Thursday 30th June 2016
In case you missed them, a round-up of interesting retail related stories from the last week or so. Or, in the case of this edition, the last two months! We’ve been quiet but don’t worry we haven’t emigrated. Yet. 🙂
My Local has entered into administration and it looks as if only a very small percentage of the My Local estate, possibly around 35 of the 125 stores, will carry on trading. If 35 stores do survive, they are likely to be bought by another retailer and The Co-Op is said to be leading the race. Morrisons sold around 140 convenience stores to My Local October 2015 for around £25m in October 2015. Commentators said at the time that the stores were badly positioned and that was the reason Morrisons was losing around £36m annually on C-stores. My Local’s latest problems seem to prove that Morrisons did the right thing by selling. To Morrisons’ credit, it has said it will offer former Morrisons employees a job if a purchaser for My Local is not found.
The Co-Op is not just rebranding, it is trying to return to its traditional ethical values. On the re-brand front, the clover leaf logo, apparently first used in 1968, is back and the ‘old new’ logo will reach TV screens near you very soon. The Co-op going back to its roots is not just about a re-brand, it is about rediscovering the point of difference it lost in the public perception after the collapse of its bank, Paul Flowers and so on. In today’s saturated market, grocery retailers have to find a USP– and price is not enough. Being an ethical business is the USP the Co-op once had a firm grip of, and one which it could lead the charge on (I wrote about businesses seeking out such territory in November, click here to read the article). The announcement that Richard Pennycook has said he will take a 60% pay cut certainly provides credibility, and the re-brand perhaps signifies a return to what the Co-op used to be known for.
Steve Rowe’s statements about Mr & Mrs M&S were probably not particularly attractive to the people who fall into that bracket, or indeed those who do not and equally unattractive was the profit warning. Mr Rowe promises to return the clothing side of the business to growth, which was also Marc Bolland’s mantra but it never came to pass. That said, what lies behind these headline grabbing statements are what appear to be sensible strategies. Stop chasing fashion trends and attempting to compete with fast fashion brands. Focus on quality, low and stable prices. Perhaps Steve Rowe will manage to do what Marc Bolland failed to do, but it will take time.
The IGD published its five year forecast one week before Brexit. The Grocer says that the report seems optimistic given the result of the EU referendum, but like everything else just now, that is by no means certain. Here are the headlines from IGD’s research (i) the grocery market will grow by around 10% to £197bn; (ii) supermarkets/hypermarkets will not grow market share during that period; (iii) convenience will grow by 11%; (iv) online will grow by 68%; and (v) discounters will claim £1 in every £8 spent taking their market share to £25bn.
We suppose we had to mention the effects of Brexit, which looknegative for retailers and businesses in the supply chain. Depending, of course, on what Brexit actually means once the dust settles. In simple terms, the cost of putting products into stores goes up if the value of the pound goes down, and if free trade between the UK and the EEA ceases. Then comes the conundrum, pass the price hikes on to consumers, or cut your profit margin. For food retailers, recent history tells us that consumers don’t like rising prices and they will take their money to a cheaper alternative if it happens.
Asda has announced that chief executive Andy Clarke will be replaced by the head of Walmart’s Chinese business, Sean Clarke (who is not related to his predecessor). Former Sainsbury’s director Roger Burnley, who had been widely expected to take over as CEO, will become deputy chief executive and chief operating officer. Latest Kantar data shows Asda’s like for like sales down by 5.9% in the 12 weeks to 19 June. This follows Asda’s Q1 update last month which showed like for like sales down 5.7%. Brexit or no Brexit, it’s still extremely tough out there in the grocery sector.
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