What the recession has taught retailers about adapting

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Phil Mullis, Partner

Phil joined the firm in 2008, became a Partner in 2012 and heads up the Retail and Wholesale sector team for Wilkins Kennedy.

Nov. 22, 2018

 

It has been 10 years since the global credit crunch and recession of 2008. Is the retail sector finally overcoming the squeeze, or, has the credit crunch set a more permanent precedent?

The retail sector was deeply impacted by the global recession. It resulted in a huge overhaul in lending and spending for both businesses and their customers. The loss of jobs, reduced wage growth, low return on savings put pressure consumers’ disposable income – lessening their retail spend. 

Shutting up shop

The impact on the retail sector was plain to see. There was a rapid reduction in retail sales, along with stores seemingly closing daily. Shoppers faced with reduced or stagnant income cut their discretionary spend on both essential and non-essential items.

According to Retail Think Tank (RTT), which run an annual Retail Health Index, the golden quarter of 2008 saw the UK’s Retail Health crash by six points – the biggest fall in history. Little did we know this was going to set the precedent for a huge change in consumer spending and ultimately a seismic change in the retail landscape.

Bringing about change

It is fair to say that the combination of squeezed wages and high unemployment bred a discerning shopper. We saw the rise of the value based retailer – particularly in the food sector, which gave consumers perhaps less option but clearly greater value in their shopping baskets.  We have seen other retailers using a discounting strategy to woo in cash strapped customers. Whether discounting for discounting sake works is open to debate – having a clear customer focused proposition is perhaps the answer.  We saw the demise of major high street brands such as BHS, Woolworths, JJB Sports, Phones4u and Comet and the rise of the online retailer, such as Asos and AO. One of the key messages that came out was – is your brand and proposition relevant in today’s world.

The development and rapid growth of technology has opened up a number of opportunities for both retailers and customers; retailers offer a multichannel platform to customers looking for a good deal and convenience in how the product is sourced e.g. home delivery, click and collect or perhaps in store. We see consumers browsing online from their smartphone, whilst standing in a bricks and mortar store.

Today sees some retailers reducing their physical estates rather than engaging on a space race; and we also see different retailers sharing space to benefit both parties and of course their customers – think of Sainsbury’s and Argos as one example.

Those retailers who have adapted to the technological world while keeping their eyes focused on giving the customer what they want, when they want and where they want it are those that will thrive in a challenging marketplace.

What the future holds

The RTT has predicted that Brexit could cause another sharp fall in retail health. However, there is evidence that lessons from the recession could help retailers be more robust but only if they accept, adopt and embrace change.

As accountants we believe passionately that planning is key but furthermore, it is critical that retailers should stick to their brand identity and values and by doing so will give the customer reason to come back, not just once but repeatedly. In addition, we advocate the avoidance of heavy discounting outside of seasonal sales and the understanding that all your sales are profitable, rather than sales for sales sake.

What next?

The Wilkins Kennedy Retail and Wholesale team love solving problems and working together with clients to drive and grow their businesses.  Please do get in touch with one of the team and see how we can help you in a rapidly changing and dynamic retail marketplace.


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