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

Photo: Getty
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The end of loyalty: why are we still surprised when politicians betray each other?

There was Labour’s attempted coup, now the cabinet is in civil war. Have British politicians always been so openly disloyal?

Politicians have always had a reputation for backstabbing, but recently Westminster has been a battleground of back, front and side-stabbing in all parties. The shadow cabinet trying to oust Jeremy Corbyn after the EU referendum; Michael Gove abandoning Boris Johnson to make his own Tory leadership bid; and now Johnson himself derailing Theresa May’s set-piece Brexit speech with his Telegraph essay on the subject – and rumours of a resignation threat.

On the surface, it seems Brexit has given politicians licence to flout cabinet collective responsibility – the convention that binds our ministers to showing a united front on government policy.

The doctrine of cabinet collective responsibility was outlined in the Ministerial Code in the early Nineties, but it became a convention in the late 19th century “the way in which we talk about it still today, in terms of people failing to adhere to it”, says the Institute for Government’s Dr Cath Haddon, an expert in the constitutional issues of Whitehall.

It even goes back earlier than that, when the cabinet would have to bond in the face of a more powerful monarch.

But are we witnessing the end of this convention? It looks like we could be living in a new age of disloyalty. After all, the shadow cabinet was allowed to say what it liked about its leader over nearly two years, and Johnson is still in a job.

An unfaithful history

“I think it’s nothing new,” says Michael Cockerell, who has been making political documentaries and profiles for the BBC since the Seventies. “If you think back in time to Julius Caesar and all the rest of it, this loyalty to the leader is not something that automatically happens or has been normal both in history and modern democracies – there have always been rebels, always been ambitious figures who all work out exactly how far they can go.”

He says the situation with Johnson reminds him of Tony Benn, who was an outspoken cabinet secretary under Harold Wilson and Jim Callaghan in 1974-79. “He knew exactly how far he could push it without being sacked, because of the old thing about having him inside the tent pissing out, rather than outside the tent, pissing in.”

Cockerell believes that Johnson, like past cabinet rebels, knows “how far” he can go in defying May because she’s in a precarious position.

“Often if a prime minister is weak, that’s when the ambitious members of the cabinet can parade their disloyalty while still claiming they’re being loyal,” he says. “Most people who are disloyal always profess their loyalty.”

The peer and former Lib Dem leader Ming Campbell, who has been in politics since the early Seventies, also believes “it’s always been like this” in terms of disloyalty.

He gives Wilson’s governments as a past example. “There was a fair amount of disloyalty within the cabinet,” he says. “I remember it being suggested by someone that the cabinet meetings were often very, very quiet because people were so busy writing down things that they could put into print sometime later.”

“Fast-forward to John Major and the ‘bastards’,” he says, recalling the former Conservative prime minister’s battle with trouble-making Eurosceptic cabinet members in 1993.

Dr Haddon adds the examples of Margaret Thatcher being brought down by her cabinet (and tackling the “wets and dries” in her early years as PM), and Tony Blair and Gordon Brown’s teams briefing against each other.

She believes “nothing changes” regarding disloyalty because of the way British government works. “The UK system really provokes this sort of situation,” she says of Johnson. “Because we have empowered secretaries of state, we have a sort of federalist structure, and then we have the prime minister in the position of primus inter pares [first among equals].”

The idea of the prime minister being a fully empowered leader in control of a team is a “modern concept”, according to Dr Haddon. “If you go back into the nineteenth century, ministers were very much heads of their own little fiefdoms. We’ve always had this system that has enabled ministers to effectively have their own take, their own position in their particular roles, and able to speak publicly on their perspective.”

She says the same happens in the shadow cabinet because of the nature of opposition in the UK. Shadow ministers don’t receive tailored funding for their work, and are therefore “often very much reliant upon their own team” to develop policy proposals, “so they become quite autonomous”.

How disloyalty has changed

However, disloyalty plays out differently in modern politics. Campbell points out that with politics developing in real time online and through 24-hour news, there is a far greater journalistic focus on disloyalty. “Previously it would’ve been in the Sunday papers, now you get it 24 hours a day, seven days a week,” he says.

Dr Haddon believes pronouncements of disloyalty are more “overt” than they were because of the way we communicate on social media. Platforms like Twitter discourage the “coded messages” of past disloyal cabinet secretaries, and show infighting more starkly.

“There is this immediacy of reaction,” she says. “And that it’s constrained to 140 characters leads people to ever more brief, succinct declarations of their position. We are also living through a period in which, dare I say, hyperbole and strength of position are only exaggerated by that medium. There’s something in that which is very different.”

And even though British political history is littered with attempted coups, betrayals and outspoken ministers – particularly over Europe – there is a sense that the rulebook has been thrown out recently, perhaps as Brexit has defied the status quo.

Collective responsibility and the idea of the prime minister as primus inter pares are conventions, and conventions can be moulded or dropped completely.

“The constitution is open for discussion now to an extent that I can’t remember,” says Campbell. “You’ve got arguments about independence, constitutional arguments which arise out of Brexit, if we leave. In those circumstances, it’s perhaps not surprising that the constitutional convention about cabinet responsibility comes under strain as well.

“If you’ve got a constitution that depends upon the observance of convention, then of course it’s much easier to depart from these if you choose,” he adds. “And in the present, febrile atmosphere of constitutional change, maybe it’s hardly surprising that what is thought to be a centrepiece is simply being disregarded.”

Anoosh Chakelian is senior writer at the New Statesman.