“Beware of the Gap syndrome”, Conlumino analyst Neil Saunders warned us, as retailers gathered for breakfast at Carluccio’s, courtesy of recruitment firm Bloom Retail.
“No-one ever buys full price at GAP anymore,” he added, explaining that the consumer is so switched on to Gap’s constant discounting strategy that they wait for the inevitable Sale that Gap now feels under pressure to deliver.
Saunders insists that retailers like Gap must set their prices right from the beginning to avoid pressure from discounting competitors. “The customer can’t see the difference in quality between a £20 Gap polo shirt and one from H&M next door at £4.99,” he says. “Look at Next. It’s a really well run business and a lot of that can be credited to it not doing sporadic discounting. They have fantastic [planned] Sales.”
But it’s easy to see why retailers are feeling the pressure. Saunders delivered some painful facts today from research commissioned by Conlumino. Over the next six months to one year, 37.7% of consumers said they would cut back spend on clothing – the highest percentage of any category. Almost 75% said they were “thinking much more about the clothing” they’re buying, while almost 60% are buying fewer items of clothing.
And who can blame retailers for discounting this “summer” (I use the term loosely as I can’t remember the last time I went outside without an umbrella)? According to Saunders, GDP growth in Q2 of 2012 was 1.7% in womenswear and 1.9% in menswear, compared to 3.5% and 2.5% respectively in Q4 of 2011. At least things should pick up by Q4 of 2012, with 3.3% and 2.4% GDP growth respectively.
But it’s not all doom and gloom. Saunders believes that, in the face of a recession, many retailers have stepped up in terms of innovation, holding up as examples Ted Baker’s quirky store concepts and Debenhams’ exemplary embrace of multi-channel retailing.
Saunders says the consumer is polarising, so retailers need segmented offers – good, better, best – whilst the market itself is also polarising, with retailers having to offer clarity and a clear positioning. Saunders also emphasises the importance of own label. With consumers using technology to compare prices (in 2002, they spent an average of 52 minutes browsing before purchasing; in 2012 it’s 89 minutes), own label collections give retailers more of a “unique” positioning, where they can control the prices (and margins). In fact, speaking to one retailer in room (who asked not to be named), she told me she’d just got back from trade show Who’s Next in Paris to look for brands to collaborate with one an exclusive basis. Differentiation – and avoiding the discounting rut – is key, she says.