Britain may no longer be a nation of shopkeepers, but we are still a nation with some bloody good retailers.
The recession has driven down consumer confidence and spending, and the economy has shrunk by over 5%. The retail sector is at the front end of this downturn. Yet many of our top retail businesses have continued to thrive.
The discount sector has obviously benefitted from consumers’ heightened desire for value, but many of our mass retailers have also seen sales as well as profit growth.
All the main grocers — Tesco, Asda, Sainsbury’s and Morrisons — continue to prosper and the high street stalwarts, Boots and WH Smith, have both delivered profit growth.
Retailers of bigger ticket items, such as Argos, Comet and Currys have faced the biggest challenge, and have therefore focused their efforts on driving down costs. Similarly, the ‘Middle England’ retailers, John Lewis and M&S, have also suffered, although both are showing signs of a comeback.
Even more impressive has been the recently reported sales and profit growth at our leading DIY retailers, B&Q and Homebase.
So what do our retailers do that other sectors could emulate? I believe that there are three key factors for their success:
- A relentless focus on customers and value. Retailers understand that demonstrating lifetime value for customers drives their performance. They cannot afford to rely on one-off sales but must demonstrate their commitment to customers on a daily and ongoing basis. It is easy to switch retailers — whether on the high street or online — and if you aren’t cutting the mustard, shoppers will immediately vote with their feet.
- Agility and opportunism. Market disruptions bring threats but also new opportunities. Tesco, for example, is currently investing even more seriously in its banking business to exploit the opportunity from customers’ lost confidence in the major banks. And HMV has seen an upturn in performance by re-focusing its business as an entertainment brand that includes live music venues, rather than a music retailer.
- Delivering lean and focused operations. Driving down costs is a way of life for retailers, whatever the economic conditions. Most retailers already had a pretty lean cost structure going into the recession, and have continued to find ways to deliver buying margins and more efficient business processes. Next, for example, has recently reported 7% profit growth despite flat overall sales.
Customer focus, value, agility, innovation, operational excellence and cost management may not be new business concepts. But they are the foundations of business excellence, and will continue to drive the actions of the nation’s leading retailers.
