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Taking Stock #22: If we’re going through a tunnel when will we see the light?

by Sean Fleming

In a little over two months, the fun really begins. Black Friday, which in the US traditionally kicks off the run-up to Christmas, is on 23 November. Wherever you are in the world, we’re about to enter retail’s favourite period. The one where it can actually make some money. And of course, this is also good news for the delivery sector.

It used to be said that Black Friday got its name because it was the point in the year when retailers’ fortunes came out of the red and into the black. This is almost certainly untrue. But it makes for a good story. What is true is that this is the time of year that makes or breaks the sector.

If you’ve had a bad year, you can still come out smelling of roses if you get things right in the end-of-year peak period. But it can go the other way too. A tough year has tempted many businesses into being overly generous with deals and discounts during the busy period, which leads to damage caused trying to process a high volume of business on little – or even no – margin. And sometimes that damage has been fatal.

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The last 12-24 months on the retail front here in the UK have seen many household names disappear. BHS, Austin Reed, Staples, Jaeger, MultiYork, Maplin, Toys R Us, Henri Lloyd, Poundworld, and House of Fraser to name but a few. Some have been picked up by new owners via pre-pack administration sales, and so may return to health. But there are no guarantees.

Meanwhile in Italy, retail sales are also suffering. Year-on-year, sales value declined for the first time in three months – down by 0.6%, reversing the 1.4% increase seen in June

Time and again the finger of blame has been pointed at the internet, ecommerce, and Amazon. But as I have pointed out here on the Milkman blog, and anywhere where people will listen, this is lazy and wrong. And it turns out I may have been right.

In case you don’t feel like clicking, the point I made was that retailers who don’t meet customer expectations are asking for trouble, and that trouble only gets bigger when there are intense competitive threats to contend with. Put another way, I think Amazon’s success has shown up the weaknesses in many other retailers’ strategies. Some have chosen to adapt their offer to suit changing customer demands, others chose to do nothing.

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News from across the Atlantic suggests things are about to change, however.

According to the New York Times: “From the garden section at Walmart to the diamond counters at Tiffany & Company, old-school retailers are experiencing some of their best sales growth in years.”

I encourage you to read the whole article, but in case you haven’t got time right now, let me summarise some of the main points.

  • Many retailers are expanding their physical presence or spending billions to overhaul their existing stores
  • Retailers that work hard to match the convenience and gratification offered by ecommerce are doing well
  • Those that have failed to evolve are doing less well
  • In 2017, nearly 5,700 stores shut across the US
  • So far this year, about 4,480 have closed
  • An average of roughly 50,000 retail jobs have been added each month since February

One of the key trends emerging in this retail rejuvenation has been the adoption of an omni-channel outlook in-store. Browse, shop, or collect. Try things out. Attend product demonstrations. Or just have lunch. The expansion of services, the growth in the use of personal shoppers, and the proliferation of apps demonstrates many retailers really understand the extent to which shoppers want something different. And they’re giving it to them.

“There has been a shakeout, and 2017 was seen as the bottom,” Melina Cordero, head of retail research for the Americas at the real estate firm CBRE told the New York Times.

Maybe it’s too early to call it a recovery.

Maybe it’s too soon to see the light at the end of the tunnel.

But it’s a tunnel. It’s not a never-ending abyss. There is light, there is an end. Even if you can’t see it yet.

 

#retail, #Taking Stock

    
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