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COMMENT AND OPINION | Malcolm Scott


MALCOLM SCOTT


OPINION The Co-op Group agreed with some manufacturers to


It seems strange that a business with such advantages against its


competitors should not be able to survive and expand


return stock and sold off all other appliance stock. Staff were being offered alternative positions where possible within the Co-op Group. Once stock was exhausted, the separate electricals business disappeared. This raises some questions about the sustainability of a trading policy followed by some larger online appliance retailers that starts from a base of trying to always match or beat the lowest price offered by any competitor and then tries to build in extra services that add value for the consumer. With strong consumer recognition and a vast network of 4,200 ‘sympathetic’ high-street stores, Co-op Electrical had some real advantages over many competitors. The huge asset base of the group means that divisions did not have the constraints on raising investment money that other businesses might face. The goodwill from other parts of such a large and diverse retailing group, and the opportunity for sales to the 4.5m active members and 70,000 staff, must surely have given the business an advantage over many of its competitors? With impeccable fair-trade credentials and a reputation


for ethical trading Co-op Electrical was extremely well placed to target the membership of consumer groups like Which?, National Trust, English Heritage and the like. Co-op Electrical held large stocks and had a well- established distribution network that allowed it to offer exceptionally good service to consumers and to take full advantage of any manufacturer scoop deals that were available. Since the Co-op normally trades from premises


So how’s business really?


Reading the April issue of kbbreview, I noticed the same contradiction that I have been seeing in the marketplace all year. While some retailers are struggling to fi nd sales and are well down year on year, others are actually very busy. So, what is going on and why? Well, let us start with the good news – all four of the retailers who contributed to April’s How’s Business? Colchester reported that business was good or extremely good. In the same issue, we had reports from John Lewis Partnership about declining ‘big-ticket sales’, plus a report from the Builders


22


Merchants Federation identifying sluggish sales, and fi gures from Wickes for last year showing sales down 2.5% and profi ts down 19%. So, there is certainly a mixed picture here. On my travels over the past month or two, I have noticed that generally kitchen studios are still quite busy, as are some of the larger independent domestic appliance shops. However, many of the larger independent domestic appliance shops are having a terrible time with customer visits to stores at very low levels. These larger independent domestic appliance shops all have a web sales division, so this is not an issue


The WTA industry conference speaker and KBSA corporate chairman is sorry to see the withdrawal of the Co-op from the electricals market but gives a thumbs-up for the prospects of the KBB market going forward


Exit Co-op Electrical O


n March 23, Co-op Electrical exited from the appliance sector. After losing money for several years on annual turnover of around £60 million, the online and in-store electricals trading platform of the Co-operative Group Limited closed with the loss of 120 jobs.


owned by the group, it probably had a very sympathetic landlord and the best possible group business deals on everything from phones to offi ce furniture to canteen consumables. As a co-operative, the business would need to contribute to the group, but did not have the pressure of shareholders demanding large returns and would be able to borrow money at very low rates. Co-op Electrical had been quite progressive as an early adopter of initiatives like an unpacking, fi tting and testing service for consumers and has championed fair-priced, extended guarantee packages. While the Offi ce for National Statistics report for February 2019 showed UK consumer purchases online as a proportion of all retail sales actually falling from 18.8% to 17.6% against January fi gures, the online appliance sector has shown good growth for many years. I guess the management would blame aggressive


internet pricing and the willingness of some online retailers to trade at a net loss for considerable periods of time in order to increase market share. It still seems very strange that a business with all these advantages against its competitors should not be able to survive and expand. Surely there is enough space in each sector of the UK consumer market for at least one organisation that is bound by its own constitution to always put the benefi ts to its customers, who of course are also its owners, at the front of any decision-making process.


I am sorry to be witnessing the demise of such a long- established retailer.


of ‘bricks-and-mortar’ businesses losing out to online retailers. The major sheds, Ikea, B&Q, Wickes and Homebase all appear to be experiencing diffi cult trading. Against this, Wren continues to grow, now having 77 showrooms and sales of £1 billion a year, while Howdens remains positive about the future. At least one major market-


research company, MTW Research, is forecasting that 2019 will be a very good year for kitchen sales, with signifi cant growth in order values driven by consumers adopting the latest innovations. From my visits to retailers, it certainly looks to me like some of the inconsistency in the marketplace is regional, with south Wales and the South-East seeing a bit of a slowdown after a considerable


period of exceptional growth, while northern areas, coming from a less buoyant base, are now seeing a bit of growth. However, there also seems to be some clear evidence that within the middle to upper part of the kitchen market, consumers are choosing to buy now to avoid possible Brexit price increases. If you have the money and eventually intend to put a new kitchen into your home, the smartest thing to do right now is to move the project forward and avoid future price uncertainty.


This clearly is an uncertain trading period, where it seems hard to predict what will happen next. However, the UK consumer is a very resilient character, so for those who can change and adapt, 2019 can still be a good year.


kbbreview · June 2019


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