‘Bright spots’ for retail across the North West amid challenging marketplace

Times are hard on the high street with calculations that at least 15,000 retail sector jobs have either been axed this year or are at risk.

Household names including Toys R Us and Maplin have gone into administration. Supermarket giants including Asda and Tesco have also announced job cuts as they look to reduce costs, as well as Littlewoods owners Shop Direct announcing cuts and the owners of Bargain Booze, Conviviality, selling the retail division of the business.

A report at the start of the year predicted that retail growth was expected to ‘flatline’ in 2018 at best, with consumer spending highlighted as a concerning area of weakness.

February’s retail sales figures would seem to reinforce that – rising just 0.6% compared to the same month in 2017.

Stephen Robertson

Stephen Robertson is chairman of independent economics research consultancy Retail Economics. He is also a non-executive director of Manchester-headquartered Timpsons and Rochdale-based Footasylum.

He said of the sector: “Costs are going up and retailers haven’t necessarily been able to pass those onto the consumer.

“Linked to that is the fact that any  consumer can sit in front of their computer and do a very fine job of finding out what is the best price in the marketplace in a matter of moments.

“Competitive transparency has never been great, so we have seen a few businesses in real trouble.

“But there are successful retailers. There are a number of vigorous businesses in the North West such as Boohoo and Footasylum, all showing really good growth in recent years and I think that is because of the clarity of thinking of the founders of those businesses.

“It is about having the vision and the delivery. It is about executing that vision brilliantly and in order to do that you have to have great people.”

There are other bright spots; the Co-op has got eight new stores planned for the North West, including Lancaster, Southport, the Ribble Valley, Audenshaw and Oxford Road in Manchester. Alongside that the business has a major refit programme underway in the region.

John McNeill, Co-op divisional managing director for the north, said: “The convenience sector is flourishing and we are at the forefront of this. Shopping habits have changed and this has been to our advantage.”

Trafford Centre and Arndale owner intu also reported record levels of retailer demand for its first quarter of the current financial year. Its shopping centres are experiencing increased footfall year-on-year to date, excluding the periods of severe snow, by 1.5% in the UK and continuing to outperform its UK benchmark.

David Fischel, intu chief executive, said: “Our prime shopping centres produced a strong first quarter with lettings at increased rents, high occupancy and footfall exceeding the comparable period last year, with footfall significantly and consistently outperforming the ShopperTrak national retail benchmark over the last five years. We continue to see growth opportunities for our £10 billion UK portfolio.”

Looking at the disruptive nature of online retail, now reaching close to 20% penetration, Paul Martin, UK Head of Retail at KPMG, says the sector continues to undergo “fundamental structural change.”

Matthew Lewis, Head of Retail at law firm Squire Patton Boggs, agrees and says companies across the retail world

Matthew Lewis, partner at Squire Patton Boggs

are taking a “root and branch” look at their structures and how they operate.

He said: “In a changing world where there are more online sales being pushed through they are asking if they need the same levels and types of management and the same number and types of stores that they have traditionally had.

“If you look at what organisations are doing now, there is a divide between short-term survival and long term prosperity.

“One part is how they survive the here and now; that is why we’re seeing them look at their portfolios and cost reductions.

“Then there is ‘how are we going to thrive going forward? Part of that is about the retail experience. What experience are they going to provide for their customers. Do they know them?”

Lewis believes that in this issue the ethical and health agendas of the consumer are going to be increasingly important.

Sue Richardson

Sue Richardson, KPMG North head of retail, said: “It is a tough sector to be in at the moment.

“Those doing well in the region are focusing on three things – value, convenience and customer experience.”

She highlighted North West-headquartered business Boohoo as a “great example.” The online fashion retailer continues to grow. Its Burnley logistics operation can hold up to 10m units of stock and was able to process an average of 120,000 orders every 24 hours during the last Christmas period.

There are 1,900 people working in the warehouse across the Boohoo, Nasty Gal and PrettyLittleThing brands.

Richardson said: “Boohoo is a great example. Look at their published Christmas trading figures, their sales numbers are fantastic.

“The convenience in terms of the delivery service they offer that works for people and they have the value offering as well.”

She added: “Businesses are having to really challenge themselves on their models to see that they still work in the modern retail environment.

“Some have got their infrastructure and footprint al geared up to a retail market of 10 years ago. It has changed significantly, so what do you now do with that infrastructure?”

She says that some businesses are looking to take out whole tiers of management in-store as they look at how they operate.

Discussions are also taking place with landlords. “You could argue, where you have got declining retail market should landlords be reducing rents?”

However, she adds: “Retail still a very strong sector in the North West. We have got some very big high-profile players. We have strong clusters of talent in the sector.”

Helen Dickinson, chief executive of the British Retail Consortium, added: “Inflation is still eating into shoppers’ budgets, pushing them to spend a greater share of their income on essentials and leaving less left over to buy discretionary, predominantly non-food, retail items. At the same time, weak growth in household earnings is keeping overall sales low.”

She added: “The fact is that consumers want to spend, they just don’t have the resources to do so.”