Q1 2013, Retail High Noon

The news was predictable albeit the detail not so easy. Would Tesco pull back share, would M&S turn the corner, would HMV survive? Then Jessop goes bump in the night before we’ve taken down our Christmas decorations. How come John Lewis cleaned up and posted record sales? Lots of confusing messages coming in from the front line and one thing is certain – the crystal ball is fogged up.

Clearly there are numerous issues and variables that affect business performance, not least of which is the impact of on-line sales on business performance (brand share) - switching around between different players. However my prognosis is there is a higher, more significant trend that could play out in the first quarter of 2013.

It is obvious that sector structures are changing. What I mean is how we search and buy things is moving all the time to a new and different place. Say 10 years ago we might go to three camera shops to review camera options and then decide on which one and buy it. Today most of us would do a thorough search on-line looking at reviews, price comparisons, service levels, etc., before we consider who to buy from. This process radically affects the dynamics of the market that has led to Jessops biting the dust. We don’t really need what Jessops provide anymore, life has moved on from a model that has been overtaken by alternative and better ways of reviewing how to spend our £300. The only decision left is who to buy from.

(I recently reviewed laptops and decided not to buy on-line as my instinct was after sales service would be at best tiresome so I bought from Peter Jones. My reason was that I could walk in if a problem occurred; and it did after a few weeks whereupon PJ’s gave me a new replacement within five minutes.)

It seems to me the potential mayhem ahead of us will be about a sector adjustments that could be significant. I think a return to clear positioning with clear propositions will separate out the winners and losers. Looking at the grocery sector as an illustration, only one brand has clear ground they can own –  Waitrose in the premium corner (M&S Food is a good secondary player)- two brands in the economy corner, Aldi and Lidl – yet at least five brands in the middle – Tesco, Sainsbury’s, ASDA, Morrison’s, Co-op. Also where does Ocado fit in? If location and therefore convenience was parity I wonder who would thrive and who wouldn’t? In my opinion ASDA and Morrison’s are the weaker players in this crowded bit of the playing field as they seem to hop from one foot to the other undecided about their core positioning.

A current example of a brand under the cosh is M&S with  their general merchandise suffered the fallout of a worse-than-expected festive season; sales slumped by 4% year over year. Marc Bolland, the CEO, is under intense pressure to turn the ship around but it has lost some of its mojo in recent years as competitors have improved theirs. On the one side Primark is doing great and on the other side more contemporary brands chip away. It seems to me M&S isn’t best in class at any one thing anymore, whereas its historic reason for being was doing basics very well.

Even with some glossy, well produced TV advertising from RKCR/Y&R pre-Christmas sales still declined; however I uphold my observation that the TV work is what M&S would like to be seen as versus what they are seen as. As a friend on mine said “You can paint lipstick on a gorilla but it is still a gorilla”.

So my hypothesis is a) more retail casualties in Q1 ’13, b) more adjustment to the structure of markets, c) necessary and vital focus on the positioning and propositions of retail/e-tail brands and d) a changed waterfront of players in Christmas 2013.

Picture: http://www.flickr.com/photos/kev747

 


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