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Grant Thornton’s Thames Valley 250 sector watch


Prepare for a new retail environment


Against a backdrop of waning consumer confidence, Barry Knight, Grant Thornton’s head of retail, highlights some of the trends, downsides and opportunities that the retail sector may see in coming months.


Even more shop vacancies


Unless it is prime space there will be a significant number of non-renewals on leases in secondary and tertiary positions. The country’s excess retail space is starting to show as online sales continue to surge. The Local Data Company reports that the high street shop vacancy rate in the 750 towns that it monitors has risen to 14.3% from 4.6% in October 2008.


A shift up the quality curve


There will be further acceleration of the move away from ‘shed shopping’ to more pleasant environments. The sector is full of cheap, low quality goods sold in similarly described outlets. Not everyone will want to forsake the now fundamental right to cheap goods, but there will be a shift up the quality curve. The squeeze on


incomes over the next few years could result in people no longer buying cheap goods, but fewer quality items. The true perception of value is returning.


The rise of the unindebted


Retailers with established business models, but not saddled with high lease rentals, will expand aggressively as property values fall.


The fall of the smaller retail park


We will see smaller retail parks closing. The consumer attitude is: “If I am going to travel to a retail park, I will want to buy a lot of goods not just one”. It isn’t just cost that is driving sales of supermarket non-food items; it is the convenience.


Beware the housing market


Any retailers that rely on the housing market will have a very tough year. The market will be stagnant because of those consumers deciding not to move and many others carrying out major DIY projects upon which they will have already spent out to avoid the VAT increase.


More web and more apps


There has been a rapid increase in the number of smaller retailers developing fully transactional websites and mobile apps. Domino’s Pizza reported a 63% rise in online sales in the year to December 26, while orders placed through its iPhone application, launched in September, crossed the £1 million mark.


A poor year for young fashion


In the absence of any major fashion trends (of which we were particularly bereft in 2010) another poor year beckons, for young fashion in particular.


A rise in interest rates?


2010 was a benign year with interest rates remaining very low. The expected rise in interest rates will affect both consumers and the retailers directly. The result will be an increase in retail failures and Company Voluntary Arrangements (CVAs) involving landlords. We expect the use of CVAs to start being used by smaller retailers as the process becomes more streamlined.


Details: Barry Knight, head of retail barry.s.knight@uk.gt.com


Family values that sustain success


A successful heritage may provide positive PR for a company, but no retailers, bar antiques sellers, want customers to think that their business lives in the past.


Tradition and progress go hand in hand at F Hinds, the high street and online jeweller that stands at no.77 in our Thames Valley 250 listing of top performing companies.


That awareness of the need to move with the times led director Andrew Hinds (sixth generational head of the £50 million-plus turnover business) to make a bold but astute commercial decision in 1997. F Hinds became one of the first ‘clicks and mortar’ e-commerce jewellers in the UK.


Online sales still only represent a small part of F Hinds’ annual sales, but significantly an increasing number of customers are now choosing to ‘reserve and collect’ or to research online before visiting a store to make their purchase.


“We are willing to be pioneers where we can see a clear benefit, but are happy for others to lead where the risk outweighs the potential rewards,” says Hinds with the


www.businessmag.co.uk


simplicity that defines his company’s pragmatic analysis of innovation.


The 155-year heritage of F Hinds has taught it that consumer trends are constantly changing, both in terms of product and the routes to market. “We continue to change our operation to match the direction we see the market moving in, while not trying to get too far ahead of the present,” says Hinds.


Acceptance of change is a strength of the Uxbridge-headquartered jewellery firm, but commercial balance is also a management doctrine. “We operate with a combination of prudence and justified expansion within our own resources, with a focus on our people – our staff, our customers, and even our suppliers!”


While online selling is now well established, F Hinds high street retailing across England and Wales, despite falling consumer footfall, is faring well too – the company’s 110th shop opens in Wrexham this month.


“Staff are trusted to get on with their allocated role and are not micro-managed. As a result, we have a very flat structure for our size of organisation (roughly 1,000 full and part-time


employees). This has not changed much, but at shop level it is easier to judge results and recently we have probably focused a little more closely on that.”


To counter the market downturns F Hinds has also moved into new product areas (branded collections in more affordable materials) and focused on high value areas where the company can offer a point of difference (diamond rings allied to sector knowledge and service expertise).


With the rising price of jewellers’ raw materials, notably gold and silver, F Hinds has also returned to buying unwanted gold from customers – an area in which it has not been active for more than 60 years.


While its online business may be the prized gem in this jeweller’s crown, its innovation and target marketing are the distinctive retail settings of F Hinds. That, and the company’s focus on traditional business basics and progressive future strategy.


As Hinds advises: “You need to stay on top of costs to stay in business in the present; but not forget that you need to go out and be positive otherwise the business will not have a future. It’s always a balance, but it’s even more important than usual today not to neglect either aspect.”


THE BUSINESS MAGAZINE – THAMES VALLEY – MAY 2011


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