If you want to see what retail will look like down the line, look at the UK. It’s not a pretty sight. Last November I started my retail distress list. I am now well down my fourth A4 page listing casualties across every sector of the industry. Why is this so extreme in the UK? Many will blame Brexit but the core reason is structural.
Online penetration of the UK retail market is now 18%, higher in many sectors and far higher than most other developed markets. Fifteen years ago online retailing barely existed. Today, retail on the web generates c£60bn of annual sales. Over this period, it has not attracted any genuine incremental spend but cannibalised revenues of physical stores and added costs along the way. Meanwhile, not only has physical space contracted but it has expanded.
The key driver of massive structural change in UK retail is chronic overcapacity. There are simply too many mouths to feed. The resulting pressures on trading economics have been magnified by Brexit and a UK consumer economy which is broadly flat. The majority of our retailers now have too many stores which leasehold commitments make difficult to shut. So, we have static sales, rising costs and intensifying pressure on cash flows.
Many retailers are not in great shape to deal with the squeeze. Most leadership teams learned their trade in growth markets where you built new stores and business expanded. Today’s market is more about capturing business from the guy next door. The net result of this relentless pressure is growing number of bankruptcies and restructurings which try to reshape the cost line but all too often, fail to strengthen the sales line.
Trading pressure is impacting everyone, but not to the same degree. Retailers like Aldi, Primark, B&M, Selfridges, Costco, Ted Baker, Home Bargains, Asos and Zara are all trading very well, even if each is having to run faster. They all are 100% clear who they target and that knowledge defines everything they do. It sounds so simple and obvious, but it’s what most of the industry has lost sight of.
Our market restructure will be long (3-5 years) and very painful.
The differences between winning and losing isn’t about online versus offline, or about having the latest tech wizardry. Engaging your core customer and avoiding diluting that engagement is critical.
Save the date for the next Paris Retail Week show from 10 to 12 September 2018
For its 4th edition, Paris Retail Week, the biggest European trade event will take its full scope and will gather in Pavilion 1 of Paris expo Porte de Versailles the e-commerce sector, dedicated to solutions for e-retailers, ranging from digital marketing to logistics, and the Store / Equipmag sector, dedicated to physical commerce and distribution.
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Pour sa quatrième édition, Paris Retail Week, le plus grand événement retail européen de la rentrée prendra toute son envergure et réunira dans le Pavillion 1 de la Porte de Versailles le secteur E-Commerce, dédié aux solutions e-commerce, du digital marketing à la logistique et du secteur Store / Equipmag, dédié au commerce physique et à la distribution.
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