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Richard Hyman: Yesterday's assets are today's liabilities

Richard Hyman

Traditional signs of retail strength – such as a large store portfolio – can now be weaknesses, says retail analyst Richard Hyman.

Everything in retail is turning upside down. For generations, the key to growing a retail business was to open more and more stores. Getting physically bigger was what it was all about. 

The size of a retailer’s store estate was a proxy for its strength – having several hundred stores or more always impressed, and ensured you were taken seriously. Today, the opposite is true, and what were once thought of as assets are increasingly liabilities. Most retailers have far too many stores and exiting leases is so much harder than signing up.

Being listed was another indicator of strength and importance. Having access to (relatively cheap) capital was often critical if you wanted to grow fast. Acquisitions could be relatively cheap. I would say that, today, being listed is a growing disadvantage – you become hostage to quarterly trading updates to a market that expects you to always beat your past performance, come what may. Retail is a business that can never be judged quarterly, because it cannot be led or managed against such a short timeframe.

Many have sacrificed some of their engagement with core customers in pursuit of peripheral ones

For most of us, the retail industry we have grown up in has been characterised by relentless growth. While the wider economy has seen ebbs and flows, and the odd recession, retail demand has known only growth … until now. The most-used management tool has been the rear-view mirror, assuming that the past will be repeated going forward. It won’t, and not knowing what the future looks like is the major source of industry challenge we see right now. Looking behind you makes it so much more difficult to see what lies ahead, but many decisions are still being made this way.

Every aspect of today’s retail business requires review. It is not just that most retailers have too many stores – the stores are also mostly too big. And they mostly carry far too many products, aiming to please too many different customers. Many have sacrificed some of their engagement with core customers in pursuit of peripheral ones – in other words, chasing sales growth at almost any price. The consequences of this are clear: poor availability, constant promotions and deteriorating trading performance.

Innovative 18,000 sqft menswear destination opens at selfridges london complete with the uk’s only free permanent wooden skate bowl (6)

Selfridges’ revamped menswear area

Despite this backdrop, there are plenty of role models demonstrating how it should and can be done. And while simply copying will not work, aspects of success can be incorporated and fine-tuned for your own business. Selfridges thrives while most department stores are struggling. This is a company that executes innovation brilliantly – not necessarily technical innovation, but constant change in the offering and service, giving customers a compelling reason to visit regularly.

While, as a rule, it will become increasingly challenging to build a retail business selling someone else’s products, Selfridges is brilliant at doing this very thing, truly curating an offer whose sum is greater than the parts. A lesson to landlords, as well as to retailers.

Cosmetics brand Lush invests heavily in its staff, training them to deliver immersive, empathetic service to a very loyal customer base. Supermarket Aldi offers a finely edited range around 5% the size of its typical superstore competitor, producing hugely superior trading economics. More recently, it has invested in developing a more segmented offering, gradually adding more upscale products. Its customer profile today is classless – very far away from the cheap and rather one-dimensional Aldi of 30 years ago.

Primark obviously leads on very low prices but has very cleverly added layers of increased fashion and complementary ranges to build around what remains its core basics offer. Ted Baker is an excellent example of brilliant branding. If you took the labels out and removed the store name, everyone would still know exactly which store they were in. Ted may have lost its founder, but I’m sure that it will remain true to its culture, brand values and distinctive handwriting.

This is by far the most challenging market we have ever seen. The market is forcing an industry shake-out and there are too many mouths to feed. But the “death of stores” and the “end of the high street” have been hugely overdone. We are seeing the beginning of an end game for mediocre retailers, but for there will be more room for the truly outstanding players to make excellent returns. 

About Richard Hyman

Richard Hyman is an expert in the retail industry, who has provided top-level analytics, insight and thought leadership on retail intelligence to hundreds of businesses over the past four decades.

He provides strategic advice across all elements of the Retail Executives business, including executive search, business advisory, board placement and training. Retail Executives is a specialist executive search firm, finding senior executives for the retail and fashion sectors.

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