Scant seasonal cheer for the retail sector

Archived article dated Friday November 30th 2007

It's fair to say that the latest crop of retail figures haven't made particularly cheerful reading for businesses in the sector and there have been plenty of worrying headlines in the past few weeks.

By Helen Dickinson

In terms of official figures, the most recently published take us only to the end of October. The BRC-KPMG Retail Sales Monitor (RSM) found that month was a pretty disappointing one, with a 3% total and 1% like-for-like increase in sales over the same period as last year. This represented the worst performance since November 2006 - which itself was the worst month of that year - leaving many retailers feeling understandably nervous.

The ONS statistics painted a similar picture with sales values deemed to be 3.2% above the same period last year - a lower growth rate than the 3.6% and 4.2% reported in August and September respectively.

The RSM for November is due to be published next Tuesday (4th December) with ONS to report the following week and as we are already in the run up to the busiest retailing period of the year, I'm sure we'll all be hoping that the figures are going to be looking healthier - however, I am not convinced that this will be the case.

Against this slightly shaky backdrop, there are some retailers which don't seem to be finding the going so difficult. I can think of a number of companies which continue to perform strongly despite the caution of consumers.

So what's their secret?

This was the subject of the latest KPMG/SPSL Retail Think Tank (RTT) white paper which was published recently. It explored the secrets of successful retailing and how the RTT believes that retailers can survive - and even prosper - in a downturn.

I think that many companies in the sector - even those that are currently performing well - will be thinking about ways to protect themselves if the much-discussed economic downturn does materialise.

First and foremost, it's crucial for retailers to know their customers, a subject which I have covered many times in this column in the past. Whether it's ensuring that the right staff are employed who can empathise with shoppers, tuning into the latest trends and fashions or second-guessing how their attitudes are changing - hands up who spotted that ethical retailing was going to take off so dramatically this year? - the needs of customers simply cannot be overlooked in today's competitive climate.

There are plenty of examples of businesses which have lost touch with their customers but a lot fewer which manage to win back confidence sufficiently to tell the tale. Customers are the key stakeholders in every retail business and being fully aware of and able to respond to their needs is the single most important thing a retailer can do.

Of course, this is closely linked to being able to provide the right proposition - there's no point in knowing what customers want if it can't be provided when and how they want to buy it.

There are some good examples of how retailers have come up with ways to hone their propositions. Tesco is often highlighted as having successfully achieved this through the way it has targeted and adapted its proposition through its Metro, Express and Extra formats, as has Marks & Spencer with its Simply Food outlets. By tweaking and shaping key aspects of their core propositions, such as location, stock lines and opening hours, they have successfully adapted to meet customer needs in different situations.

The final aspect of what the successful retailer looks like shares plenty in common with all businesses, regardless of sector; having the right business model and the right organisational structure. Companies faced with a challenging outlook should continually be assessing fundamental business principles such their management team and supply chains, to ensure it's in the best shape possible.

Having asked the questions 'what makes a successful retailer?' and 'how do retailers survive in a downturn?' the RTT came to the conclusion that it's the same factors for both.

Nothing really changes in a downturn; it's simply harder to hide mistakes. So if Christmas and the year ahead do prove to be tough, taking time to assess these fundamental principles of retailing now is likely to be well spent.

Helen Dickinson is Head of Retail at KPMG

Read the latest Retail Think Tank white paper at www.retailthinktank.co.uk

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