February 2019

Paul Laville l CEO, T21 Group

Navigating the end of the year minefi eld

With some of the nationals posting mixed results for the Christmas period — and some businesses not even seeing 2019 at all — smaller retailers in the electrical sector seem to have faired well

s I write this, sitting in an office now devoid of any Christmas brandy (yes, I checked) on a cold, grey January morning, the first furtive snapshots of Christmas trading are starting to pop up in my newsfeed. By the time you read this you’ll know more than I do right now but as I ring round some of my clients in the industry to learn how they fared, it’s heartening to hear that whilst everybody would have preferred more consistent business across the festive season, there doesn’t appear to have been any outright failures. Most retailers I’ve spoken to are either slightly up on last year or about the same, and all are cracking on with their January promotions. I won’t say that everyone is happy with the state of affairs right now, but there does seem to be a pragmatic acceptance across the industry that Christmas in electrical retail isn’t what it once was and will never be the same again. The traditional uplift of customers and sales expected in the week or two prior to the big day has now diminished to the point where many retailers find themselves in a strange no-man’s land between the end of November and the start of the January sales. Christmas seems to have been at

A least

partially replaced, pulled forward in the calendar by the attraction of Black Friday, which, love it or hate it, needs to be in some way acknowledged as a thing that will affect business — and as such, requires a strategy for navigating without being crushed by it. The Christmas results from Sainsbury’s intrigued me; this week they reported a 1.1 per cent downturn in like-for-like sales in the 15 weeks up to 5 January. Mike Coupe, the retailer’s CEO, admitted that they’d restricted the breadth of their promotions during Black Friday. They skirted the event’s horizon with a handful of offers but refused to be drawn deeply into a price war that would strip out their GP. Although the company enjoyed a relatively successful Christmas their figures for the quarter were affected by a 2.3 per cent drop in non-food general merchandise, which is predominantly sold through Argos who,

in their previous incarnation, were key detonators of the whole Black Friday explosion, eager as they were back then to take on Amazon’s big guns. It’ll be interesting to see how far Sainsbury’s managed to retain their profitability throughout the quarter. John Lewis, on the other hand, reported a 1.4 per cent increase in YoY sales during the seven weeks up to 29 December with its technology departments seeing a 3.1 per cent upturn in the final week of the month. Good news for them you might think, but stories are emerging that the company may have to hold off paying Partner bonuses this year. Industry commentators seem to be agreed that John Lewis’ upturn was driven by last-minute discounts. Is anyone to ‘blame’ for that though? As the shadows of austerity and uncertainty wear down the spirits of shoppers, especially over Christmas where there’s more pressure to indulge, the lure of discounts and deals is very powerful. Similar to Sainsbury’s, fashion retailer Next clung

to its margin like velcro, discounting only when Christmas was over. According to the pundits it was looking grim until a massive 15.2 per cent upsurge in online sales through December saved the season and pushed Next back into black. Sales in stores however, despite the annual early- morning post-Christmas queues around the block, were down by nine per cent. A good example as

any for illustrating the importance of including a strong digital strategy in your business plans. Yes, profitability is likely to be hit, but if it’s managed properly it needn’t be detrimental. Where would Next be if they didn’t have that online shop? As the farcical pantomime of Parliament runs on to 29 March it’s difficult to know exactly what business initiatives will work in 2019, but clearly it’s going to be even more difficult if you don’t develop strategies for coping with events like Black Friday, or find a way to sell value-added services against box-shifting competitors, or don’t acknowledge the need for a quality online presence. Those who refuse to accept change and who stick instead to traditional retail models are crumbling. Debenhams are igniting warning signs right across the internet as their shares plummet, whilst M&S seem to be blaming everything but themselves for their generally miserable fortunes. I’m heartened that the majority of retailers I meet and work with in this industry have already started working to accommodate the changes ahead but I hope more will adapt. 2019 is not going to be easy for any business and as we saw, crushingly, with HMV going into administration just days before the end of last year, anyone can fall. If that sounds horribly pessimistic then I’d like to suggest that the reverse is also true, which is that anyone can succeed if they take action.

It’s diffi cult to know exactly what business initiatives will work in 2019. Those who refuse to accept change and who stick instead to traditional retail models are crumbling


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