s health woes: “Eat clean get lean!” “The simple secret of intermittent fasting!” “The paleo way is the only way!” “Six weeks to a super you!”

However, despite the barrage of diet books, the expansion of nutrition research and the growth of education about healthy living, global obesity has more than doubled since 1980.

It may be that this is due to the conflicting information constantly issued from the diet industry. “Eat lots of protein – it’ll speed up your metabolism!” “Too much protein will damage your kidneys – reduce your protein intake!” “Superfoods are a vital source of antioxidants!” “Superfoods aren’t so super at all!” “Don’t snack it will make you pile on the pounds!” “You should snack – it’ll stop you from binge eating!” It’s no wonder people aren’t sure what to eat.

The UK launched its first dietary guidelines in 1994, which have since been continuously revised to form the guide now known as “The Eatwell Plate”. The dietary guidelines recommend plentiful carbohydrates “such as rice, bread, pasta and potatoes”, at least five portions of fruits and vegetables, some protein, some milk, some dairy and minimal saturated fat.

However, a recent report serves to highlight the confusion consumers face when it comes to food: it claims that the official advice on low-fat diets is outright wrong, even damaging.

Led by the National Obesity Forum and the Public Health Collaboration, the report (not peer-reviewed, it’s worth noting) attacked a host of official health proposals. It claims that “eating fat does not make you fat”, and criticises Eatwell Plate’s small fat allowance. The report also stated that saturated fats have been unfairly demonised, as there is allegedly little evidence to suggest that they cause heart disease. Meanwhile sugar consumption should be dialled down to zero, apparently, and calories shouldn’t be counted, as an abundance of them won’t cause obesity. Also, forget about the exercise - apparently a bad diet can’t be outrun, according to the report.

Professor David Haslam, chairman of the National Obesity Forum, said: “As a clinician, treating patients all day every day, I quickly realised that guidelines from on high, suggesting high-carbohydrate, low-fat diets were the universal panacea, were deeply flawed. Current efforts have failed – the proof being that obesity levels are higher than they have ever been, and show no chance of reducing despite the best efforts of government and scientists.”

Dr Aseem Malhotra, consultant cardiologist and founding member of the Public Health Collaboration reinforced this by saying the guidelines were “perhaps the biggest mistake in modern medical history, resulting in devastating consequences for public health.” Under current dietary guidelines, obesity levels have indeed increased in the UK, with nearly two-thirds of men and women overweight or obese, costing the economy more than £3bn per year.

In the face of such starkly opposed sides - both backed by seemingly reputable experts who claim all their research is based on empirical evidence - what are consumers meant to do?

The vilification of fat

In 1983, it was recommended that overall dietary fat consumption should make up only 30 per cent of total daily energy intake – 10 per cent of which, at most, should come from saturated fat.

The recommendations came from a number of research papers published at the time, which suggested a link between saturated fat intake and increased levels of LDL cholesterol – the cholesterol which has been connected to increased risk of heart disease, stroke and atherosclerosis.

An even simpler reason for the suggestions boiled down to this: fat has more calories per gram than carbohydrates – nine calories per gram versus four, to be exact. This shape to future official guidelines, and gave birth to the low-fat high-carbohydrate mantra. Fat was cemented as public enemy number one.

As a result, the fat eliminated from people’s diets was to be supplemented with an increased intake of carbohydrates. Tipping the scales in favour of carbohydrates were promises of weight loss as a result of higher fibre content, elevated levels of serotonin to aid sleep and boosts in mood from feeling fuller.

But obesity levels continued to soar, and health experts shifted their focus to the next culprit: carbs.

The low-carb era

An analysis by The American Journal of Clinical Nutrition combined the results of 21 studies and found that “saturated fat was not associated with an increased risk of coronary heart disease”. Other studies demonstrated the positive effect on testosterone levels in men from increased saturated fat intake, and have noted increased levels of triglycerides (the stuff that makes you fat) from lower fat diets.

As a result, dieticians developed a deep suspicion of carbs, and sugar in particular, and diets like the Atkins regime became more and more popular.

In part, the report by the National Obesity Forum and Public Health Collaboration uses the research that propped up these low-carb high-fat diets as a means by which to attack the general consensus surrounding healthy eating. Dr Malhotra, who led the latest report, previously worked in a pressure group called Action on Sugar – a group that has tried to get the food industry to reduce the amount of sugar added to food.

The reasoning goes something like this: guidelines encouraging greater carbohydrate consumption are oblivious to the fact that sugars constitute a vast amount of refined carbohydrates. By cranking up the sugar intake we ratchet up the risk of type 2 diabetes; this in turn could spark further health problems including obesity.

The logic seems sound, and yet obesity levels have continued to soar in the face of this research. The notion that all sugar should be avoided also ignores the fact that our brains require a significant amount of glucose for optimal functioning.

Everything in moderation

In the face of an industry that can’t make up its mind about how people should eat, it’s no wonder obesity levels have grown to epidemic proportions. So what can be done?

Professor Susan Jebb, the government’s obesity adviser, believes that the current debate needs to expand beyond the battle between carbohydrates and fat. She said: “We’re eating too many calories – if we want to tackle obesity people do need to eat fewer calories and that means less fat and less sugar.” And she’s right. If decades of research have pointed to anything assertively, it’s that calories count, and paying attention to portion sizes could take us a long way.

Both fat and carbohydrates are necessary for our bodies to function. The solution? Enjoy everything in moderation. Eat fruits without fearing fructose, don’t throw away the egg yolk, get a decent amount of protein and yes, you should have your slice of cake too.