FSP Retail Blog

A Moment On The Lips, A Lifetime On The Hips

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Feeling a bit peckish but don’t want to pile on the pounds? Fancy a bag of crisps but worried about the salt content? Never fear, Cranswick Food Company are here to help.

The Duchy Originals sausage producer has tried to patent a revolutionary new product that promises to provide everything the slimming carnivore could ask for – namely, meat crisps.

Said crisps promise to contain fewer calories, fat and salt than the traditional potato variety while having all the flavour of your favourite Sunday roast. These little gems are made by whizzing up some beef and turkey, mixing it with emulsifiers, heating gently then microwaving. Yum!

I don’t know about you, but I can hardly wait…

Locking the Stable Door

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The proportion of UK multiple retailers trading unsustainably has increased from around 23% last year to 28% this year. Furthermore, the location of the stores of “at risk” retailers, and the reasons for their financial stress, are now different. Retailers are categorised as “at risk” if the ratio of gross profit on sales to the cost of labour and depreciation is below parity.

Last year, a disproportionate number of shops of “at risk” retailers were in medium to large industrial towns, mainly in the north of England. The stores belonged principally to traditional retailers, such as Woolworths, whose store locations had been determined by historic shopping patterns. Many of these stores have, as anticipated, now closed and the towns are experiencing high rates of vacancy. This has attracted much attention, not least from BCSC, but in truth, the horse has bolted. These towns need to develop a new, viable retail strategy built around their surviving retailers. Amongst these retailers, the proportion now “at risk” is lower than the national average. There is, after all, still a role for these towns within the retail hierarchy.

Currently, the proportion of “at risk” stores is higher than the national average in some prime retail locations scattered right across the UK. The likely explanation is that less experienced retailers have taken on inappropriate stores in otherwise sound retail locations. Identifying such traders and developing contingency plans is a significant asset management task. With credit difficult to secure, and banks looking to reduce outstanding loans, retailers that have expanded aggressively from an unsound base or taken on high levels of debt are amongst those most at risk.

Given the continuing high proportion of “at risk” retailers, FSP anticipates that retailer failures will continue in smaller numbers throughout the year. However, the profile may change with a lower proportion of “traditional” retailers and more that are over-extended or debt-driven. As always, forewarned is forearmed.

Family Values

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Family Values

Traditionally, January is the busiest time of the year for divorce lawyers, and as the economic situation takes its toll, January 2010 us unlikely to be any different.

But never fear! If you’re currently thinking of filing or are in the midst of a tricky separation, don’t worry about trivialities such as who’s going to get custody of the toaster…for Debenhams have launched the perfect solution; the divorce gift list.

The idea, inspired by the increasing trend for people to celebrate rather than commiserate the end of a relationship, gives the newly single the opportunity to ask their friends and family to help out with household items their separation may have left them without!

Unsurprisingly, no trace of the aforementioned service can be found on the Debenhams website!

A bird in the hand is worth two in the bush...

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…but are they all of equal value? In shopping centres and retail parks, recruiting particular tenants within an explicit retail mix strategy creates a more robust rent roll than simply taking the highest, or any, bidder. Without a tenant mix policy, the retail composition of the centre or park is determined by the judgements and vagaries of individual retailers.

Rent is paid from turnover and the lower its proportion the better. The proportion can be reduced either by agreeing a lower rent or by increasing turnover. Other things being equal, retailers whose customer profile matches the visitor profile will increase turnover more easily than mismatched retailers. Furthermore, several retailers with similar customer profiles outperform a ragbag of differently targeted shops. Historically, retailers in the same trade tended to group together in the same area of town.

There are five broad objections to shopping centres and retail parks having an explicit tenant mix strategy:

1. Retailers know their own business best, so don’t second guess them.

   This over-estimates the resources of retailers and their agents to know the potential of your particular location. In FSP experience, the vast majority of retailers welcome solid evidence of the scale of the business opportunity represented by your centre or retail park

2. We’ve managed successfully so far without a retail mix strategy.

   This omits the role of shoppers in making a retail location successful. FSP can demonstrate that happy shoppers visit more often and spend more per visit so that annually they are worth two or three times more than an unhappy shopper. Creating more happy shoppers increases sales, makes the retailers more profitable and therefore willing to pay more for their space. Establishing the identity of the happy shopper is therefore a fundamental step

3. It’ll only tell me what I already know.

   In Made to Stick, Chip and Dan Heath describe the Curse of Knowledge which prevents experts from being able to see the issue from the perspective of the uninitiated. A tenant mix strategy gives a different emphasis to what is already known and thereby effectively communicates the potential of the location to retailers

4. It’s a sledgehammer to crack a nut.

   On an established scheme, units come up one at a time, so the expense of developing a retail mix strategy is not justified. While more centres now have multiple vacancies, this may be a valid objection if the task is simply to fill it and flog it. However, FSP has been involved in a number of pre-acquisition due diligence investigations where such a policy has cut no ice with the potential purchaser

5. A different skill set is required to present the business case to retailers when it flows from an evidence-based retail mix strategy.

   It can be difficult for letting agents dealing with many different schemes fully to understand the potential of each one for each target retailer. Much of the responsibility for this lack of understanding lies with the research providers who don’t make the evidence very accessible. Naturally FSP pleads not guilty to this charge but only because it is a high priority to work with the client and letting teams to translate the research into practical actions.

I now look forward to a flood of enquiries for help in developing tenant mix strategies!!

With kind regards,

Geoff Nicholson

Christmas Trading Update

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Christmas 2009 sales are relevant to the past, not the future. Sales over the Christmas period, as so far reported, seem to be the last act of consumer defiance of the economic circumstance. The first reports of Christmas sales performance show like-for-like sales increases that average between 5% and 10% across all merchandise categories. Such a performance does not mean the good times are back but relief that last year was not worse. The outlook for the coming year is at best anaemic.

All the money the Government has spent, on bank bail-outs, tax relief, cash for clunkers, quantitative easing and so on, prevented complete economic melt-down in 2009 but at the cost of future growth. Recent measures of consumer confidence show the steepest drop in more than a year. While the household savings ratio has been positive for 6 quarters, household debt to income remains above 150%. It has a long way to go to match the levels of the early 1990’s, when it was about 100%. The prospect of higher taxes, unemployment and interest rates will encourage consumers to embark on the long trail back to balance, through increasing the proportion of disposable income allocated to reducing debt and to savings. The spending growth of the last decade and more, driven by massive reliance on borrowing, seems unlikely to return in the near future.

Within this low growth environment, retailers will still need to expand, to spread their fixed costs over a wider range of stores. However, the economic case for each additional store will need more than ever to be firmly based on credible evidence. Costly errors have long been unacceptable. What will now be career-threatening will be to take on marginal stores. Forward thinking landlords will continue to 'de-risk' deals. This is achieved through better understanding of individual retailers, their value to particular schemes, likely trading performance and the most effective types of assistance required to turn marginal deals into sustainable opportunities

The SnapShop Christmas Sales Report is available to Members of the SnapShop website, and to FreeZone registrants within their 3 month trial period. To sign up for FreeZone and to get access to the full report, visit www.snap-shop.co.uk/freezone

And Finally...Butt of a Joke

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The North Face Apparel Corp has apparently filed a federal court lawsuit in St Louis against parody brand The South Butt.

The brand, started by a college student to help pay for his fees, sells t-shirts, fleece jackets and sweatshirts with the tagline “Never Stop Relaxing”.

The cease and desist request apparently stated that the companies’ logos are similar enough to cause “confusion”. Honestly now, when was the last time you confused your face with your butt…?

Other mildly amusing parodies discovered when researching this article include; DeadBull to RedBull; Naïve to Evian; and Nescrape to Nescafe.

The Golden Rule

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“Do as you would be done by” is an ethical code that has its roots in a wide range of world cultures, present in the philosophies of ancient India, Greece, Judea and China.  It is based on the understanding of the human condition expressed by John Donne as, “No man is an island, entire of itself …- any man's death diminishes me, because I am involved in mankind; and therefore never send to know for whom the bell tolls; it tolls for thee."  We are indeed social animals.

There is a view that the current economic situation was precipitated and is perpetuated by a failure within society in general and particularly in the financial community, to maintain the Golden Rule.  For those who are not retailers, the upcoming break from normal routine may provide space to reflect on whether the ethic of reciprocity is really still relevant to our society.  If it is, is there a personal responsibility to reflect it in the way I conduct my life and business?  None of this is easy but as Edmund Burke reminds us, "All that is necessary for the triumph of evil is that good men do nothing."

With these merry thoughts ringing in my head, I wish you a happy holiday and a prosperous New Year

Geoff Nicholson

 

 

Clas Ohlson - Watford Store Opening

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I’ll be honest with you, when I joked that I could take Technical Director Ken Gunn’s place at the Clas Ohlson store opening in Watford, I didn’t actually think that might happen. Ken has worked closely with Clas Ohlson on their UK expansion strategy, and as such attends as many store openings as possible. Today, however, he was required elsewhere, so along I went to see what all the fuss was about…and here is my first official FSP store review! Enjoy!

The Watford store is the 5th in the UK for the Swedish household accessories/ electricals/DIY retailer Clas Ohlson, and its 116th worldwide. It is located in a former Zavvi store in the Harlequin Shopping Centre – the main shopping destination in the town – and presents a slightly different layout to its other UK locations, which fill vacant Woolworths units and as such have a larger, more open feel than this one. That’s not to be taken as a negative, though; many of you will remember the multi-level layout that most Virgin Megastores – and therefore Zavvi stores - used to have. I think it’s fair to say this format typically utilised larger first/second floor selling areas and mezzanines to create a more accessible, less overwhelming trading space, which works well in shopping centres and for Clas. Had the former Woolworths store on Watford High Street been available of course, perhaps Clas would’ve stuck with the formulae – as it is, Watford Borough Council bought the store in June of this year in relation to the redevelopment of Charter Place, which is adjacent to the old store. The result of this deviation from the norm makes for an interesting visit…

 

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The ground floor level of the store was reserved primarily for seasonal products – both gifts and decorations – with the majority of stock located upstairs in the large first and mezzanine levels, accessible via stairs, lifts and escalators. A clear store layout with ample signage means that particular products are easily located, though the beauty of the store is the opportunity it provides to get lost! Think Ikea marketplace, only tidier with better merchandising and no feeling that you must follow the crowd around a pre-determined route! And probably with less arguments, since there truly is something for everyone at Clas; if we’re going to be stereotypical, there’s homewares for the girls, hardware for the boys and multimedia for the kids. Enough to keep you happy for a good few hours. It was multimedia that drew the crowds this morning, with a particular offer on a portable DVD player the main attraction. Apparently there were 400+ hopefuls queuing around the organised barriers system waiting to get in when the store opened to the public to a great fanfare (literally. There was horn blowing) and those of us already in the store made sure to make scarce once the hordes began pouring in!

A special mention also has to be given to the style of opening ceremony that Clas Ohlson adhere to. The traditional Swedish ribbon cutting ceremony itself provides great entertainment for guests, but the best part about the whole thing is the honours that are dished out and the passion with which the management speak. I know most feel obliged to attend such things, but both Klas Balkow (CEO) and Mark Gregory (UK Managing Director) conveyed a genuine sense of achievement and thanks during their speeches, and it was great to see individual members of staff mentioned by both. It must provide a great sense of inclusion to those involved in the projects, and that in turn is great motivation for the staff – the importance of which is lost on many retailers of today. And of course, showmanship and hype for the customers is never a bad thing.

So in short, I like Clas Ohlson – and not just because I have to! It has a warm, welcoming feel – important for a girl in a DIY shop (and a stark contrast to my visits to Robert Dyas), the pricing is just right and the wide variety of merchandise actually isn’t a negative as it can be for some. Hopefully the UK will welcome this unique concept with open arms, and some sense of variety can be injected back into the high street.

What's in a name?

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We at FSP endeavour to identify the registered company behind all the lovely retailers we feature on SnapShop (our online retail intelligence service).  Piece of cake you might think.  One fascia, one retailer, one name, one company.  If only!!

Firstly, there are the groups.  Does a fascia have its own registered company or not?  Even within the groups they can’t seem to decide!  Topshop, the flagship fascia in the Arcadia Group, does not, Wallis – same group, different fascia – does.  Want to know how Wallis is trading – easy, we can see the accounts.  Same for Topshop?  Not likely! 

Then there are the takeovers (in my opinion these should be banned for the simple purpose of making my life easier!).  Gadget Shop now belongs to The Entertainer, D&A to Boots, MK One has a chequered history having been owned by everyone (Philip Green, Baugur, Hilco, Internacionale) and Perfect Pizza and Papa John’s have an intricately involved history.

But if you’re stuck for a name, there’s always Hamsard.  Over one hundred current or recently dissolved Hamsard companies are registered with Companies House.  Style Menswear did belong to Hamsard 3032.  Neither now seem particularly functional, with all the Style trade now through Envy, but my life would surely have been a whole lot easier if Mr Kinnaird had called his company something a little more meaningful!

Registered companies with eponymous fascias are few and far between.  A small request for more of those is very high on my Christmas list, but no amount of finger crossing or Christmas pudding stirring is likely to bring that to fruition.  So battle on I will in the struggle to see just who is trading as what.  However, if you’re listening Santa, more in the style of Next Retail please!

P.S. The Next Retail link above will show you what SnapShop has to offer.  To find out more, call FSP on 01494 474740

 

Bringing Home The Bacon

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Many retailers these days will be tired of paying the bills…sick of sticking stamps, dreading licking another envelope…

So to make things a little easier – more ‘tasty’ if you like - we introduce to you…Mmmvelopes.

Developed by [where else but] US-based company J&D’s, Mmmvelopes are traditional looking envelopes that offer a tasty twist; instead of tasting like, as they put it, ‘armpits’, the glue on their Mmmvelopes tastes like bacon.

Yes. Bacon.

So what are you waiting for? Its time to catch up on your paperwork…

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