Retailers on the high street may be grumbling about lower sales and a miserable new year, but, as Lisa Miles learns, the future of shopping is cheap and virtual
At the end of 2005, high street retailers were counting their takings with a heavy heart. The UK consumer, they were told, was relinquishing retail therapy in favour of sensible spending and serious saving.
But a closer look at the retailers in our Top 500 reveals that the picture might not be so bleak. Consumers have merely changed their lifestyles and so adapted their shopping habits accordingly. The "average customer" no longer exists and a multi-channel approach to retailing is proving more successful that just relying on bricks and mortar.
Home shopping, particularly online retailing, is booming. The Deloitte Christmas Retail Survey showed a 50 per cent increase in people using the internet for the bulk of their Christmas shopping. And 70 per cent of retailers now think that having a website is important to consumers at this time of year, up from 50 per cent in 2004.
In 2005 Liverpool-based retailed TJ Hughes entered the home shopping market with the launch of a new website, replacing a view-only site. A fellow Merseysider, retail giant Littlewoods, has shed its stores and been making multi-million pound investments in preparation for taking on the home shopping market with a new, slicker model.
In Manchester N Brown Group, whose home shopping division focuses mainly on catalogues, reported internet sales up 55 per cent to £333m, some 14 per cent of turnover, in its interim results for the six months to the end of August 2005.
"While there's a lot of talk about online retail, it is just another channel," says Alan White, chief executive of N Brown. "The vast majority of our online sales are driven by a catalogue. SimplyBe, for example, sees 45 per cent of its orders made online, but the colours and pictures are better in a catalogue. Where online does come into its own is that once the customer has got onto the site we can target them with lots of offers. We see a 20 per cent higher average order value online."
With group pre-tax profit up by over 45 per cent and turnover improved by 8.6 per cent, N Brown's home shopping formula is clearly working and White believes retailers that don't offer home shopping in some form are missing a trick.
The group has a very focused offer and its average customer is "the older or larger lady", as White diplomatically puts it, those less affected by market forces such as the housing market. "The average age of our customers is about 60, while the high street is increasingly not for the older customer," says White. N Brown's fastest growing brand is SimpleBe, clothing and lingerie up to size 32.
But the customer is targeted via more than one route. "We want to offer customers retail by post, telephone and on the net. The more channels a customer uses the more loyal they are," says White.
While the group's Zendor fulfilment subsidiary has helped the likes of JJB, Early Learning Centre and Woolworths come into home shopping, choosing to enter this market has to be a commercially viable decision. "We are seeing more and more companies coming into that multi-channel space," says White. "But there are implications for them in terms of the profitability dynamics in the high street stores."
Back on the high street, discount retail chains are becoming more and more visible, with the likes of Peacocks and Primark making long-lasting inroads into the consumer psyche. Knowsley-based discount clothes retailer Ethel Austin has been feeling the pressure as its market becomes ever more crowded.
"The discount sector is strong, but it's becoming more and more competitive," says Simon Cooper, chief executive of Ethel Austin. "Everybody's getting into that and doing it well. Primark and Peacocks have improved themselves and are investing lots of capital in improving their presentation. The supermarkets are looking at giving more and more space over to clothing and even the likes of Marks & Spencer are moving their prices to be more aggressive and affordable."
In June 2004 ABN Amro Capital acquired Ethel Austin Retail Group from private equity player LDC for £3122.5m.
In November 2005 it was announced that the company and its investors were looking at a financial restructuring. Former Powerhouse managing director Cooper took over from Phil Hoskinson, who has moved to the role of deputy chairman, while finance director Steve Williams has been replaced by Steve Smith.
Cooper, whose retail background includes stints at Arcadia, Debenhams and Warehouse owner Rubicon, says that a business plan has been written to stabilise and modernise the company. "The strategic plan includes the need to put investment into the distribution function," he says. "We have to get the product to the stores more quickly, tighten up the lead times with the supply chain and deliver stock to the stores in a pre-retail format."
A refreshment project is making the stores look and feel more modern and attractive. Cooper says that 24 renovations have already been completed, with another 70 planned.
The company's core customer is aged 25 to 45, but, explains Cooper, its clothes have a wide appeal. Stores sit in small, local high streets, rather than in major retail locations such as the Trafford Centre. "They are convenient; local people shop with us and we have a lot of repeat custom coming in so we are a bit more robust as we are not trying to take on the likes of George head on," says Cooper. "We have a unique market place."
But, while the discount market may be becoming increasingly crowded, Cooper explains that the trick is not just to keep reducing prices. "We are not about being the cheapest, but want to be the best value out there," he says. "We are about being great value. If we tried to take everybody on and be the cheapest, we would go bust in a week. We are looking to give our customers great, affordable, value clothing."
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