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It’s a new year and still profit is reality, turnover is vanity

Happy New Year. On behalf of the entire Drapers team I send all our readers best wishes for a healthy and prosperous 2015.

Before we look forward, we have to look back a few weeks to review the extraordinary trading pattern caused by the Black Friday discounting frenzy that started on November 28. I have made my views clear on this pernicious US import (see Drapers November 29 and December 6). At its worst, it is dangerous folly.

I was delighted this week that an eminent commentator like Andy Street, the managing director of John Lewis, should also eloquently voice the reasonable concerns of any sensible retailer. To paraphrase the store boss, enough is enough. Offering sizable discounts just before the traditional Christmas trading period begins is rash, damaging to profitability and, on a practical level, creates a consumer demand - principally online - that many retailers find near-impossible to service.

I say well done to Andy for publicly voicing what the vast majority of conventional traders must be thinking. But I strongly suggest to Drapers readers that they start to prepare now for the same madness in 11 months’ time. I fully expect that Amazon, which brought this unwelcome import from its homeland to the UK, will once again drum up customers’ passion for heavy discounting the day after the US Thanksgiving holiday. We must remember that Amazon cannot be classed as a “conventional trader”; for 2013 it posted losses of $216m (£142m) on global sales of $3.9bn (£2.6bn). It is hard to think of any other business with such a model. The date for your calendar, by the way, is Friday, November 27.

Given the importance of the pre- and post-Christmas trading periods, we have plenty of views and reactions from all sectors of the industry in this first issue of 2015, Indicator and our executive predictions. Summing it up well is Colin Temple, chief executive of fashion footwear retailer Schuh, who admits that a spot of strategic discounting may be acceptable but “profit is reality, while turnover is vanity.”

It was good to see Next standing apart from the madness of pre-Christmas Sales. Without any excuses, chief executive Lord Wolfson resolutely stuck to its strategic path and still had consumers queuing overnight for its traditional Boxing Day Sales. Yes, footfall in stores over the pre- and post- festive season was down but this was more than covered by the growth in online. And here’s the good bit: margins were maintained.

As we report this week, independents that stayed away from mad reductions traded well and at good margins. I praise them for holding their nerve and maintaining trust with their consumers. But I foresee some tough talking going on with suppliers that sell to serial discounters or, even worse, discount widely on their own sites.

Retailer/brand relationships will no doubt be the subject of much discussion during the next several weeks of trade fairs and showroom visits. The Drapers team currently is blinking at the punishing schedule that will see us tripping around many parts of Europe, as well as covering plenty of events in London, starting with this weekend’s London Collections: Men. We hope to see a lot of you on our journey.

Included with this issue is our latest Next Generation supplement, which highlights some of our industry’s brightest new talent. Now in its sixth year, our 30 Under 30 showcase attracted its largest-ever number of applicants and we list in the supplement an extra 20 names to watch. Reading this and feeling the passion of the young people we highlight, you cannot help feeling confident about the future.

Readers' comments (3)

  • Thierry BAYLE

    Having worked in the US, we know how discounts can happen nearly every month in some Department Stores. It can also be driven by fresh goods being delivered every months in boutiques and therefore to accommodate the next month delivery, you wish to clear the previous ones.

    We work slightly differently in Europe ( apart from pronto moda or equivalent ).

    We are clear that we need to focus on profits and not sales.

    One question we are not addressing is

    Considering my focus on stock management and optimisation / buying-merchandising and open to buy, I can share that many stores do not manage as good as they should how much to buy and when to bring the goods in.
    This is affecting the profitability and cash flow of the business.
    I seldom see this "non sexy-non glamorous" side of Retail being on display in retail forums, retail panel discussions...


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  • Thierry BAYLE

    I forgot to add that a French Fashion Federation has decided to invest in providing Retail Training.
    Its members are Brands who have a wholesale and retail activity.
    Wholesale - the percentage of independent boutiques is decreasing and should be losing 4/5% within the next 5 years. The Federation sees the wholesale business of its members going down due to that and one of the reason is the insufficient training of independent retailers in France.
    Retail - the members have retail locations and need more help and guidance to turn those stores at a profit. And it is not fully the case today.

    It is therefore also great to see Whos Next adding more Retail Experts for visitors to get free retail advice this January ( including on stock optimisation/ open to buy ) both in French and English.

    Have a great selling and buying season.
    Happy Retailing.

    Thierry Bayle

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  • Chris Bishop

    Surely profit over turnover has always been the focus!

    With the announcements this week for BANK and USC it is naturally a worrying trend for classical multi-brand retailers.

    Thierry I echo your comments on the basic principles commonly being missed at retail forums / panel discussions to the harm of the industry. Especially the emerging talent!

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