Round table: East Mids retailers ready to ward off ‘perfect storm’
Consumers have become more careful with how they spend their money, but there is little to suggest that retail is entering a “perfect storm”, according to our latest round table, sponsored by Barclays.
Keith Ross: Can you give us an overview of where you see the retail sector at present please, Ian?
Ian Gilmartin: There can be no doubt that consumers have changed their habits. They are much more in tune with saving cash and being careful with how they spend their money, and people are buying little and often – rather than, for example, doing a big weekly or monthly shop.
Many retailers are under significant pressures because of their real estate portfolios – they simply have too many stores and they’re struggling to fill them with products. What we’re seeing now is that a consumer needs a real reason to go out and buy something in a shop.
It might shock some, but only 15% of shopping is done online in the UK – the High Street still has a significant place, and shoppers still love its vibrancy.
I don’t share the view that the retail industry is set to enter a ‘perfect storm’ brought on by Brexit and any interest rate rise. I have a politer view; retailers have been through tough times recently – and the impact of Brexit won’t be as immediate as the Crash of 2007. Retail is full of great people, and, as a bank, we’re here to help people.
Ross: What is confidence like in the boardrooms of big retailers?
Gilmartin: Supermarkets have two problems: they have too many properties, and not enough stock to fill them. However, the huge retailers are lucky – a company like Next can see its profits drop by 10-15% and still make longer term decisions. Conversely, a company like Hobbs, which is operating in a crowded marketplace would struggle to do that.
It’s now become about how these retailers perform online. Next, for example, does very well in that space.
Victoria Orr: Customers now want to be able to get things the next day. That’s put pressure on retailers to get their online offer right.
Ross: What are the margins like when dealing with the big online retailers?
Will Orr: The power of Amazon can’t be underestimated. The question a lot of independent retailers and suppliers have is: do I try and set up my own shop on Amazon – or do I sell to them direct?
Phillip Hall: Certain retailers play the game well by increasing their prices on Amazon.
Barry Croft: The likes of Amazon will eventually take over the High Street. I agree with Will; what we need to decide is whether we set up on our own, or do we play their game?
Robert Pick: The issues we’re facing include a chronic shortage of drivers in our industry, which is affecting the bottom line. The sector is 50,000 drivers short, and this is putting pressure of costs. Young people simply aren’t interested in a career as a driver, despite the fact we tell them they can work as many hours as they want and earn as much as they’d like to. The average age of a driver is now 54.
Gilmartin: How are retailers behaving with regards to terms and conditions?
Mark Cohen: That really depends on which retailer you’re dealing with.
Ian Pridmore: The likes of Next, The Range and B&M are good to deal with, but the supermarkets are still causing pain. What I’ve found is that the value retailers are willing to work with you a lot more. We’re seeing the likes of Aldi be a lot more open to working with partners. Those value supermarket chains are phenomenal.
Cohen: I agree – the perception of Aldi and Lidl has completely changed.
Gilmartin: The High Street will change too. There’ll be more independents, and local councils will have to come up with rates incentives as, in certain places, vacancy rates are stark.
What retailers need to do is give people a reason to come and visit them. Places such as Exeter and Bristol have done this incredibly well.
Cohen: I’d like to see independent retail make a strong comeback – that’s where the real margins are.
Croft: If there’s a real reason to go to independents, then people will. But they must offer something different.
Victoria Orr: People like a community feel – and that’s what independents can offer.
Gilmartin: It all goes back to having a point of difference – that’s how retailers will thrive.
Ian Gilmartin, Barclays
Keith Ross, Barclays
Will Orr, EJ Orr
Victoria Orr, EJ Orr
Barry Croft, Elbar Services
Mark Cohen, Raford Supplies
Phillip Hall, Hallmark Consumer
Robert Pick, RHCV
Ian Pridmore, Pyramid International