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Friday 10th February 2012

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Retail round up - The Sunday papers

DIY giants trim advertising spend, Waitrose wages web war, Vat cut seems to have worked...

The Sunday Telegraph

Britain's biggest do-it-yourself and furniture retailers have significantly cut marketing spend in the past year as the recession bites. The Easter weekend, traditionally be the time for home improvements, saw the news that B&Q had reduced advertising spend by one third to £34m in the year to the end of January 2009, and the trend continued in February and March. The research by Nielsen Media Research comes as it emerg

ed last month that B&Q's like-for-like sales had declined by 6.1pc in the year to January 31, while sales of outdoor products fell by 10pc. Nielsen found that Focus cut its advertising spend by 32pc to £10.3m, while Ikea has reduced its UK advertising expenditure in the period to £9m - a fall of 27pc. Many home and DIY retailers which have increased marketing spend have done so to publicise large discounts, said Nielsen, citing Wickes' 14.7pc spend increase to £14.6m. DFS has cut its advertising budget by 11pc, but the sofas retailer is still spending £87m on advertising. Sofas company ScS reduced advertising expenditure by 48pc to £7m. Recent figures from market analysts Verdict suggest that DIY spending will fall substantially this year, from £12.2bn to £10.9bn.

The Sunday Times

Waitrose is to scrap delivery charges for groceries ordered online, the first supermarket chain to do so. The move, to be confirmed this week, will up the ante in the fierce battle between the leading supermarkets for internet customers. Mark Price, managing director of Waitrose, said scrapping the £5 delivery charge was an effective way of investing in marketing, and represented a step change in the sector. Waitrose Deliver takes about 10,000 orders a week, so dropping the charge will mean sacrificing £50,000 every seven days. Typically, supermarkets charge between £3 and £6 per delivery, though the fees can be waived on larger orders. It is not clear whether Waitrose's rivals will follow suit, but Price said he was not worried. “Clearly, we will get a first-mover advantage,” he said.

Alistair Darling's temporary cut in Vat, widely criticised as being an expensive failure, has worked, according to a report to be published this week by a leading economics consultancy. The Centre for Economics and Business Research (CEBR) compared the trend for retail sales before the 2.5-point Vat cut, which took effect on December 1, with what happened subsequently. It also looked at the pattern of sales growth in the last recession. Its conclusion is that there was an immediate boost to sales growth after the cut's introduction and it has been maintained. The CEBR's assessment is that in the first three months of the lower rate, retailers' turnover was £2.1 billion higher than it would otherwise have been. “The rise in retail growth is even more remarkable given the economic context over this period,” said Doug McWilliams at the CEBR. “Following the intensification of the credit crunch in October, the UK economy was in freefall. Indicators of business and consumer confidence declined markedly, interbank lending spreads rose to new record levels and lending volumes fell to a trickle. “Despite all of this, retail sales not only continued to grow, but growth accelerated.” The CEBR's report predicts that retail sales will be between £8 billion and £9 billion higher this year than would otherwise have been the case. These higher sales, which will themselves generate higher tax revenues, will reduce the net cost of the Vat cut to taxpayers, originally put by the Treasury at £12.5 billion. “The figures are clear; the Vat cut is working,” said the CEBR. “It appears to be good value for taxpayers.”

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