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 UK press’s timid reaction to Brexit is in marked contrast to the satire unleashed on Trump

For the BBC, it seems, to question leaving the EU is to be unpatriotic.

Faced with arguably their biggest political-cum-constitutional ­crisis in half a century, the press on either side of the pond has reacted very differently. Confronting a president who, unlike many predecessors, does not merely covertly dislike the press but rages against its supposed mendacity as a purveyor of “fake news”, the fourth estate in the US has had a pretty successful first 150-odd days of the Trump era. The Washington Post has recovered its Watergate mojo – the bloodhound tenacity that brought down Richard Nixon. The Post’s investigations into links between the Kremlin and Donald Trump’s associates and appointees have yielded the scalp of the former security adviser Michael Flynn and led to Attorney General Jeff Sessions recusing himself from all inquiries into Trump-Russia contacts. Few imagine the story will end there.

Meanwhile, the New York Times has cast off its image as “the grey lady” and come out in sharper colours. Commenting on the James Comey memo in an editorial, the Times raised the possibility that Trump was trying to “obstruct justice”, and called on Washington lawmakers to “uphold the constitution”. Trump’s denunciations of the Times as “failing” have acted as commercial “rocket fuel” for the paper, according to its CEO, Mark Thompson: it gained an “astonishing” 308,000 net digital news subscriptions in the first quarter of 2017.

US-based broadcast organisations such as CNN and ABC, once considered slick or bland, have reacted to Trump’s bullying in forthright style. Political satire is thriving, led by Saturday Night Live, with its devastating impersonations of the president by Alec Baldwin and of his press secretary Sean Spicer by the brilliant Melissa McCarthy.

British press reaction to Brexit – an epic constitutional, political and economic mess-up that probably includes a mind-bogglingly destructive self-ejection from a single market and customs union that took decades to construct, a move pushed through by a far-right faction of the Tory party – has been much more muted. The situation is complicated by the cheerleading for Brexit by most of the British tabloids and the Daily Telegraph. There are stirrings of resistance, but even after an election in which Theresa May spectacularly failed to secure a mandate for her hard Brexit, there is a sense, though the criticism of her has been intense, of the media pussy-footing around a government in disarray – not properly interrogating those who still seem to promise that, in relation to Europe, we can have our cake and eat it.

This is especially the case with the BBC, a state broadcaster that proudly proclaims its independence from the government of the day, protected by the famous “arm’s-length” principle. In the case of Brexit, the BBC invoked its concept of “balance” to give equal airtime and weight to Leavers and Remainers. Fair enough, you might say, but according to the economist Simon Wren-Lewis, it ignored a “near-unanimous view among economists that Brexit would hurt the UK economy in the longer term”.

A similar view of “balance” in the past led the BBC to equate views of ­non-scientific climate contrarians, often linked to the fossil-fuel lobby, with those of leading climate scientists. Many BBC Remainer insiders still feel incensed by what they regard as BBC betrayal over Brexit. Although the referendum of 23 June 2016 said nothing about leaving the single market or the customs union, the Today presenter Justin Webb, in a recent interview with Stuart Rose, put it like this: “Staying in the single market, staying in the customs union – [Leave voters would say] you might as well not be leaving. That fundamental position is a matter of democracy.” For the BBC, it seems, to question Brexit is somehow to be unpatriotic.

You might think that an independent, pro-democratic press would question the attempted use of the arcane and archaic “royal prerogative” to enable the ­bypassing of parliament when it came to triggering Article 50, signalling the UK’s departure from the EU. But when the campaigner Gina Miller’s challenge to the government was upheld by the high court, the three ruling judges were attacked on the front page of the Daily Mail as “enemies of the people”. Thomas Jefferson wrote that he would rather have “newspapers without a government” than “a government without newspapers”. It’s a fair guess he wasn’t thinking of newspapers that would brand the judiciary as “enemies of the people”.

It does seem significant that the United States has a written constitution, encapsulating the separation and balance of powers, and explicitly designed by the Founding Fathers to protect the young republic against tyranny. When James Madison drafted the First Amendment he was clear that freedom of the press should be guaranteed to a much higher degree in the republic than it had been in the colonising power, where for centuries, after all, British monarchs and prime ministers have had no qualms about censoring an unruly media.

By contrast, the United Kingdom remains a hybrid of monarchy and democracy, with no explicit protection of press freedom other than the one provided by the common law. The national impulse to bend the knee before the sovereign, to obey and not question authority, remains strangely powerful in Britain, the land of Henry VIII as well as of George Orwell. That the United Kingdom has slipped 11 places in the World Press Freedom Index in the past four years, down to 40th, has rightly occasioned outrage. Yet, even more awkwardly, the United States is three places lower still, at 43rd. Freedom of the press may not be doing quite as well as we imagine in either country.

Harry Eyres is the author of Horace and Me: Life Lessons from an Ancient Poet (2013)

This article first appeared in the 20 July 2017 issue of the New Statesman, The new world disorder