With the first half of 2011 drawing to a close, Retail Gazette has taken a look back over the last six months to rate the retail sector’s performance.
And like a selection of school reports from your average UK classroom, some have achieved excellent results, most have managed to keep clear of trouble, a few who have found it hard to stay out of detention and a couple have finally been expelled.
Financial pressures outside of their control has of course made things very difficult for traders and like in a failing school a major lack of resources is making it very difficult to get any work done.
Instead of a lack of staff members, books or pens though, retailers are struggling with a dearth of customers as slow growth, high inflation and low wages keep wallets firmly shut.
E-commerce has been the exception to this rule and the major players in this sector have shown their strength this year; Amazon and eBay continued to grow in the UK with significant acquisitions whilst Asos and Supergroup posted annual sales rises of 58 per cent and 91.8 per cent respectively.
But aside from e-tailers and those in the luxury market, which are doing a booming business in Asia, retailers across the country have spent 2011 striving to combat the persistently tough trading conditions.
With all sectors fighting to encourage shoppers to spend, the relatively secure supermarkets have also spent an enormous amount of effort competing to be the biggest bully in the playground.
Convenience, price and property have been the major battlegrounds for the grocery retailers so far this year.
Increasing selling space is vital right now with so little growth in sales but the huge plans by Sainsbury’s set out in January and the ambitions of Waitrose and Morrisons in convenience make you worried if there will be enough room for all these new stores.
Haldanes’ taking legal action against Co-operative Food, confirmed today, could be a taster of how nasty things could get if success does not follow expansion.
Asda also found itself in trouble over misleading ads about its increased price match guarantee in February, after complaints by Tesco and Morrisons. Tesco then launched its own price comparison service, but its ads duly got banned after Asda objections.
With the main supermarkets desperate to increase selling space, rumours that Iceland could be put up for sale which emerged in May had all the usual suspects circling the second tier grocer for scraps.
Expansion could become more difficult, particularly in convenience, if the Mary Portas review (also announced in May) advises on more independent stores in town centres. That is if the government chooses to act on any given advice which is highly dubious.
Re-organisation, restructure or reduce costs
Along with major investments in multichannel which nearly all firms now see as essential, many major retailers have been conducting significant re-organisation programmes since the start of the year.
Amongst these changes has been the departure of some of the most senior members of the class, including Rose at M&S, Bond at Asda, McBride at Amazon UK, Ortega at Inditex, McPhail at New Look and of course Tesco’s Leahy, and many other companies have shuffled their management line-ups.
More radical changes then just personal alterations have been initiated by a number of high profile retailers however, following a string of profits warnings and tumbling sales results.
Cost costing has been the buzz word at results presentations so far in 2011 and several retailers such as Next, WHSmith and Debenhams have skilfully managed their stock and stores to post profits despite struggling sales.
More embattled traders like Game, Thorntons, Jessops, Dixons Retail, Blacks and Clinton Cards have all been revamping shops or trialling concept stores in an attempt to try and turn around trading, but the biggest most significant revolutions have happened at JJB Sports and HMV.
JJB was saved from the brink of administration by its successful CVA in March and with its restyled stores reportedly recording improved trading levels the pressure from investors seems to have eased, whereas HMV still has some work to do.
The banking facility agreed this week is of course good news as it kept the wolves at bay but with the sale of Waterstone’s last month, questions remain over what the company hopes to become.
Can it really convince consumers that it is the go to place for electricals? And as the last major entertainment store standing, is its restructuring proof there is no longer a place for a retail chain selling physical media products on the UK high street?
Down & Out
Another significant trend during the first half of the year has been disappearance of several struggling retailers from the market.
Insolvencies rose by 30 per cent year-on-year in the first quarter as many firms have not been as lucky as JJB to get a last minute lifeline to keep shop doors open.
Of the big names, British Bookshops fell into administration in January, Birthdays (Ireland) and Officers Club followed in March, the next month Oddbins went down, Focus DIY started a scramble over its large outlets when it closed down in May, and now Haldanes has fallen in June.
With retail sales stalling again in May after a bank holiday and royal wedding boost the previous month, a vast improvement in the short-term is probably too much to ask for.
Insolvency experts have told Retail Gazette that there will be more failed businesses in the second half of the year than there have been since January, but there are still reasons to be optimistic.
Hard times offer opportunities for the brave and those which end at the top of the class come December are likely to be the businesses which have made shrewdest changes during the first half.
Then we will see which firms’ store revamps have paid off, who has invested best in new technologies and who is still present at the end of year register.