Sales have come earlier this year with many retailers heavily discounting (40% more than last year) due to the nearly continuously bad UK weather from April to the end of July April, the Olympic effect in London and concerns over the Euro.
Luxury brands sales though are up, especially in UK designer outlet centres such as Mc Arthur Glen where brands such as Mulberry and Ralph Loren are 35% up. More affluent customers are now going to outlet centres presumably to save money are creating a leap in value of the average shopping basket.
Mulberry with a 54% annual profits leap is one of the winners of the luxury boom and plans to double its UK manufacturing output. Prada sales were up 36.5% as a group worldwide.
The Olympics have seen poor London retail trade as shoppers steered clear of the West End. This does not seem to have affected luxury shopping locations like Harrods where some reports have sales up 50% in the last week, as well as in parts of Mayfair.
Those recession hit areas in the UK have encouraged the likes of Bright House, the largest rent to own household goods store which aims to open 35 new stores. Sales are by HP, appealing to the poorer UK areas, but with a 29.5% interest rate, some organisations like Barnardo’s felt this was morally indefensible. On the other hand Poundland,which has no such HP issues, are looking for 70 new stores of 4/10,000 sq ft in the South West and South Wales.
Changes in Retail
3% of UK shopping areas now take 25% of the spend of non-essential items (CACI). Thus Thorntons are trying to close, it is reported 160 shops, having too dense a network of shops in the UK in a brand that has been overtaken by the likes of Hotel Chocolate at the higher end of the market as chocolate addicts spend on quality and less on quantity.
Towns or Shopping Centres that offer thus a better lifestyle and all round offer will provide the determining factor for future success.
Some fashion chains shops like Abercrombie and Fitch are pumping aromas onto the Street to attract customers, just like the old coffee shops used to do with ground coffee smells as part of a shopping experience, something you can’t get on line yet! Not all adjoining retailers may like this and it could like external music, become a contentious issue.
Successful retailers need to be multi-channel operators to give customers flexibility. Mobile technology does offer shoppers instant price comparisons. So providing the shopper is happy on price, the choice of a retailer will be based on customer service and trust and the “shopping experience.”
John Lewis on line sales have grown in 8 years from zero to £680M in 2011/2. Shoppers who spend across multi channels tend to spend more too. JL’s Brighton Waitrose has a “click and collect” window allowing customers to scan QR Codes. Simplicity for the shopper is vital with JL’s 20% of sales being by “click and collect” now. These virtual shopping walls customers where shoppers can scan items on their mobile phones are appearing more and more.
Of the total on line spend, wealthy achievers spend 6% on food on line,15% on fashion,13% on homewears,10% Leisure, Jewellery 6%, 7% on footwear, 35% on electrical and 25% on communications. Hard pressed customers spending less, proportionately, on line. (CACI Research).
The wealthier the customer, the more they spend on line, so the wealthy towns and shops must seek to provide a good environment to attract shoppers.
Stores that are immune stores to the internet will remain touchy feely products and service such hairdressers, pet shops, opticians, shoe shops as well as luxury fashion, where madam or sir gets pampered and those retailers that offer something different with great service and an experience not offered online. A holistic brand experience is the keyword. Shops can also be a “walk in catalogue” for the internet.
London
London house sales indirectly driving the retail market rose by 76% last year in the outer boroughs. Inner boroughs saw a 6.7% rise in average value.
Changing face of fashion Streets
Landlords continue to create new “retail quarters” to drive values and desirability. King Street Covent Garden is one such location with the likes of Apple, Burberry Brit, Rugby Ralph Loren, 7 for all Mankind and Oliver Sweeney having been attracted to the Street by careful marketing and buying out unsuitable tenants.
Marylebone High Street and Mount Street are other recent examples of how landlords where they can get overall control have changed the nature of the areas. Lower Sloane Street too is moving more upmarket with the replacement of some of the lesser retailers.
South Molton Street has recently emerged as one of the most sought after Mayfair Streets with a recent deal at number 33 at £550 Zone A, £385 Zone A before, to US Group Oro Gold’s cosmetics franchisee, setting a new record rent. Golfino, the German international designer golf & leisurewear brand, also opened their second stand-alone shop in South Molton Street following their successful opening in Edinburgh Multrees Walk.
Oxford Street not to be left out saw a leap in rental values with Footlocker paying £800 Zone A up from the £725 paid by Aldo on 309 Oxford Street 15 months ago. Rents have more than doubled in 10 years.
Crossrails street works have damaged trade at the top of Oxford Street near Tottenham Court Road as well as Charing Cross Road, which is effectively isolated. The same has been the case for the Oxford Street end of New Bond Street/Hanover Square where the new Crossrail station halls are to be located. The locations will be transformed though come 2017 when the works may be finished.
And what else is new in London retailing?
A lot of Irish investors who had cheap euro financing before 2008 have to sell up in prime parts of the West End, although many have doubled their money in doing so. The luck, perhaps, as they say of the Irish!
65,800 sq ft of new leases were signed in exclusive shopping areas like Bond Street and Sloane Street recently with only one UK retailer Belstaff, the rest were Italian, French and Swiss taking 38% of the space. (C&W Research) from Alberta Ferretti, Loro Oiana to Salvatore Ferragamo.
Adidas are seeking 3/4000 sq ft close to running areas like Parks and the River, capitalising on the Olympic effect, while Sweaty Betty glamorous, yet practical women’s active leisurewear with 24 shops, are now looking forr 700/1000 sq ft in Marylebone High Street, Primrose Hill, Wimbledon Village, Dulwich, Covent Garden, Oxford, Harrogate, Guildford, Beaconsfield, York, Marlow & Edinburgh.
Jill Sander are looking for a 2500 sq ft flagship store in Mayfair or Sloane Street and Bering watches are after 500/600 sq ft from Oxford Street to Regent Street Covent Garden and Carnaby Street
Loake shoemakers are seeking a 600 sq ft shop in the City while Hollister have opened their flagship store in Regent Street with male models in swimwear as an attraction to shoppers.
Kusmi Tea Paris trading in 20 countries, are looking to open a 1500 sq ft flagship in Chelsea, Brompton Road, Marylebone High Street or Notting Hill, while Espression Lavazza are targeting 1400 sq ft in central London and the City. Kamps a German baker with 500 stores, want 900/2000 sq ft.
Maplin have designs on more London stores of 1500/3000 sq ft. Blanc a new dry cleaner with eco-friendly products is looking to open in Brompton Road to Notting Hill. Body Shop is emerging from its acquisition slumber looking in London for 800 sq ft shops.
The UK
Fashion sector
Jon Moulton bought Jaeger for £19.5M, all being debt, with the goal to pull it round after Harold Tillman’s lack of success with this brand and Aquascutum, which went into Administration earlier in the year.
Dr Martins are being courted by Mikhail Fridman, a Russian Billionaire and Hamleys are being eyed by Groupe Ludendo of France for £60M, which has shops throughout Europe.
Monsoon rose by 12% on earnings although sales were flat. Overseas sales were 23.5% up offsetting a 4% drop in the UK. SuperGroup T/A Superdry on the other hand posted 14.1% sales increase but still with profits warnings and concerns they may lose their way like French Connection.
Dixons, capitalising on its ipad sales, posted an 8% rise in the spring.
Liberty London, apart from new London locations, are after 2000/3000 sq ft in White City, Bath, Bicester Cambridge and Cheltenham.
Men Kind with 23 stores wants 25 more stores targeting the top 75 UK towns for 1500 sq ft.
H&D Fashions, a ladies fashion boutique, are after UK towns in prime spots of 800/3000 sq ft for both pop up and long leases, while River Island require 2/3000 sq ft in prime locations nationwide.
Tony & Guy have some 21 requirements for 750/1250 sq ft shops and Jo Jo Maman Bebe are looking for 800/1500 sq ft, but are after the better UK towns.
Bonmarche, post Administration, having kept 212 stores, are expanding again into 2500 sq ft units.
Blacks Leisure reported a 14% sales fall for the full year post JD Sports acquisition of them. Overall revenue was up 20% though for the group.
Non-Fashion sector
What with the UK success in the Olympics Evans Cycles are continuing to expand into major towns with requirements of 4/8000 sq ft outside London and 2500 sq ft inside. Recent openings have been in Edinburgh, Liverpool, Manchester, Guildford and Wimbledon.
Tiger Stores homewear are after 1750sqft to 3000 sq ft in mainly the South.
Metro bank now have 11 units their last one in High Wycombe, with currently 60,000 customers and 6000 new accounts a month and will want 200 units within 10 years. They offer 7 days opening free accounts, no charges, no cash handling charges, free coin counting, and instant call access after 3 rings, to set them apart. Priority requirements for 3500 sq ft at ground floor only are in London and the south, plus Oxford and Brent Cross.
WH Smith have taken 30 stores within the last two years and are after 1200 sq ft sales in affluent market towns such as Clapham to Ludlow.
Marie Curie, mainly in the South with a rent ceilings of £40,000 pa, want 700 to 2000 sq ft with Sue Ryder after the same space and wanting 40 stores in 2012/3 at market rents.
Jessops 200 shop chain, now owned by its bankers HSBC, with 47% shareholding, had a 3% sales rise in June.
Sports Direct has been basking in the sun, while others failed, as customers looked for cheaper alternatives. Shares up 40%.
Farrow & Ball paint and wallpaper, remain seeking 750/2000 sq ft in affluent towns from Bury St Edmunds to Exeter and opening in Blackheath, while Blue Inc fashion are still seeking 2500/4000 sq ft in selected UK towns
Food Sector
Coffee shop expansion and small format supermarkets show no sign of abating their expansion. Discount food is more popular in the recession effected areas of the UK, with Aldi’s sales up 27.9%, earlier in the year.
The Co-op,Tesco, Sainsburys & Waitrose continue their march for new 3,000 sq ft shops.
Eat now with 118 shops want another 100 over the next 5 years of 500/2000 sq ft mainly in the London area, while Auntie Anne’s Pretzel are looking for up to 500 sq ft throughout the UK- 1200 shops worldwide.
Greggs, with a £701M turnover, need another 20 stores for 2012 of 500/1200 sq ft from universities to Bus Stations. Café Nero are targeting the Home Counties in 850/2000 sq ft while Costa continues their relentless expansion in 750/2000 sq ft, with 1000 shops already in the UK. Muffin Break, the unique market fresh baked food/coffee shop group are after as many as they can achieve.
The push for Drive Trus continues McDonalds want 300 more drive thrus and Costa following.
and those in downsizing …
Clinton Cards 767 shops, was the biggest looser, going in Administration in May. The internet played its part as cards have given way to texts and on line cards and competition from supermarkets. Clintons failed to get to grips with market changes had a uninspired overpriced product with massive UK shop branch duplication, plus an £80M pa rent bill.
Johnson the Cleaners are disposing of a number of branches and Austin Reed continues to sell off 16 non performing Viyella and County Casuals shops.
French Connection have 14 stores on the market, all in major shopping centres, where they are paying rents up to £500,000 pa a high price if the brand is not performing. Esprit has 7 large stores for sale at high rents too.
Milles Cookies are selling off their worst branches in Edinburgh, Liverpool and Bristol, while Kew closed its branches as Jigsaw saw no hope of any recovery for its brand, while most of Cafe Giordano cafes are on the market. Argos is suffering and wants to downsize their 748 stores with profits down substantially. They were the first multi-channel retailer, but the internet has overtaken their original market leading concept.
So what are the obvious lessons to be learned from these types of retail failure?
Being careful with expansion, duplication in the same town and huge rent commitments.
Keeping ahead of retail changes, promotion and offering something you can’t get online-a shopping experience of excellent customer service, trust and price sensitivity- something John Lewis seem to have cracked long ago. The successful part of the retail market has polarized into the budget sector and the designer /Luxury sector, so the in between, will always be difficult to master.
