Hoisting The Sales

MY LOCAL SHIP’S CHANDLERS CAN BE QUITE BUSY ON THE GROUND FLOOR. This is where they sell anti-foul paint, varnish, binnacles, line and life jackets. On the first floor they have sailing shoes and clothing. Just the other day, the owner Jimmy was quite busy dealing with his boating customers who all seemed to be re-painting, re-varnishing or re- equipping themselves or their boats. Standing by his till, Jimmy took payment from half a dozen old salts before he was able to go his clothing ‘department’ to see if he could help the chap who Jimmy had seen climbing the stairs earlier.

When Jimmy reached the top of the stairs he saw the customer had one of the more expensive all-weather sailing jackets on and, while talking on his mobile, was pulling at the collar to read the label. He heard the ‘customer’ say: “Yes, it’s an Extra Large, Arctic Sailing Cubby in blue and it’s £89. I see on your website you have it at £80, but Fred’s Sailing dot com have got it for £75. Can you do better?”

It was all Jimmy could do, not to throw the customer out of the first floor window. He rightfully told him to get out. This will not be an unfamiliar tale for many of you. No doubt you counter this behaviour by having your own website, by the personal service you provide and the ‘community’ that only a local gun shop can produce. However, for other retailers and particularly department stores, it is having a devastating impact here and in the US, a country with whom we share a well-developed retail economy and increasing preference for online purchasing.

The numbers of store closures on both sides of the Atlantic are staggering. In the UK, for example, House of Fraser is closing 31 branches; Mothercare is closing 50 branches and New Look is closing 60 stores including its flagship shop in Oxford Street. Carphone Warehouse is cutting its branches and through insolvency, Toys R Us has closed completely.

The changes that are necessary to survive in today’s retailing environment include specialisation and a seamless link to an online shopping experience that can provide not only a competitive price but safe, secure and reliable delivery. For many, the shop is there for customers to touch and feel, to try a product but the online experience is where the sale is made. I do not say, ‘sale closed’, because taking money from the customer, is very, often just the beginning of the transaction as delivery and returns are all part of the service and the costs.

I’m sure I am not telling of something you don’t know but let’s look at from a different perspective, the job losses. Just in the last months, potential retail job losses are frightening: House of Fraser, 6,000; Mothercare, 1,700; Homebase, 3,520; M&S, 4,390; Tesco, 2,300; Poundworld, 5,100. Although not a complete list, already this totals over 23,000 and some 30,000 if you include Toys R Us and Maplin earlier in the year and some smaller retailers.

What is concerning about these jobs are many of them do not ‘translate’ into another sector. The skills of shop selling gained with a big retailer do not enable the employee to trade their knowledge and experience into the online world.

Some of those losing their jobs are people who are involved in field sports or whose income may support someone who is involved in field sports and a customer of a gun shop. This impacts a potential customer’s attitude to spending.

Official government statistics continue to show a picture of strong employment numbers but I have concerns about this data. It is not clear how it ‘allows’ for the massive growth of part- time contracts; the existence of self-employed contracts, flexi-hours and zero-hours contracts and those seeking work or deemed inactive are excluded. The employment figures do not give an accurate picture about the buying public and their potential to spend on their pastimes.

Furthermore, the revolution in retail is producing low or unprofitable jobs/contracts for delivery drivers and robotic warehouses which in turn remove the need for warehousemen. Some of these people are field sport enthusiasts and clay shots and if you add in the some of the announced redundancies in industry and the banks, the same but larger picture emerges: Job losses estimated at: Rolls Royce, 3,000; at Jaguar Land Rover, 1,000; Vodaphone, 250; BT, 13,000; Nissan ‘hundreds’; HSBC, 1,400; Lloyds, 620; Deutsche Bank, 1,000. That’s another 20,000 people.

Whether the job loss is their own, their friend or someone they know, or even just announced on the TV or their Twitter feed, this will have an impact on your customers’ view of their future and what they are going to spend their money on. Retailers in particular need to counter this mind set. Perhaps, it is worth thinking about how you enable these customers to feel good about continuing their sport by offering a discount line and considering giving some help to a local club in recruiting with a discounted membership sponsored by yourselves for new members and a members discount evening when they come and benefit from a discount for that night only.

In Germany, like the UK, big changes are taking place and similar job losses are seen at least in the financial sector. Last month saw a 2.1 per cent fall in German retail sales. It is a worrying sign.

Of further concern, the European Central Bank has stated that it will be taking a cautious approach to increasing interest rates and to reducing its quantitative easing programme. I am not sure that failing to increase interest rates

and stop printing money, is at all cautious when the US is increasing its rates and reducing its quantitative easing programme. What is certain is that just those factors will tend to make the Euro fall and the dollar rise. This will cause problems for the Eurozone and those seeking to re-finance or roll-over dollar denominated debt such as many emerging market countries and China. It will be exacerbated as the US money supply continues to fall and the premium paid for lending longer, say 10 years as opposed to 2 years, disappears, as it is doing in the US.

There will be a fight for funds and borrowers will need to pay more interest and repay more dollars as their home currency falls. Bringing this down to the gun trade, reduced availability of bank debt is likely with high rates needed and therefore more likely, the longer they are put off.

The pound, at $1.31 at the time of writing, is likely to continue to be weak while we do not raise interest rates. The resultant exchange rate may aid our exports but it is not clear that the aid will be sufficient to offset the ‘costs’ incurred. Buying in US dollars will continue to be more expensive than before Brexit.

In these less favourable economic times (from the perspective of buyers attitude) it may be worth changing the mix of stock to increase ‘budget’ or lower priced lines and reducing the middle-of-the-road stock. What China may not be selling to the US may be picked up more cheaply in the UK perhaps. However, I recommend that stocks are trimmed overall and not increased in pound terms. You may have more items but not necessarily more investment, and a risk of leaving you and your business all at sea.

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