2018: The Year that Was

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2018 year that was

2018 was, to put it mildly, a nerve-racking and turbulent year for the UK retail industry.

Not only did it present some of the toughest trading conditions in modern history, leading to the most crashes and job losses since the global financial crisis of 2008, but the breakneck speed of change exacerbated the void between those performing well and those struggling.

Here’s the Retail Gazette’s look back at what dominated the headlines in 2018.

#MeToo

The #MeToo movement was one of the most persistent and shocking stories of the year, with women all over the world exposing sexual misconduct and harassment from within their industry of work.

Retail, of course, was no exception. Most notably, Topshop owner Sir Philip Green was the centre of one the year’s most significant #MeToo scandals after he was accused of “serious and repeated sexual harassment”.

In late October, Lord Peter Hain used the protection of parliamentary privilege to name Green as the prominent City businessman at the heart of a story published in The Telegraph which levelled numerous allegations against the retail tycoon.

He said: “My Lords, having been contacted by someone intimately involved in the case of a powerful businessman using non-disclosure agreements and substantial payments to conceal the truth about serious and repeated sexual harassment, racist abuse and bullying, which is compulsively continuing, I feel it’s my duty under parliamentary privilege to name Philip Green as the individual in question given that the media have been subject to an injunction preventing publication of the full details of this story which is clearly in the public interest.”

Although Green said he “categorically and wholly” denied the allegations, a Topshop boycott soon gathered pace, and further calls for Green to have his knighthood revoked began to spread, while Beyoncé distanced herself from Green by buying out his stake in her Ivy Park fashion label.

Green was not the only figure to become embroiled in a misconduct scandal this year.

In February, athleisure giant Lululemon’s chief executive Laurent Potdevin was forced to resign following allegations he “fell short” of “standards of conduct”.

Later that month, Guess co-founder Paul Marciano was accused of “improper conduct” and forced to give up his daily responsibilities.

March saw the first of three departures at Nike due to “behaviour occurring within our organisation that (does) not reflect our core values of inclusivity, respect and empowerment”. Brand president Trevor Edwards, head of diversity and inclusion Antoine Andrews and vice president Jayme Martin had all stepped down by the end of April.

Meanwhile in June, Clarks chief executive Mike Shearwood stepped down after the shoe retailer found his conduct “fell short” of expectations and in September, JD.com saw its share prices divebomb after chief executive Richard Liu was accused of sexual misconduct and arrested in the US.

Most recently, Ted Baker’s founder and chief executive Ray Kelvin announced he was to take a leave of absence after an online petition – signed by over 1000 staff members – accused him of making colleagues “uncomfortable” by allegedly enforcing a “hugging culture”, as well as asking young female staff to “sit on his knee, cuddle him, or let him massage their ears”.

Sustainability

A more positive theme of 2018 was the huge effort made by the retail industry to reduce plastic waste and improve sustainability.

The movement was largely driven by David Attenborough’s seminal episode of Blue Planet II in December last year, which took an unflinching look at the damage plastic and microplastics were having on marine life.

When reports laid bare the scale of the industry’s reliance on single use plastic, estimated to be 59 billion tonnes a year, major initiatives were introduced across the industry to tackle the issue.

In March, the government announced it was set to launch a bottle deposit return scheme, encouraging retailers across the country to impose variable tax and return capabilities across their estates.

Morrisons has since become the first to introduce bottle deposit reverse vending machines in its stores, while Co-op trialled the same idea across various festivals over the summer. Tesco and Iceland have also announced support for the scheme.

Various retailers also announced further initiatives to limit the use of single-use plastic bags after the initial 5p plastic bag tax in 2015. Waitrose announced in September it would scrap 5p single use bags altogether by next year, Co-op said it would roll out biodegradable plastic bags across 1400 stores, and H&M revealed plans to do away with all plastic bags by the end of the year.

Iceland vowed to banish all plastic packaging within five years, while many other companies including Lidl, National Rail and Ikea launched initiatives to do away other single use plastic items like straws and packaging.

For the Christmas season, Waitrose announced it would ban all plastic glitter found in its Christmas products by the year 2020, in response to the public’s demand for grocery retailers to do more on part to steadily end the use of plastic. Waitrose pledged it’ll produce all its own-brand Christmas cards, wrap, crackers, tags, flowers and plants free of plastic glitter or with glitter-like biodegradable alternatives.

Fashion retailers also significantly upped their sustainability initiatives this year. Aside from H&M’s plans to do away with plastuc bags completely, Burberry also vowed to stop burning unsaleable clothes, Asos pledged to train designers in circular fashion, John Lewis trialled a buy back scheme to cut landfill waste, Adidas said it would cut the use of “virgin” plastics by 2024 and Asda said it was working to reduce microplastics in its George range.

Food waste was also a big theme, with Co-op introducing a food share scheme which will donate eight million meals a year, while other grocers like Morrisons have begun selling kilo boxes of “wonky” fruit and vegetables, which would usually be thrown out, for just £1.

CVAs and Administrations

This year has not been the greatest in terms of business for retailers, as many studies and reports have indicated 2018 to be the worst year for UK retail since the global recession a decade ago.

Throughout the year several retailers experienced decline in profit or sales and have been left with the doomed choices of either having to enter a CVA or administration.

Retailers that have entered CVA include Homebase, New Look, Carpetright, Office Outlet, Mothercare, The Original Factory, and Select Fashion.

Meanwhile, House of Fraser announced plans to launch a CVA at one point during the summer, but it never eventuated and fell into administration instead.

Within 24 hours, retail tycoon Mike Ashley’s Sports Direct bought the department store in a pre-pack administration deal.

Sports Direct also bought Evans Cycles out of administration in November, after it failed to find a suitable buyer to keep it afloat.

There were other high-profile administration cases in retail this year, the most notable being Toys R Us, Maplin and Poundworld.

Other high street names that collapsed include the Crawshaw butcher chain, American Golf, Coast, Barrington Sports, Mothercare’s Children’s World fascia, Bench, Henri Lloyd, Fabb Sofas, Bags Etc, Calvetron Brands, Warren Evans, East and Elizabeth Emmanuel.

Blue Inc had entered into CVA last year, but it had to be handed over to administrators just this month as business was steadily declining.

Although CVAs can provide hope for businesses to rejuvenate, this is not always the case.

Poor management, lack of product diversity on offer, lack of point of sales options and sky high rents can still drive a retailer to the ground.

However, many retailers prefer to enter a CVA rather than administration as CVAs are usually cheaper to instigate, less draconian, and most importantly, the business can continue to trade, which gives hope for survival.

Experiential Retail

Chances are by this point the words “experiential retail” make you cringe, and that’s because it was one of the buzzwords of 2018.

Falling footfall, waning consumer spending power and a shift toward wanting to “do” rather than “buy” among the millennial generation have driven the rise of experiential retail.

One thing is for certain – experiential retail is the future. Throughout this year we’ve heard stories of high street decline and the ongoing rise of online shopping.

As consumers are increasingly investing in experiences rather than products, retailers need to respond to meet the needs of their customers. Customers aren’t just looking to walk into a shop, buy a product and leave because they could do this at home from their laptops. By producing a more immersive retail experience, retailers can appeal to consumers and drive footfall, therefore increasing sales.

Quite a few department stores responded to experiential retail this year, including Debenhams who announced in October that they would introduce in-store gyms as part of a new partnership with fitness chain Sweat. The first gym opened in Debenhams’ Sutton branch, with two further gyms in Manchester and Bristol set to open in 2019. This is part of Debenhams’ strategy to create a place for “social shopping”, which is the key focus in the retailer’s turnaround scheme.

John Lewis has also upped the ante on customer experience initiatives, such as an after-hours private shopping service, while video games retailer Game increased the number of its in-store esports locations.

However, the department store that grabbed headlines this year with customer experience initiatives was Selfridges, which launched a pop-up boxing ring as well as the largest indoors skate bowl in the country.

Many retailers are trying to respond and keep up with the rapid changes in consumer requirements and shopping behaviours, but they also need to implement turnaround plans a lot faster and this requires strong leadership, determination, as well as investment.

The dramatic collapse of House of Fraser this year is an example of how retailers are lacking experiential retail.

George Allardice, head of strategy from Barclaycard Payment Solutions, told Retail Gazette that retailers this year looked for new ways to stand out from the competition and as a result steered their business towards the “experience economy”.

“Barclaycard research found that over a third of retailers did just that, as 36 per cent now host in-store events, such as classes, courses and exclusive sales previews, with a further 19 per cent planning to start doing so by 2020.

“Taking advantage of the ‘experience economy’ can boost both sales and customer engagement, as shoppers increasingly want to stay in stores for longer, rather than head home with their purchases.

“This year, we saw retailers making the most out of this opportunity, with recent events such as skyline skating on the roof-top of John Lewis’ flagship store in Oxford Street.”

He added: “While bricks and mortar stores sought to encourage shoppers through their doors, they faced stiff competition as Brits continued to indulge in their love of online shopping.

“This has posed further challenges for retailers as the culture of ‘serial returners’ continues to grow.”

Allardice concluded: “In light of this, our research found that UK shoppers are returning £7 billion of purchases every year, leading to a ‘phantom economy’ of lost revenue for retailers, with sales coming in that they ultimately can’t recognise.

“This year, we have seen some retailers implement policies to prevent huge volumes of returns. It will be interesting to see whether more online retailers will follow suit in 2019.”

Another retailer that dipped into experiential retail is H&M’s Kings Mall store in Hammersmith, which introduced a new concept to create a Mediterranean feel for customers and features repair, personalisation and self-checkout services.

Mergers and Acquisitions

It seems that there’s been a rush of retail acquisitions and partnerships this year as companies search for ways to combat sales slumps. Acquisitions can sustain many different goals beyond simply buying up the rival.

In the past year, the public has seen retail mergers and acquisitions rise by 15 per cent. Examples include The Co-op’s approach for Nisa, valued at £143 million, Tesco Opticians’ acquisition by Vision Express owner Grandvision, and Multiyork Furniture’s acquisition by DFS.

However, the biggest of them all and perhaps one of the largest in UK retail history is the proposed £12 billion merger of Big 4 rivals Sainsbury’s and Asda. The merger is yet to be approved, as it is still under investigation from the Competition and Markets Authority (CMA).

Should the CMA give it the final green light it needs, the new Sainsbury’s-Asda entity would make it the UK’s largest supermarket group, effectively toppling Tesco from its longstanding position at the top of the market share.

Another acquisition that stole headlines this year was Mike Ashley’s £90 million rescue of House of Fraser from administration in August. In the advent of this, the retail tycoon cited his ambitions to create the “Harrods of the high street”.

House of Fraser wasn’t Ashley’s only acquisition, as he also bought Evans Cycles through a similar king of pre-pack administration deal in November.

Clicks-tobricks, pop-ups and concessions

Over the past few years we’ve seen the less profitable retailers changeover from the high street to online in a bid to reach a larger audience as well as remain cost-effective.

This year, Retail Gazette explored the many click-to-bricks that have branched out to bricks-and-mortar retail. This has become a new opportunity for emerging online retailers to introduce their offering as a physical presence, and therefore gain an increased amount of exposure.

Amazon, known around the globe as a tech giant and online retail behemoth, made a concerted push into bricks-and-mortar retail with the launch of its Amazon Go checkout-free grocery convenience stores in the US. Reports have since emerged that it would soon launch in the UK in London’s West End, although an exact date is not yet known. It came after Amazon had acquired the Whole Foods grocery chain last year.

Missguided is one of the new online fashion retailers that has experienced an increased level of sales and profit due to its growing popularity. In the past year it has opened two stores in London’s Westfield and Kent’s Bluewater shopping centres.

However, since the stores opened the clicks-to-bricks fashion retailer has prompted a review of 100 out of its 800 jobs, and at least 50 are expected to be cut.

Other click-to-bricks examples include Boden and Joe Browns, catalogue retailers that branched into physical retail in recent years, as well as Blaiz and Zalando. The latter opened up its first beauty store in Berlin in July.

Meanwhile, Notonthehighstreet branched out into physical retail with pop-up stores at some Network Rail train terminals.

The increase of click-to-bricks inevitably brings forward the use of pop ups as most online retailers start out as concessions in order to expose their brand to the high-street in a cost-effective way.

Retail Gazette spoke to Charlie Farr from Storefront, which specialises in renting out pop up space to brands who wish to promote their business and take a permanent lease.

“At Storefront in London and across all our global cities including New York, Paris, LA and Hong Kong, we have seen a record number of brands booking short term commercial spaces through retail, gallery, showrooms and event spaces,” he said.

“We work with all different types of landlords and brands- big institutional and small independents.

“Large institutional landlords are also changing, over 40 per cent of our pop-up spaces in London have been booked through these landlords which demonstrates their changing attitude towards short term spaces, their need to keep up with retail trends and give opportunities for brands to promote themselves in hope that they will be successful and take a permanent lease. “

Most famously, tech giants Facebook, Apple, Amazon, Netflix and Google (FANG) have all opened pop ups in 2018 through Storefront in many global cities.

“Ecommerce brands see physical presence as an essential part of their marketing strategy and effective way to engage existing and new customers offline.

“The FANG companies have all launched pop ups this year through Storefront in several global cities.

“‘Crisis on UK high street’, ‘thousands of empty spaces,’ this could not be more opposite to what we are seeing through pop ups in London.

“The retail landscape is changing, customers find it refreshing and we see now slowdown in this trend to come next year.”

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