Why is Retail suffering more in this recession?

So why Woolworths, Focus and Peacocks to name a few?

Many argue that internet competition has led to an increase in pressure on ‘real’ customers passing through the doors. There is little doubt that this has had an impact but does this mean that there is no room for traditional retail outlets? Perhaps the answer is that there is room but that the number of participants in each retail sector will diminish as there is increased competition for the ever decreasing number of consumers prepared to spend hard cash in store. So how do you become the survivor rather than the ‘bad news’ message?

The Internet Phenomenon

The received wisdom is that most people access goods on line due to the ease of purchase. Most consumers with money are ‘pedaling’ harder to retain their levels of discretionary spend. This means that they have less time to carry out their purchases and will necessarily gravitate to the more time and cost efficient solutions for their everyday needs including their purchases. The Internet meets those demands. Why? Well, the Buyer does not need to organise the family, drive to and park at the store, merely switch on the computer, log in to the website, browse and then purchase. The Seller does not need multiple sites at high rents with numerous staff to satisfy the demand of the Buyer. Overheads are reduced and pricing is positioned accordingly.

The Retail Store Challenge

Despite the demise of some retailers, others continue to prosper and there must be a reason. Certain types of purchase do require a touch and feel before the buy. Why? If you are buying staple grocery products you have selected a store and will probably buy online with delivery an added cost. The answer being that one bottle of maker brand bleach is identical to any other. On the other hand there are purchases with which the Buyer will have to live for 10 years or so and where the cost of purchase is high. Getting it wrong can be costly particularly if the Buyer would then be determined to replace it. More often than not it is this type of transaction where Buyers need to see the product and often buy at the store.

This leads to the second challenge. As mentioned the Internet Phenomenon has led to two issues arising namely: ease of access and reduced cost. In bigger ticket purchases ease of access become less relevant as outlined above. But Retail Stores cannot at present deal with the cost comparisons. A potential purchaser often goes to the store, decides on the item they wish to purchase. They go home access on the internet and carry out the purchase. The retail store has now become a shop window.

So how does a traditional retail store deal with these issues?

Solutions

There are no set solutions for any particular retail organisation as the objectives that can be achieved are dependent on the sector in which they trade.

However, many commentators have opined on the demise of Woolworths. Putting it bluntly, little money had been spent on the stores giving the impression to the consumer that the business (and by this I mean the management) didn’t care for their trade. Poor working environments created low staff morale and engendered below par customer service. So when the recession hit a larger than average proportion of people stopped coming to the stores and as a result spending money at Woolworths. Based on this trend their demise was inevitable.

So what can the retail organizations to do face down and succeed despite this challenge?

1. Ensure that spending is focused on getting potential customers through their doors. This might not make them spend but every consumer coming into the store is a potential increase in turnover.

a. Continuously ensure that the product range fits the demands of the consumer;
b. When spending on stores ensure that it delivered to ensure an environment that enhances both the product and the working environment of your staff who are your ambassadors.

2. Review the overheads of your business to ensure that your sale price stands comparison against the relevant internet sale prices. Turn the window shopper into a buyer.

a. This can be achieved by renegotiation of your lease terms with the Landlords. Remember that as other businesses go into administration the rental costs of let commercial premises reduce. Any commercially savvy Landlord would rather have a let premises paying rent albeit at a reduced amount than empty premises;
b. Where an additional service forms part of your sale, such as installation, ensure that your margins are not to high. Whilst the Buyer may purchase from you the added margin that you might achieve from the added service may be lost and indeed it is often the case that the added service cost is factored by the purchaser into the overall price making your product uncompetitive;
c. Don’t keep excess stock on premises. By finding a central solution you will reduce the overall spend of each store and benefit from economies of scale. Make your stores a window to your products

If these issues are of interest to you and in particular in relation to rental reduction negotiations please contact me on 01992 558411 or brendan.obrien@breezeandwyles.co.uk.

 

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