Retail Day
Retail Week, today
Archive for April, 2009
Grounded
Everyone moans about Heathrow but the last couple of times I’ve used it have been an absolute pleasure. It’s not just the much-vaunted Terminal 5, which is indeed amazing, but all the others too, because they have far fewer flights going through them. No security queues, no crowds at check-in - basically no-one at all.
Which is great news from a passenger point of view but must be absolutely rubbish if you’re a retailer there. Terminal 1 has a fantastic and pretty high-end shopping offer - including Harrods, Mulberry Omega and Hugo Boss - but I spent an hour and a half there early evening Monday and all the stores except WH Smith and Boots were deserted.
And no wonder - having lost almost all BA’s short haul flights and quite a few of the long-haul ones too, all it has now are the far less numerous and less upmarket passengers of Aer Lingus, BMI, United, Air New Zealand and South African Airways. What’s more, the domestic and Irish passengers don’t even pass through most of the retail on the way to their planes.
How are retailers dealing with this massive fall off in footfall? I know BAA is as ruthless a retail landlord as they come - as it has shown with its ditching of all booksellers which aren’t WH Smith - and that airport rents have a turnover element so presumably have gone down, but nevertheless some of the stores must be hurting badly and there must be some very interesting discussions going on between BAA and its tenants.
Does anyone have any insight into how this is playing out? All thoughts welcome, attributed or not.
An unfashionable view
We talk a lot about the remarkable growth of online retailing, and with good reason. Asos today turned in the sort of performance that most retailers can only dream of, and is the model of a pure-play etailer that has a fantastic brand and terrific reach among its target audience. Nick Robertson and his team are doing a terrific job and are always one step ahead of the game.
But there’s another side to the coin. The other day I was talking to the CEO of one of the UK’s very biggest retailers, who was saying that his business has been through a very serious debate internally about whether it should continue to sell online at all. Why? Simply because the cost of doing so didn’t add up for them.
That’s why some retailers like Morrisons have decided against selling online, and why there’s such confusion about how Waitrose is going to make free delivery on grocery work. Online is incredibly convenient for customers, but that convenience comes at a price for retailers.
In the end the retailer which was weighing up ditching its site decided against, and to make the site work harder as a marketing channel. But while it may be an unfashionable point of view, no retailer can afford to commit to run a channel which loses them money indefinitely.
Blue Cross Update
Updated Monday
Dan has provided some further info as follows:
Was speaking to Craig Vidler (ran Star Execs in the 80s, knows everyone in retail), and he spoke to Peter Slaymaker who was Chairman of Allders in the 70s, and Jim Knight who was a Dircetor of Debs at the same time. They both agree that it was Allders which invented the Blue Cross Sale in the 1970s as a way of extending the sale, and Jim Knight has confirmed that Debs cribbed the idea off them. the guys are currently huunting down the Allders marketing director from those days to confirm the detail.
Original post
Our good friend Dan Murphy from Alix Partners has provided an update on the Blue Cross Sale question, and where the term comes from. He said he got it from Maureen Hinton at Verdict, so it must be right, although it looks like she may have got it from Wikipedia. Here’s what he says:
A Blue Cross Sale is primarily a United Kingdom retailing device for signifying a day of further reductions in sale prices already on offer. It is usually marked by signs throughout the store showing a large blue cross, the words “Blue Cross Sale”, and the percentage by which the sale prices are further reduced. On occasions it is advertised as “Blue Cross Day” though in many cases the sale is not limited to a single day. This device was first introduced in 1970 in the then Lewis’s Department Stores, and was originally the idea of Peter Wiard, the company’s Chief Accountant. It was introduced to reduce the time taken by staff re-marking all the individual sale tickets by the requisite percentage in time for the following day’s opening time.
My question is why a blue cross? And not a red circle, green triangle or for that matter a mauve rhombus?
Chugging along
Yesterday WH Smith revealed interim results which were more of the same, like-for-likes down but margins up. Profits were down a little but it was still the very solid performance we’ve come to expect and the Kate Swann juggernaut charges on.
Swann’s mantra has been to shift the mix of Smiths’ sales into higher margin categories and out of entertainment, which has meant falling like-for-likes but rising profits. This was repeated in yesterday’s figures, but what I don’t quite get is how they’re continuing to do it when there isn’t really any entertainment in the mix left to reduce?
I blogged yesterday on Debenhams and private equity techniques, but actually the master of squeezing every last penny out of a business is Swann, even though ironically the business remains publicly owned. From opening Post Offices in store to pushing confectionary you don’t want onto you at the counter, she has created a business which is utterly ruthless when it comes to grasping every last penny of efficiency savings or incremental sales or income.
Our story today on so called Chuggers - who usually pay to occupy indoor spaces, although we don’t know for sure about Smiths’ case - being allowed to operate in Smiths stores, is a case in point. I experienced their attentions in a store last week and I hated it, and it’s a stupid idea for a business where browsing is an essential part of shopping there.
Swann does have a great story to tell though - she isn’t keen to tell it, not to anyone but particularly not to Retail Week following a (perfectly true) front page story on unhappiness among store managers from August 2007 which she disliked. But anyway, that’s by the by - you can’t please everyone all the time in this job, and she is a very effective CEO.
No credit due
I didn’t have time to blog about the budget yesterday, but suffice to say that everyone in retail appears very unhappy with the proposals on a credit insurance top up. Two things seem unfair to me:
- Only those whose cover is reduced from April 1 will be eligible. Why?
- It only applies to those whose cover has been reduced, not pulled completely.
A lot of the retailers which need the help most will therefore miss out. rendering the plans, like everything else Mr Darling has done to “help” struggling retailers, inadequate.
Dependable Debenhams
Debenhams’ senior management - particularly CEO Rob Templeman, FD Chris Woodhouse and chairman John Lovering - got a really hard time a few years ago, pretty unfairly, for becoming associated with the worst perceptions about private equity profiteering. They definitely worked the company very hard and possibly to its short-term detriment in some respects, but despite expectations to the contrary, they have proved their critics wrong and Debs is now prospering as a publicly quoted company.
Debs is operating in one of the toughest parts of retailing - middle market fashion - and its rivals Next and M&S have been doing a good job of showing just how hard it is. So for Debenhams to achieve a 10% rise in interim profits is a super achievement, and the outlook is promising too, with like for likes up for the first seven weeks of the second half.
The thing with the Debenhams management team is that while they are indeed whizzy financial engineers, they also have a really good feel for the business of retailing and this understanding of the consumer is the reason why the business is doing well. Designers at Debenhams is way ahead of what its other mid-market rivals are doing, and - in contrast to the days of private equity controlled Debs - the stores are getting some attention too and looking much better.
The challenge of reducing the level of debt on the balance sheet remains a big issue, and the management knows that will continue to hold back the City’s perception of the business. But from the operating point of view, it’s doing a fine job of navigating the recession.
Terry talks
I wasn’t able to make it to the Tesco press conference today, but Jen went down on our behalf and thought Terry Leahy seemed quite subdued, and was lacking in the dry Scouse wit which he usually brings out on these occasions. I thought he’d be on a high after Everton booked a place in the Cup Final, but maybe he had just realised they’ll be playing Chelsea and therefore stand a very slim chance of winning. He did however do his usual disdainful put-down of one particularly irksome journalist, which was pleasing to hear.
As we all knew they would be, Tesco’s results were very strong. There have perhaps been more hiccups than usual this year, and UK market share has slipped a little, but nothing worth losing too much sleep over.
Maybe Terry’s mood reflected the decline in the sureness of touch and confidence which have marked Tesco out over the past few years, and I wonder if that has much to do with the departure of marketing guru Tim Mason to run the US business. Mason is a supremely self-assured individual and his personality was a great counter to Leahy’s dry and sober outlook.
Maybe its coincidence but to my mind Tesco’s biggest failing in the past year has been in how it has struggled to reach out consumers with the flair and imagination that, say, Sainsbury’s and Morrisons have. The shopping experience feels rather cold and uninviting. Shoppers know they’re in a recession, but they don’t really need retailers to reinforce that feeling when they’re out shopping.
It will be interesting to see what Leahy does. With amiable former FD Andrew Higginson now off running Tesco’s finance business, and rising stars like John Browett having gone elsewhere, it’s hard to see where the next generation of leaders are coming from. It’s not likely to be from the rather grey characters on the board like Richard Brasher and David Potts, but the company must have a plan up its sleeve.
Leahy was asked about the succession today though, and whether there was anyone in the company who could follow him. “There are 470,000 people in the company, so I’d hope one of them could succeed me,” he said, deadpan as ever. See what I mean about the dry Scouse wit?
Talking telephone numbers
Tesco is expected to break the £3bn profit barrier tomorrow, and at the same time reveal a big push into the mobile phone market. It hasn’t been a vintage year for Sir Terry Leahy and co, but the numbers will put that into context and shareholders really have nothing to complain about.
The phones move is a smart one and shows that the company’s appetite for diversifying into new product areas has not abated. Combining the trust in the brand with the convenience of managing your mobile contract while doing your weekly shop definitely has an appeal. It’s not a bad time to be taking on Carphone Warehouse either, which also reports this week and is facing challenges on several fronts, not least its inconsistent service.
The things I’ll be looking out for in the Tesco results are:
- Performance in the UK - TNS numbers have been showing a gentle but consistent erosion of Tesco’s (admittedly dominant) market share. The discounter launch has met with mixed success and the UK like-for-like will be fascinating to see.
- The launch of Fresh & Easy in the US has been tough, and anecdotally got tougher as the US economic situation has worsened. It will be interesting to see how explicit Tesco is on just how bad it is.
- Whether Tesco is suffering in other economically challenged markets, notably eastern Europe.
One thing that we don’t need to wonder about is whether the lobbyists and pressure groups will be out ranting about Tesco - because they will be - but even if it does reveal some short term challenges, it’s the profit number that matters and that will show it continues to be a great British success story.
Not so Wild about Halfords
Halfords trading update yesterday was very creditable and the company seems to be coping well with the recession despite a big slowdown in the sat-nav market. The very likeable new chief executive David Wild - who we’ve profiled this week- came in just as the craze for Tom Toms and the like started tailing off, but he seems to be doing a good job, and his hugely impressive experience, working at a senior level for both Tesco and Walmart, can’t do him any harm.
The only people who don’t seem very impressed with what he’s doing are serious cyclists. Whenever we’ve written about its standalone bike fascias Bike Hut or Cycle Republic, our message boards have always been bombarded with hate-filled messages about Halfords from opinionated lovers of everything two-wheeled.
According to our resident cycling (and store design) guru John Ryan - who should know a thing or two about all this as he cycles 32 miles to work and back every day - Halfords is seen as being too big and brutal by cyclists who view it as a threat to their beloved independent stores. John is one of the few cyclists I like - most of them infuriate me with their pavement-riding, red light-jumping antics.
I suppose the problem is that cycling is a pursuit of people who generally don’t like cars, and Halfords will always be seen more as the petrolheads friend. Focussing more on selling a solid range of popular bikes for the cyclist who doesn’t take themselves too seriously, combined with cashing in on the fact that people are doing repairs on their cars rather than buying new ones, should be a recipe for continued success.
Crying wolf
The headline on the BRC’s press release about the March sales figures this morning is “Weak sales despite clothing growth,” but the figures themselves are nowhere near as bad as this would suggest - down 1.2% like for like, up 0.6% total. Very respectable in such a deep recession, particularly when you bear in mind that Easter fell in March last year but April this year.
Stephen Robertson is doing a first class job for the industry at the BRC, but I heard him on Five Live this morning and didn’t really buy his explanation of the numbers, which was that weather had artificially inflated them, and that consumers are putting away the money they are saving through lower mortgage bills etc rather than spending it in the shops.
I know the BRC’s job is to bang the drum for the sector but retailers have a bad enough reputation for crying wolf without telling people that good numbers are bad. We know food is propping up the rest of the market but with the exception of the truly dire furniture sector, sales across the board are holding up better than any of us feared and it certainly isn’t armageddon.
While no commentators are yet prepared to put their head above the parapet and talk about green shoots, the staggering rise in non-food share prices shows the City clearly sees recovery on the horizon.
Meanwhile an interesting test will be if the April figures are good, will the BRC put it down to the timing of Easter?
