e sell it - retail blog

I was sent this book the other day from Bob Phibbs, well known in the USA as ‘The Retail Doctor’. As the name implies, he is approached by ’sick’ retailers to ‘diagnose, treat and cure’ them to full recovery, very much like our own Mary (Queen of Shops) Portas.

Anyway, his latest book ‘Guide to Growing Your Business’ is is now available  and a very good read it is.  It is set out with very simple to understand suggestions along with real life examples and ends each chapter with simple action bullet points.

The chapters are split into clear sections including, financials, store layout, employees, selling, training, e-commerce etc. There is probably little in there which most professional retailers don’t know or appreciate but it’s always good to be reminded of many of the basics and look at your operations from an ‘outsiders’ viewpoint.

For example, many retailers are product or trading led and often don’t pay enough attention to the financials. Bob understands this and gives suggestions for key reports you should look at each week. He suggests getting print outs emailed to you of:-

1. Average sale per day - how much each customer spends
2. Number of sales - customer count
3. Weekly sales by category - top and bottom 5 establish trends
4. Weekly sales by person - how much each each employee makes you
5 . Year over year by week - comparing to previous years
6. Year over Year to date - running total for the year (will strip out changes to Easter dates for example)
7. Number of units per transaction - how your staff are upselling add-ons
8. Number of voids - a good alert to theft by staff

Now these figures will not take any more than an hour a week to analyse  but will give you excellent insight to trends to take action on. Rather than asking your manager general questions such as ‘why are sales down’ you can be more specific such as ‘why do sales drop when Vicki is working’?

As I’ve mentioned, it is a very easy to understand book with  simple step by step guides and at £13.99 or less will save/make you money even if you only take on board 1 or 2 of the suggestions.

You can buy it from £7.25 here

Tony Heywood - Gilcrest Services Ltd
Retail Troubleshooter
Business Turnaround and Recovery
www.gilcrest.com
www.linkedin.com/in/tonyheywood2

It’s been revealed today that Tesco has been actively looking around London’s West End for a Flagship store of  6,000+ sq ft for it’s F&F clothing brand.

The  ‘value’ clothing market is estimated to be worth £9.3 bn in the UK and Tesco lies in 5th place behind Primark, (Asda’s) George, T K Maxx and New Look with a market share of around 10.4%, not a position Tesco is generally happy with.

The F&F  (formerly Florence and Fred) brand has grown fast over the last few years with expansion into several sub-brands such as F&F Trends, F&F Couture, F&F Petite and F&F True (larger sizes) along with developing it’s internet presence. It even boasts it’s own celebrity with, the former model, Caprice as one of the designers.

It’s debatable whether Tesco can make the economics of a prime high street site square with selling similar products in it’s (much cheaper) supermarkets located in Retail Parks. You would expect Tesco to have done their sums but the equally professional Asda spent nearly 5 years trying to make their stand-alone George shops profitable before finally closing the 11 sites in 2008.

It may be an interesting year on the Retail front with a number of overseas chains, such as Victoria’s Secrets, Forever 21 and Vera Moda looking to take advantage of the cheap pound and (temporary?) availability of some prime retail sites after the shock of the last 18 months.

We may see a different High street in the next few years to what we are used to.

Tony Heywood - Gilcrest Services Ltd
Retail Troubleshooter
Business Turnaround and Recovery
www.gilcrest.com
www.linkedin.com/in/tonyheywood2

What’s been happening over the last week? Over the general economic doom and gloom has been a raft of good figures from Britain’s retailers.

John Lewis continued their good start to the year by last week claiming that Fashion sales were 30% up on the same week last year.

Laura Ashley revealed a like-for-like sales rise of 5.3% in the 17 weeks to May 29.

New Look defied the recession to post a 17.7% hike in profits to £163m for the year to March 27.

Womenswear retailer East returned to profit in the year to January 31 and is planning to open further stores and concessions.

Peter Simon and his family shared a recession- defying dividend of £14m as Monsoon reported an eightfold increase in profits, from £3.96m  to £32.96m and plan to open 140 stores in the next 12 months.

All Saints has put British fashion firmly on the global map after it racked up sales of nearly $1m (£680,000) in its first week of trading on New York’s iconic shopping thoroughfare Broadway.

So is the recession over? Are people spending like ‘there’s no tomorrow’ on  clothes again?

Clearly not as retail sales this year have been broadly flat and in real terms negative taking into account the VAT increase and inflation. But perhaps the ‘fall out’ in the High Street has now stabilised. According to Deloitte, in the first 3 months of this year, the number of retail companies going into administration fell to 44, compared with 124 in the first quarter of 2009 – representing a four-year low and a drop of 65%.

We have said goodbye to Morgan, Officers Club, Faith Shoes, Woolworths, Adams, USC, QS, Envy, Principals, MK One and Ethel Austin to name but a few. Some of the shops have been sold, some bought out of Administration but in the main they’ve left a void on the High Street with the sales being picked up by the survivors.

So it’s survival of the fittest! If you’ve got the required funding in place,  the right stock at a fair price and overheads under control you should be able to look forward to slow but steady recovery with a bigger slice of the smaller cake.

Tony Heywood - Gilcrest Services Ltd
Retail Troubleshooter
Business Turnaround and Recovery
www.gilcrest.com
www.linkedin.com/in/tonyheywood2

We now have a new Government in the UK and a coalition at that.  There’s no doubt that the next few years are going to be hard with the expected tax and VAT increases along with a reduction in spending within the Public Sector.  However, on the positive side, there’s probably more certainty in the markets and, whilst it’s going to be tough, the signs are that there will be a slow but steady improvement in the economy.

So, have you planned for growth? Maybe you have found yourself a niche that has successfully got you through the massacre on the High Street? Then now might be the time to be looking to expand.

I’m indebted to Colin Thomson of Cavendish for reminding me of some good tips on planning for growth.

Firstly, know what it means for you, your family, your staff and your company. You are probably going to have to put in the extra hours of work with less holidays and increasing stress.  Your attention may be more in demand as it could lead you to being in the ’spotlight’ within the industry as the boss of a successful growth  company. Are you prepared for all this?

You are? OK, lets get started.

1. Budgets and Plans - Obviously, you need to sit down and prepare the figures. Be rigorous in the detail, producing contingency plans with best and worst scenarios. Sound out the experts as they have a wealth of experience with successes and failures. Plan in as much detail as you can as the additional effort will be well worth it.

2. Finance -  Get the full backing of your funders. Make sure the Banks and other sources of finance are prepared to support you.  Ensure you have more funds available than you plan to need and additional back up arrangements should one or more funders pull out. Keep on top of this, regularly updating cash flows and keeping funders informed during the expansion.

3. Staff - Ensure that you have the support of your staff and have the right people who will be up to the job. Some staff’s abilities will grow with the company but others may not be up to it. Look to hire people for the specification of what the job will be, not what it is now. If they are good they will help you get there.

4. Product - Focus on your core business rather than getting side-tracked into other areas. You’re likely to have more success taking what you do well to other locations than trying to diversify ranges. For example, if you are a successful ladies fashion retailer your skills may not easily transfer into producing  menswear or children’s wear range. Also make sure that your suppliers are behind you and will continue their support. This means keeping up with your product requirements and setting appropriate credit limits.

5. Customers -  Stay close to your customers. Seems an obvious point but it’s surprising how often you can ‘take your eye off the ball’ during a period of change. It’s always a good idea to keep your customers informed of what’s happening - not only the good things but also when there are problems. They appreciate the updates and will reciprocate with loyalty.

There are many others things you need to consider such as marketing/advertising, staff rewards, facilities, changes to operational procedures etc. But if you can focus on the above points you will be most of the way there.

Good Luck
Tony Heywood - Gilcrest Services Ltd
Retail Troubleshooter
Business Turnaround and Recovery
www.gilcrest.com
www.linkedin.com/in/tonyheywood2

Here’s a neat little site for those who get confused between their mark-ups and margins. It contains a list of all the retail formulae you will need with explanations. It will actually calculate the figures for you on-line if you’re lazy!

It’s called Retail Formulas - check it out here

Tony Heywood - Gilcrest Services Ltd
Retail Troubleshooter
Business Turnaround and Recovery
www.gilcrest.com
www.linkedin.com/in/tonyheywood2

An odd thing seems to be happening on the other side of ‘the pond’.

After 40 years of retail expansion, 2010 seems to be the start of an ‘intentional’ contraction.

To quote Retail Wire:-

While mall-based apparel retailers in 2009 might have looked to outright close weaker stores, the current year is seeing many reducing the size of stores in a bid to improve store productivity. Is the trend toward smaller stores a positive or negative for mall-based apparel stores?

The CFO at Williams-Sonoma (The US largest home furnishing chain) announced that “they will continue to close additional stores in large multi-store markets.  Our strategy for store closings is to optimize our cost per square foot.  The goal is not closing stores per se.”  They have found that closing stores causes customers to use other stores or, more often, use the internet.  Over the next 3 years, 25% of their leases will be expiring.  Williams-Sonoma sees that as an opportunity to re-negotiate leases, relocate, or simply close the store.

According to research by the International Council of Shopping Centers, at the end of 2008, there were over 14 billion square feet (SF) of total retail selling space in America, 7 billion of which is in over 102,000 shopping centers of various sizes.  This translates into over 46 SF of total selling space and 23 SF of mall space for every man, woman, and child in America.  To put these numbers in context, in Europe, the equivalent numbers range from 1.1 SF (Italy) to 2.5 SF (UK) to 3.3 SF (Sweden).

OK, perhaps we need to put this into perspective.

We are a long way behind having the space saturation as the US but then, the UK’s cost per square foot , salaries and taxes are far in excess of theirs.

I know of a major Kitchen/Bathroom ’shed’ retailer that decided to close one of their West London stores last year as takings had dropped and the store desperately needed updating/refurbishing. After closing, they found that 80% of the store’s turnover was added to the 2 other West London stores significantly increasing profitability. Therefore, they only lost 20% of takings but saved 100% of the overheads. They are actively looking at whether this ‘trick’ can be repeated elsewhere in the UK.

Where does this leave the independent retailer?

The benefits may be that the smaller retailer could pick up some extra business, that there would be no upward pressure on rents. Perhaps cheaper or better quality sales staff could be available or local suppliers more keen for your business.

But overall, I feel that this could have a very negative effect of the traditional retailer. We’ve already seen many High Street  shops boarded up and looking like ghost towns. Much as the large retailers are competition, they do draw customers into the shopping centres making them lively and inspiring customers to spend money. If the  centres go the same way as the High Streets it doesn’t bode well.

What plans to you need to put in place?

Do your research and try to get as much advance notice if major retailers are looking to close. If you can, ensure that your lease(s) have break clauses so you are not stuck with a long lease that you can’t get out of. Keep flexible and don’t sign any long term contracts. Lastly, build up your internet presence. It’s going to take up an increasingly larger share of consumer’s purchases. Although a relative late entrant to the on-line world John Lewis’s internet sales already make it bigger than their Oxford Street branch (with 20% of the costs).

As always, the smaller retailers advantage is their flexibility so ’stay on your toes’.

Tony Heywood - Gilcrest Services Ltd
Retail Troubleshooter
Business Turnaround and Recovery
www.gilcrest.com
www.linkedin.com/in/tonyheywood2

The plethora of good results from the UK retail sector over the Christmas period may not be as good as the figures suggest.

Verdict Research said firms had gained £14bn of extra trade that would have gone to rivals if they had not gone out of business over the past year.

It pointed out that companies such as Woolworths, Zavvi, Principles, and Bay Trading are no longer trading.

Verdict said retailers also benefited from more buying ahead of the VAT rise.

With VAT returning to 17.5% from the temporary 15% on 1 January, it said this gave retailers a one-off lift.

Verdict’s comments come after the British Retail Consortium (BRC) said the UK High Street saw its biggest rise in December trading for eight years.(see the previous blog)

The RBC estimated that like-for-like sales rose 4.2%.

Verdict retail analyst Matthew Piner said: “Big, high-profile collapses such as Woolworths have had all the coverage, but the relentless closure of small stores has done just as much to push up vacancy rates.

“This has freed up extra sales which have been absorbed by the bigger stronger players, lifting their sales.”

Verdict points to other one-off factors behind December’s strong retail showing.

These include the cold weather boosting sales of warm clothing, food price inflation lifting the results of the supermarkets, and less discounting meaning consumers having to pay more.

Looking ahead, Verdict predicts that 2010 will be “tough” on the High Street.

“The extra spend freed up for survivors by casualties is a one-off gain, and we do not predict that there will be as many casualties in 2010 - most of the weakest have already collapsed,” said Verdict’s lead retail analyst Maureen Hinton.

She added that consumers are also concerned about higher taxes and continuing job insecurity.

As a result, Verdict predicts that consumer spending will only grow 1.1% this year, the second lowest rate of growth, after 2009, since its records began in 1966.

You have been warned!

Tony Heywood - Gilcrest Services Ltd
Retail Troubleshooter
Business Turnaround and Recovery
www.gilcrest.com
www.linkedin.com/in/tonyheywood2

Retailers are facing a “very tough” 2010, despite posting upbeat Christmas sales figures, the head of the British Retail Consortium (BRC) has warned.

BRC director general Stephen Robertson said consumer spending may not grow in the face of tax rises and continuing economic uncertainty.

“There will be tough sales and perhaps no growth,” he said in an interview with the Sunday Telegraph.

Most of the major retailers, whilst reporting generally good Christmas sales, have stated that they expect 2010 to be  tough/difficult/challenging.

It would have been a surprise if retailer sales for the Christmas and Sale period were not up against last year, given the disappointing sales of 2008, the rush to beat the VAT increase and fewer retailers on the high street with loss of Woolworths, Zavvi, Borders and a host of furniture groups.

Another reason given is that consumers have been re-directing some of their disposable income to the High Street with their lower mortgages, cutting back on holidays and not moving home. Should interest rates start to move then this may be reversed and missing out on holidays in 2009 will make them more of a priority for 2010.

For sure, this is going to be a long hard climb to get back to the halcyon days of 2007 and many retailers see the only growth is through increasing market share. i.e at the expence of other retailers.

Another year beckons where you cannot rest on your laurels. It’s going to be tough but those that survive will reap the rewards in future years.

So, as ever, watch those costs and overheads, keep your stock levels tight working to shorter lead times where possible and negotiate hard!

Good Luck

Tony Heywood - Gilcrest Services Ltd
Retail Troubleshooter
Business Turnaround and Recovery
www.gilcrest.com
www.linkedin.com/in/tonyheywood2

Last month we discussed eBay’s petition on the issue of brands  restricting the sale of their products on the internet. I was totally clear that the public should be able to sell their pre-owned items without restriction but are brands entitled to block the sale of new (genuine) items?

The high profile case which effectively gave the brands control over  distribution of their products was Tesco’s battle with Levi Strauss.

In July 2002 the High Court upheld a ruling in November 2001 that Tesco was not allowed to sell cut price Levi jeans without permission from the US-based clothes giant.

The grocery chain was fighting for the right to import designer goods from around the world and sell them at an even greater discount to UK customers. Under the EU’s trademark rules, any company can import branded goods from another EU country for sale in the UK, even without the manufacturer’s agreement. But the permission of the manufacturer is usually required when importing from a non-EU country.

You can understand that the brands want to protect their valuable image rights and should have some degree of where and how their products are sold to maintain the ‘exclusivity’.

I can sympathise and, in general, agree with this view. If the public want to buy a cheap pair of jeans, Tesco has their own and other brands on sale. There is no cartel whereby jeans manufacturers artificially keep the price high and there is, for all intents and purposes, a free market.

However, if you particularly want to buy a pair of Levi’s jeans, that is your choice and you should be prepared to pay a premium for the marketing and general brand building costs.

So should these products be able to be sold on eBay? Well, yes, providing they have been sourced legitimately.

It is inevitable that the prices will be somewhat cheaper (although with postage costs maybe not appreciably so) as there are not the overheads associated with prime High Street sites and in any event, eBay now takes a sizable chunk of the sale price. However, these same savings are available to any on-line retailer so eBay is not offering any unfair advantage.

If you want to buy branded merchandise from eBay or any other e-commerce outlet then so be it. I don’t believe that it’s unfair competition and wish eBay luck with their fight to get the EU laws changed.

Tony Heywood - Gilcrest Services Ltd
Retail Troubleshooter
Business Turnaround and Recovery
www.gilcrest.com
www.linkedin.com/in/tonyheywood2

One in 10 retailers closed their doors between January and September this year according to research released today by the Local Data Company.

Fashion and footwear was one of the worst casualties of the recession with 17.9% of stores in the womenswear and kidswear sectors and 12.4% of menswear stores shutting their doors in the first nine months of this year. Footwear also fared badly with 14.9% of stores closing.

The Times suggest that the independent sector was a casualty of rising rates and limited access to credit during the period, with 15% of independent fashion stores reported to have closed in the nine months.

However on the same day retail landlord Land Securities stated that they will no longer offer retail tenants rent concessions amid signs of increasing demand for space.

Land Securities chief executive Francis Salway told The Times: “The downturn has been tough on property companies and on retailers. There are instances of retailers still asking for concessions, and it can be in our interests to show flexibility in specific areas, and we have led on a number of such initiatives. However, we do not believe across-the-board changes to agreed contracts are appropriate.”

Land Securities is the largest property developer in Britain, and has 1,600 retail tenants.

The revelation came as Land Securities revealed it was offering a new lease that does not penalise tenants for paying monthly instead of quarterly, according to The Times.  It intends to roll it out to its entire portfolio.

The new agreement called the Clearlet lease, will see the landlord scrapping the 1% premium on monthly payments.

Land Securities comments were supported by the British Property Federation. Its chief executive Liz Peace said: “We’ve seen first hand the steps landlords are willing to take to help retailers, from offering monthly rents to working with them to reduce service charges. But the fact everyone needs to understand is that cutting rents too far would undermine the investment value of retail property.”

Rival landlords British Land and Hammerson have also noted an increase in demand for properties from retailers.

So what’s going on?

Well, it appears to be that the strong are getting stronger at the expense of the independent retailers. Relatively good figures coming from the likes of John Lewis, Debenhams, Arcadia Group, River Island and Next show that there is money to be made in the High Street but only if you have the financial muscle. No doubt these large groups have been able to negotiate hard with their suppliers over terms, have areas where costs can be trimmed and have the supply chain management to cope with the tough trading conditions.

However, the independents are fighting to get funding from banks, loss of credit insurance cover leading to curtailment of supplies or pre-paying and very little excess ‘fat’ to trim.

I think that we may see next year’s VAT change and the large business rate increases being the final straw for many independents.

I hope not.

Tony Heywood - Gilcrest Services Ltd
Retail Troubleshooter
Business Turnaround and Recovery
www.gilcrest.com
www.linkedin.com/in/tonyheywood2