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Memo from Musgrave: Shops remain the strongest link in the retail chain

How many shops is enough shops? That rather basic question must be bothering retailing chiefs as never before as the shift in shopping patterns requires them to recalibrate some of the basic formulae of the business.

Online sales look set to continue to rise, but the most impressive performers in the fashion ecommerce space usually have several hundred bricks-and-mortar units in their empire.

Talking with etailers, retailers and brands, it is clear to me that no one knows the answer to the how-many-shops query. Similarly no one will definitively say how big online sales will become and when they will plateau. And the overwhelming question often danced around or ignored is: how can decent sustainable profits be achieved in these challenging times when the consumer wants everything immediately, for free?

Chatting to a couple of once-struggling better-end multiples recently, I was struck by their insistence that their respective turnaround strategies had to involve opening more physical stores (and not just concessions) as well as improving their online performance. These statements of intent will be good news to my property contact who recently reminded me that, according to his statistics, an actual store is involved in 94% of retail transactions.

Of course, a business can have too many shops, as the recent experience of womenswear chain East has exposed (see page 2). As part of a rather convenient pre-pack administration that was kept very low under the radar, the former majority shareholder, Indian chain store Fabindia, has emerged as the effective controller of a new East entity that has jettisoned 19 stores, five concessions and 155 jobs. The new business has 82 stores and concessions plus ecommerce site East.co.uk. Given that its Indian-inspired fashion is a niche taste, some observers think even this estate is too large. Sometimes small truly is beautiful. Time will tell. 

On a slightly bigger scale than East and its sales just below £40m, Marks & Spencer was in the news at the weekend when Neil Craven of the Mail on Sunday (once a Drapers Record reporter!) revealed that returns had not been accurately represented (see pages 2-3). The oversight was caused because M&S failed to declare how many ecomm returns went through its stores rather than being returned by post. Although the numbers are huge – £500m of store returns over the past four years, including £151m in 2013-14 – the matter is more embarrassing than deceitful. Yet it highlights a problem that many retailers face – that their systems have not been able to merge their legacy store business with the online trade. No wonder software firms are so busy in our sector.

As well as merging IT infrastructure, an intriguing challenge is how to merge the teams within an organisation. The seamless experience for the consumer that we keep hearing about surely starts with a seamless team experience. I wonder how many retailers have achieved this. Measuring your own omnichannel performance, if zero is non-existent and 10 is perfection, where would you rank your company today?

And while new challenges occupy the brain power of our top retailers, it is at once reassuring and depressing to note that the old favourite – early summer Sales – is back on our news pages. The best weather of the year is still to arrive, yet the red banners are everywhere on the high street and the websites. Discounts are notably deep this season, which supports the received wisdom that this has been a poor spring and traders just need to get money in the bank quickly. Lucky old consumers.

Readers' comments (2)

  • darren hoggett

    One question that needs be asked is if shops are considered so important, why are brands discounting to such an extent that it destroys the current retail network? A deliberate ploy from brands to become a fully integrated operation to eventually retail at wholesale prices perhaps?

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  • Definition of 'deceitful':
    guilty of or involving deceit; deceiving or misleading others.

    Perhaps an editor's friendships deceive others of the truth?

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