Posted on Wednesday 14 March 2018 by Ulster Business
Not a title that propositions one of the largest high street retailers, as Next was one of the stronger performers of 2017, but a question for anyone with an interest in the retail sector, writes Gareth Howell of Osborne King.
Post-Christmas trading reports saw concerns raised by a slew of retailers including, Debenhams, House of Fraser, New Look and most notably the Company Voluntary Arrangement (CVA) proposed by Toys R Us in December.
Even the casual dining sector, which has seen much activity in the last 10 years, has not remained immune to the current climate with Byron Burger and Jamie’s Italian both proposing significant restructuring. Not that these are intended to scaremonger but more to highlight the evolving nature of the market.
As if to prove the diversity in the market a number of positive reports came out of 2017 as retailers with well-positioned brands such as Joules, Ted Baker and Fat Face fared extremely well. Success was not limited to the upper end of the high street with Primark also reporting positive sales.
This trend pervaded into the much reported-on food sector with Aldi and Lidl continuing to experience year-on-year sales growth.
There are undoubtedly concerns over consumer confidence and savviness in spending that is having an impact upon some retailers more than others, however the spectre of online activity is now a reality that cannot be ignored.
This Christmas saw a massive increase in sales for devices supporting “online assistants” that enable and support a unique online shopping experience. Although this has driven an increase in demand in the logistics sector, the traditional high street must continue to respond and evolve perhaps through in-store digital innovation which supports the online platform.
This is probably the one area which could see the most radical innovation by retailers. We have already seen Topshop launching interactive billboards showing most popular items in store and Uniqlo’s Magic Mirror which allows customers to change the colour of garments without having to physically change the item.
This area is likely to expand as augmented/virtual reality also develops. Whilst we already have streamlined payment experiences with contactless payment this is likely to increase in scope. Amazon are trialling their person-less and cashless stores with the Amazon Go format which claims to dispense with lines and checkouts.
2017 ended with some of the largest corporate transactions in the property sector with both INTU and Westfield being acquired as part of multi-billion pound deals. Many commentators suggest that these were defensive moves focused on quality assets which should remain strong in the face of continued challenges for the sector.
And so where to next for retailing in 2018? Well, I anticipate a continued diversity of both focus and fate in the market. I expect a focus to remain on strategic locations and I anticipate more retailers to report further margin squeezes as the year progresses.
Outside the prime areas, a value-orientated focus will likely continue to dominate.
Although inflationary pressure seems to be showing signs of easing, the key watchwords will be “operational efficiency” as retailers seek to get themselves in the best shape. Whatever happens, it is certain that we will all need to think long and hard about the solutions