Retail & Leisure News - 20 November, 2017
Headwinds facing non-food sales in the UK continued to blow hard in February. According to the BRC, while food sales boosted overall sales growth of 0.6% on a LFL basis, the non-food sector saw LFL sales fall 3.3% in the three months to February. Despite signs of easing inflation, the continuing weak growth in household earnings is forcing consumers to spend a greater share of discretionary income on essentials, and dampening overall sales growth.
The challenging macro picture provides the background for last week’s high-profile retailer failures, as Toys R Us and Maplin both collapsed into administration (and New Look announced plans for a CVA). However, while the macro conditions are certainly a contributing factor, they tell only half the story. Arguably, at the root of these failures lies the inability to adapt to fast-changing consumer demand and the online-driven structural change sweeping through the retail market.
Toys R Us has failed to innovate and invest sufficiently in its store portfolio, resulting in a chronic lack of theatre and fun in its in-store experience. The drivers behind Maplin’s failure are different, but despite a real focus on service, ultimately it failed to create a compelling customer proposition (at the right price) to entice shoppers through its doors. For all retailers, providing consumers with a distinct reason to visit the store is crucial, particularly when goods are available cheaper and more conveniently online.
So, a stormy week for UK Retail, but as always, a balanced view needs to be struck. The latest tranche of negative news obscures the fact that many retailers continue to successfully find ways to navigate change.
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