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Retail Forecast 2007

Drapers quizzes fashion retail's key executives to find out what's in store for the industry in the coming year

JULIAN KILMARTIN, HEAD OF MENSWEAR, MARKS & SPENCER

The design directions for menswear take their cue from smart military references on one hand, and eco-travellers on the other. Reefer styling and the use of simple military detailing are in evidence. Colour is still important, but there is a move towards a pure and simple palette for summer, with a greater emphasis on neutrals and the way they are linked to pale, off-whites.

JOHN EGAN, CHIEF OPERATING OFFICER, THE SHOE STUDIO GROUP

This year is set to be the year of differentiation, not discounting. The big issue facing the market is that anyone who trades as they normally do won't be around in 2008 because everyone has to innovate. The year will be about extending product categories and ensuring the exclusivity of your product.

RUSSELL HARDY, CHIEF EXECUTIVE, BLACKS LEISURE GROUP

M&S's growth, Tesco's dominance and the internet will make it tough next year. This has been the first winter where the web has got going on clothing. Many retailers will look at the mix and price points to try to get some inflation back into the market. Global warming will have a big impact on new launches, so retailers will adjust their supply chains to take account of this. In-store environment and service will become even more important.

ADRIAN WRIGHT, CHIEF EXECUTIVE, SRG

The first half will be difficult and the second half will pick up, but Christmas trading will be even later next year. Sales won't kick in until the last week, and online shopping will have a bigger effect. With less cash coming in, retailers will have to look at cash flow - HoF has already tried to improve this with new supplier terms. Shoppers now understand more about quality, so even cheaper retailers will suffer unless they offer value.

MIKE TOMKINS, CHIEF EXECUTIVE, M AND M DIRECT

There will be more competition online over the next 12 months, so it will be the service that mail order businesses can deliver that will determine who comes out on top. This will be down to things like making sure product is in stock, delivering using a reliable carrier and, if things go wrong, ensuring that there's a response mechanism. Mail order businesses will also spend more on improving the security of online transactions.

PHILIP MOUNTFORD, CHIEF EXECUTIVE, MOSS BROS

Rates and utility costs will be a major concern. They have had a big impact this year and this will continue, with rises directly affecting the bottom line. Trading next year won't be any easier. There's less disposable income around and so many products competing for consumers' cash. We must also start realigning our seasons, rather than trying to sell overcoats in August.

PETER COWGILL, GROUP CHAIRMAN, JOHN DAVID GROUP

Redevelopments in town centres and the attitude to management of malls has led to rent inflation. As a result, we will be more cautious and fussy about store openings next year. Also, the big brands will be trying to restore their brand equity in the UK, because they are realising that discount retailing is not the way forward. Sportswear retailers will become more defined in terms of their target market.

MARK CUTHBERT, BRAND DIRECTOR, WRANGLER

I don't think the USP is going to be price next year. The industry is over the £4 jean because there will always be someone that can do it cheaper than you. The main challenge is getting your message out to the consumers, whether that is by marketing or through retail presence. Either way, standing out with a unique message is critical.

SAJ SHAH, CHIEF EXECUTIVE, JANE NORMAN

Retail next year will be tough because interest rates will go up even further. I don't think that will ease until 2008. To offset a tough market, we are aiming to focus on product, product, product next year, as well as our approach to our windows and store presentation. Good visual presentation is always essential.

MARK HUDSON, UK RETAIL AND CONSUMER LEADER, PRICEWATERHOUSECOOPERS

Consumer prices will hold steady next year, or even fall in some sectors. There has been some very glib commentary out there, saying that because retailers' costs are going up, the prices on goods in stores will go up as well. The reality is the market doesn't work that way any more. There are a whole series of value players whose model is based on driving prices lower, and they don't show any signs of relenting.

There will also be room for cost savings tied to the weaker dollar. Much of the product from Asia is sourced in dollars, so it's likely that retailers have been able to take out more costs than originally anticipated. In spring 07 and possibly into autumn, that depreciation of the dollar versus the pound is likely to flow through into consumer prices.

KATE BOSTOCK, DIRECTOR OF WOMENSWEAR AND GIRLSWEAR, MARKS & SPENCER

This spring should see the return to a more smart-casual way of dressing, in contrast to autumn's formal dressed-up looks, with a slightly softer silhouette and the emphasis on layering. We feel the spring has some very strong yet diverse trends inspired by a number of moods and eras, from futuristic styling and casual sportswear through to reworked 1980s and modern 1920s. I think this year will be less about what you wear, but how you wear it.

RICHARD HYMAN, MANAGING DIRECTOR, VERDICT CONSULTING

It's going to be a difficult year, but my feeling is that it will be a bit better than 2006. Last year was tough because we had weak fashion trends. For the best part of the past decade we have had negative price inflation, which has meant that retailers have had to sell more product to make headway and run faster to stand still. I think negative price inflation will hit a brick wall this year and will be less pronounced, which should give retailers a little sliver of breathing space. M&S's recovery will continue - we have only seen the tip of the iceberg as far as that is concerned. There will be some retail casualties in 2007 but that's not a bad thing for those that are left behind, because the market really needs some players to be taken out to give it some room for manoeuvre.

LAURA TENISON, MANAGING DIRECTOR, JOJO MAMAN BEBE

Rents are too high and it's tough finding good locations. We are working in a landlords market, and that will continue next year. There are some shopping centres we would like to go into but they are too expensive. We know they are enticing huge anchor stores that are probably not paying a penny of shopfit costs and are on two-year rent-free agreements, but it's the smaller shops and independent retailers that are picking up the bill.

MARK MCKEON, CHIEF OPERATING OFFICER CLOTHING, RUBICON

The interplay between bricks-and-mortar retail, ecommerce and mail order is the biggest revolution that has taken place in my career so far. Finding the right balance between these three is absolutely key for the coming year. Retailers that don't have a transactional website need to get on board and establish these new routes to market in 2007, and the best retailers will be the ones that manage to get the hang of that.

KYLE SALT, OWNER, FREEDOM CLOTHING - WINNER, INDEPENDENT YOUNG FASHION RETAILER, DRAPERS AWARDS

For us as an independent, the difficulty is competing with the high street. The multiples - mainly the likes of Topshop - are now getting very good and are raising their game, whereas a few years ago the quality was not as good.

As an independent, we have the choice to try new brands, but we're now becoming more ruthless - if a product doesn't have the necessary va-va-voom, we won't go with it. We always listen to our customers and work from the shop floor backwards.

MARK NEWTON-JONES, CHIEF EXECUTIVE, LITTLEWOODS

The online revolution will be the biggest issue in 2007. Customers aren't really spending less, they are just changing their spending habits. Why fight your way through the crowds when you can shop via a PC? Retailers need to move fast to capitalise on this, and smaller players will suffer if they can't deliver the right experience. The other issue this year is customers moving towards more better and best product. They have had their fill of throwaway fashion and £4 jeans.

GIULIO CINQUE, OWNER, GIULIO - WINNER, DESIGNER STORE OF THE YEAR, DRAPERS AWARDS

The main challenge next year is how retailers will keep customers interested in new product. The high street has been offering so many promotions, and the most worrying thing is that Sales are getting even earlier. Independent retailers do not have endless resources, and that's where it can be damaging - if you don't get your new stock in quickly, you'll miss the boat.

We always have to be constantly researching and moving forward. There are no free lunches here - customers are asking for more in terms of product, and I'm working closer with suppliers.

DOMINIC GALVIN, MANAGING DIRECTOR, MK ONE

The big thing for us next year will be energy costs again. They have a major impact on both our cost base and our customers' spending power. When council tax and energy costs rise, it affects the disposable income of our core customers, most of whom fall into the C1, C2, D demographic.

PAUL KELLY, CHIEF EXECUTIVE, SELFRIDGES

Customers increasingly demand what's special, the best, the newest or most luxurious - in all categories. This is where they are prepared to spend, and the trend will continue into 2007 and beyond. We will see more 'self-gifting' with high-end treats such as jewellery and watches. But at the same time, men will be following the lead set by canny female shoppers for some years now. They will decide on the fashion look they are after and put it together by mixing high street labels with top designer brands.

MARTIN HEARSON, CAMPAIGN CO-ORDINATOR, LABOUR BEHIND THE LABEL

Campaigners and fashion brands have been playing cat and mouse for a decade now but, with the groundswell of consumer interest we saw in 2006, next year could finally see ethical trading coming of age. It will need a step-change in what the industry is doing: finally tackling the living wage issue that it has been sidestepping for years; moving beyond bulk social auditing, which most now acknowledge is of only limited use; recognising that local trade unions and labour rights groups can help with achieving compliance; and moving ethical sourcing out of the CSR niche to examine the impact of brands' own purchasing practices. We're ready for it - all that is needed is the political will.

NICK SAMUEL, MANAGING DIRECTOR, HOBBS

The decline in footfall will continue because of shoppers browsing online, rather than in-store. The amount of retail space being built will also spread shoppers around. Consumer demand will force retailers to be more mindful of the environment - it will be about shipping product from overseas, rather than flying it, and making product closer to home.

ANGELA SPINDLER, GLOBAL MANAGING DIRECTOR, GEORGE

Next year will be another challenge for retailers, with sustainability and ethics high on the agenda. The challenge for many will be delivering a real point of difference. The winners will be retailers that understand their customers best, get their core ranges and prices right, and have the ability to inspire and delight customers with their quality and style.

PETER LUCAS, CHAIRMAN AND CHIEF EXECUTIVE, BMB

This year, supermarkets will continue to grow and put pressure on the multiples. Marks & Spencer will consolidate again - I don't see its growth slowing. The department store sector will remain solid, but overall the market will be tough.

On the product side I see a continuing trend for casualwear. Tailoring will still have a tough time - it was about 14% down last year like for like, compared with a rise in casual sales. It will be tough for formalwear, but the situation will improve next year for that sector.

PHIL WRIGLEY, CHIEF EXECUTIVE, NEW LOOK

I think the big issue for the coming year is that the customer will remain completely in control in 2007, which is not a bad thing. It will mean that there will be a greater pressure on retailers to give customers the value that they are looking for.

There is now more and more choice for fashion shoppers on the high street and, in addition, space is opening at a faster rate than the market is growing. So there is oversupply versus the level of demand, as well as a continuing desire among customers to get the right product at the right price.

This new approach to shopping will be more evident across the whole sector in the coming year, from the premium end to the discounters. This all means that customers will continue to expect better value.

BRIAN MCCLUSKEY, MANAGING DIRECTOR, OFFICE

The issue for 2007 is that consumers have less money to spend because interest rates are up and electricity costs are going through the roof. Shoppers are very aware of value and that trend is continuing.

Although most people are still looking for a bargain, I feel the time is coming when shoppers will say they want quality over price. I think it will be a tough year, but these things go in cycles.

TONY SHIRET, ANALYST, CREDIT SUISSE

The big question is whether anyone will adapt their logistics and buying to the point where they can benefit from the vagaries of global warming. That aside, the growth of the value sector means mid-market operators need to think about their longer-term positioning. There are too many of them and their positioning is vague enough to make them vulnerable to focused competition.

For some years they have been able to put this off because of the benefit they have gained from a weak dollar in their bought-in margins. This will continue into 2007 and will be reinforced when transitional Chinese quota agreements end in 2008.

The fashion situation contrasts with food retail, where the market leaders took on the new discount entrants in the early 1990s and came out on top. The clothing retailers have generally gone for margin, allowing new entrants to prosper, but this is unsustainable in the medium term. We have a low expectation that anyone else will take on the value players as M&S has done under Stuart Rose.

Next is likely to be the most interesting company in the sector in 2007 - we expect a slowdown in out-of-town openings and a more serious drive to establish a better trading format than the current refit programme.

MARY HOMER, BUYING DIRECTOR, TOPSHOP

We feel customer confidence is good. Our focus on supporting young designers is something our customers have come to expect, so we will continue to excite with collections from the leading lights of London Fashion Week. The San Francisco look will be key for spring, with denim maxi-skirts, coloured smocks and patterned dresses, along with our take on workwear with modern shapes in luxurious fabrics. Jane McNally Buying and merchandising director Peacocks

I'm optimistic about next year, especially in terms of product trends. I think we'll see the new longer-line silhouette evolve, becoming more commercially acceptable. A lot more will be happening colour-wise too, with a move away from the doom and gloom of grey and neutral tones. Price pressures will continue, with the value players - and M&S - leading the way.

ALISTAIR LEE, MANAGING DIRECTOR RETAIL, ROYAL BANK OF SCOTLAND

We are still looking to do more business in the sector in 2007. There will be more changes in ownership because there are still venture capitalists with money to spend, and we expect the disparity between losers and winners to widen. Ethical issues in retail will continue to hit the media and become much more important for businesses as a result.

NICK ROBERTSON, CHIEF EXECUTIVE, ASOS.COM

2007 will be more of the same - no really big trends, which is now the trend. Retailers that are lighter on their feet will fare better. Prices will continue their downward journey in the fast fashion space as both the internet and discounters pass the economical benefits of these new models on to customers.

STUART ROSE, CHIEF EXECUTIVE, MARKS & SPENCER

The high street will be a tougher place altogether next year. The winners will be those that can innovate.

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