In conversation the other day, the ex-chief executive of a prominent value retailer gave me his gloomy prediction for the future of the value market in the form of a blunt Anglo-Saxon phrase.
Many would agree with him. Most of the recent crop of failures on the high street have been so-called ‘value’ players. We’ve seen Select and Ethel Austin fall into administration, while Ossian Retail, which owns Internaçionale and Au Naturale, is reported to be ‘on the brink’, and even Baugur, despite its deep pockets, has put MK One up for sale.
It’s not as simple as blaming the rise of Primark. It’s true the barriers to competing well in Primark’s world are huge; it has volume, scale, a good offer, prime position, and excellent PR.
Because the profit margin in value retailers tends to be low, the value retail model totally relies on large volumes. A small fall in these volumes means big problems.
You always need better ranges, and greater efficiencies. But to weather this particular storm, you also need scale and a business already in good shape. Peacocks, under Richard Kirk, recognised the need to differentiate its offer some time ago. It has scale and while still offering value, has been quietly increasing selling price, improving fashion credentials and distancing itself from Primark.
If the summer is not good there will be more casualties, even before we get to Christmas. The value market will adjust, and survive, but for the foreseeable future size really does matter.
David Pidgeon is the former chief executive of value retailer QS