What Does a Double Dip Recession Mean for Retail?

This week we have had the news that the UK has slipped in to a double dip recession, shrinking by 0.3 % in the last quarter of 2011 and preliminary figures suggest that the economy shrank again by 0.2 %  in the first quarter of 2012. There's no doubt times are tough and people are spending less but what does it mean for the retail sector?

Retail sales have dipped in April, and according to the CBI this is down to families cutting back on grocery shopping and big ticket items. A combination of high inflation and lack of pay rises are to blame. More retailers than not reported a decrease in sales.

A quote in the Guardian by Judith McKenna, chair of the CBI distributive trades panel and Asda's chief operating officer, said the situation on Britain's high streets remained fragile.

She said: "Consumers are still holding off from buying bigger ticket items, and opting to spend on smaller 'treat' purchases that give them a lift without breaking the budget.

"If as expected, inflation falls further later this year, we may see some growth in retail sales, but as long as high unemployment and sluggish wage growth dampen confidence, spending will remain tight."

The recession is not expected to last long according to leading economists and we are likely to return to growth almost immediately, and as is usual after recession grow between 4-5%. Most economists were not expecting us to even go in to recession but the massive decline in the construction sector had a big impact.

It looks likely according to several leading economists that it is a temporary blip and things will pick up, but some are warning that it may get worse before it gets better this year on the High Street.

What is a Recession?

A recession is two quarters of the year, back-to-back, where the size of the economy shrinks, as measured by GDP (Gross Domestic Product).

Earth Day & The Consumer Demand for Eco Products!

Carrying on with our green theme this week, on Sunday it is Earth Day! Originally started in America the first Earth Day was held on April 22nd, 1962 to give political weight to growing concerns about the environmental impact we have on the earth. It is celebrated all over the world as environmental issues are now part of the everyday life, especially for the consumer. Modern consumers in the UK these days want to know where their products come from, what ethics lie behind those products in the company that makes them and what impact their purchase will have on other lives.

We see ethically traded and environmental logos of the various accreditation bodies that exist such as Fairtrade, The Rainforest Alliance, FSC, etc. on lots of products on the shelves. Many companies are also ISO 14001 accredited which shows they can manage and measure the environmental impact of the company and trace back the green credentials of their raw materials.

This is all very nice for companies to do but it starts with the consumer and is led by them! As our world has opened up with modern communications people have become more educated about the impact their buying power has on the environment and communities. Interestingly after documentaries on the dangerous conditions young children work in to harvest the cocoa bean, chocolate companies felt the pressure of consumers turning off from the idea children have suffered for their chocolate bar. You now see standard chocolate bars sporting the Rainforest Alliance and Fairtrade logo's as they want to reassure their customers that their chocolate is ethically sourced. It's the same with fairtrade coffee - no-one wants to drink a cup of exploitation in the morning.

 

There are always going to be the price led consumers who don't think about the life-cylce of the product, they just want it at the cheapest possible price, however the last 20 years or so have seen growth in the eco / ethical products sector. It was a luxury of the middle classes in a position to pay a little extra for ethically sourced products but over the last couple of years it's started filtering into every day products too as companies realise what their consumers want.

Many retailers are keen to offer a green image with their branding, even global fast food chain McDonald's now looks visually very green at their outlets, with campaigns about how they source beef locally in the UK, meeting consumer trends.

According to the Co-Operative's ethical consumerism report sales of ethical goods and services have remained quite consistent despite the economic downturn with growth of 9% since last year, up from £43 billion to £46.8 billion. There are some sub sectors such as organic food which decreased last year but overall there has been a healthy rise in ethical spending not just last year but significantly over the last decade.

So let's celebrate Earth Day on Sunday, celebrate our power as consumers and demand a better greener world!

National Gardening Week - The Retail Value of the Garden Sector

We all love to enjoy our gardens in the sun at this time of year and as the sun is starting to shine and things are starting to happen in the garden we all feel inspired! This week is National Gardening Week - nicely timed with the onset of spring when we all look at giving our gardens some TLC, but what is the value of this retail sector?

It's traditionally a growth sector in times of recession and economic downturn as people look to finding pleasures at home rather than expensive holidays abroad. There has also been a bit of a 'Good Life' style renaissance lately as people are starting to grow their own vegetables again. Many boroughs now have massively long waiting lists for allotments as they have come back in demand again, with both young and old. There are initiatives such as Landshare, started by Channel 4 off the back of the ever popular grow and cook style programmes, which connects growers with people who have land spare to offer...it's a concept that has really taken off as they currently have over 68,000 members.

There are even groups of gardening guerrilla's which overnight go and plant vegetables in public spaces in cities like London and Glasgow. Urban growing is becoming popular as people utilise roof tops and grow plants on buildings, making for some pretty spectacular looking urban greenery.

We have done quite a lot of installations in this sector, it's big business said to be worth around £4.6 billion for the UK economy according to the annual HTA Garden Retail Market Analysis report, and is becoming more popular year on year with 'Grow your Own' vege's being the biggest growth area (pardon the pun).

I know I spend a fair bit every year with the idea I'll turn into a fabulous gardener, and every year all that money is wasted on my not so fabulous garden...it takes more than splashing some cash it seems! Big DIY stores with Garden Centres are really selling the whole dream, where you can get everything under one roof from your garden furniture to your BBQ, as well as the plants and flowers. These huge warehouse style DIY stores take some merchandising with seasonal displays and promotional items all summer long from small seed display stands to huge promotional banners and signs, indoors and out.

The drought we have on this year may dampen our appetite for buying in to the dream of a luscious beautiful garden but I doubt it. More likely we will all wander round imaging what gorgeous gardens we could have if we just bought this....and that..!

To learn more about how to put on an event  or to attend one of the many events taking place over National Gardening Week visit: www.nationalgardeningweek.org.uk

 

Panic! Buy Stamps, Pasties & Fuel Now...Or Shall We All Just Keep Calm And Carry On?

What a week! The country seems to have worked itself up in to a frenzy of panic! Queues at petrol stations, fighting breaking out at the pumps, rationing and road closures ...all for the suggestion that there may be a strike in couple of weeks time!

The tanker drivers union is not meeting until Monday to start negotiations and after negotiations have finished they still have to give seven days notice before they strike making this weeks behaviour at the pumps pointless. A woman was badly burnt today as the fuel she was transferring from into a jerry can from a jug set alight in her kitchen whilst the oven was on nearby. I heard some people being interviewed on the radio after they were asked why they were queueing and the reply was because they'd seen everyone else queueing! The Union has also said today that it won't strike over the Easter weekend.

Of course now everyone is realising it is a storm in a tea cup (or as our tabloids are calling it ...a storm in a jerry can) the blame game begins! With government and opposition wrangling over political motives and public bodies criticising it just fuels the fire further. The media as usual has over dramatised everything and played a big part in creating this hysteria as the Guardian's photo gallery of the main tabloids front pages shows.

All Time High Shop Vacancies - Quarterly Rents Due ... What To Do?

With a report coming out today that the number of empty shops is at its highest rate, what does this mean for retail in the UK?

According to a survey published today by the Local Data Company (LDC) town centre vacancies increased to an average of 14.6% February, up slightly from January and is the highest since they started collecting information on this four years ago..that's one in seven now shut. The LDC visit town centres, shopping centres and retail parks all year round to gather this information and have noticed a drop in occupancy levels since Christmas. They say they expect closure rates to continue especially as GAME Group are going into administration and another 600 or so stores are potentially at risk, although it continues to trade whilst looking to solve its debt and supply chain problems.

To put it in context though some areas are thriving but there's a real north /south divide on this with many shopping areas in the south doing well whilst areas in the north are clearly struggling. Their report showed that some of the better performing areas in the south are Cambridge, Camden, Exeter, Kingston, Salisbury and St Albans and Taunton. Some of the worst hit areas are Bradford, Derby, Hull, Sheffield, Southampton, Stockport, Swindon, Nottingham, Warrington, and Wolverhampton.

There's a lot of reasons this is happening, reduced consumer confidence amidst our economic problems means people are paying off debts rather than borrowing and saving rather than spending. Spending figures are down since Christmas but retail sales are actually up on this period last year by 1%. With the cost of living rising and petrol prices higher than they've ever been people have less money to spend beyond the cost of living, preferring cheaper deals online or at supermarkets.

The quarterly rents due this weekend are often the tipping point for companies struggling with cash flow as they stump up millions of pounds of rents in advance. Part of the Mary Portas review is to look into landlords providing monthly rents, making it easier for companies to retain more cash within the business as well as wider business community investment, but as the tumble weeds whistle down some of our high streets is it too late to inject some life back into them?

"It is a timely reminder to the government, who are due to respond to the Portas Review this month, of the significant challenges facing town and city centres up and down the country," Matthew Hopkinson - Director, LCD.


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The Popularity of the Pop Up Shop! Here to Stay or Passing Fad?

With Pop up shops literally popping up everywhere, what's behind this surge over the last few years in pop ups shops? Is it just a sign of the times or are they here to stay?

It's not just the UK - there is a worldwide increase in pop up shops. As well known high street stores and independents close landlords are finding it difficult to find long term tenants, so accepting a short term lease whilst they are looking for the long term tenant makes sense. You could say it's linked to the economic downturn and I certainly think that was the catalyst that kicked it off, however it's got a real buzz around it now and is gaining momentum.

 What's in it for the brand? It's not just small aspirational companies who are enjoying the flexibility of the pop up shop but big name brands are getting in on the action for a fresh and different approach than they take in their mainstream stores, often making it an interactive experience. Brands such as Liberty's have embraced the idea of pop up shop with Hermes and online retailers are using it as a way to entice bricks and mortar shoppers, with ebay opening its first pop up shop this Christmas.

For smaller brands it gives them the opportunity to showcase their products, drive traffic through to their website and gain brand exposure. Expensive business rates and long term leases prohibit this type of business from getting a shop on the high street more permanently, but the entrepreneurial spirit of small up and coming  businesses makes the most of the recession, turning negative downturn into positive innovation.

The kinds of pop ups vary quite considerably too, from retail outlets, art galleries are also now popping up in retail spaces with fringe artists getting on the band waggon, to restaurants, interactive gaming and seasonal stores.

Many of the print and retail agencies now specifically offer POP up shop services, there are companies that exist to solely service this market matching tenants and landlords. These are not the shabby Christmas pound shops we are seeing but modern, stylish stores in popular shopping districts, showcasing the best of British and international design. They offer interactive fresh new ideas, an experience as well as the chance to purchase.

This looks like it's more than just a short term trend and becoming a way for retailers to engage their customers on the high street again, and are often performance spaces as well as retail outlets. I think they're here to stay - as big brand retailers move off to retail parks out of town high streets and public spaces are going to be used in different ways and the landscape will change. This is the just the beginning of a different way of retailing as consumer tastes change and online and multi channel retailers and brand marketers see an opportunity for further reach to their markets. I think it may be here to stay for some time yet! 

Retail: The Truth About Job Pledges & Retail Job Snobbery

This year the supermarkets are pledging thousands of jobs, joining schemes to address youth unemployment, and invest in skills and qualifications. Sainsbury's yesterday launched a campaign called 'Youth Can' to address snobbery in retail careers, especially in supermarkets, and attract young people into careers with them. As there are job losses elsewhere in the both the public and private sectors government is hoping that growth in supermarket jobs will help to partly address the balance.

The Current Pledges:

Tesco are planning to create 20,000 jobs over two years as they invest in improving existing stores and open new ones. They are the country's largest retail employer and the third largest in the UK after the NHS and Ministry of Defence with more than 293,000 employees and 2,715 stores in the UK.

What's it Like to Work at Tesco - Matt Simister of Tesco Group Food Sourcing (GFS)

Asda has announced earlier this year the creation of 5,000 UK jobs with a £500 million expansion plan that includes opening 25 stores, refurbishing 43 stores and opening three new depots. This expansion will support 5,000 new positions on top of the 30,000 staff it took on last year through new store openings and the acquisition of the 147 Netto sites and staff. Overall they currently employ 180,000 people in 528 store across the UK.

What's it like to work at Asda: Sarah - Head of Strategy and Strategic Planning at Asda

Sainsbury's rather ambitiously last year pledged to invest £1 billion in creating 50,000 jobs by 2020, creating 20,000 of those over the next three years. They currently employ around 146,000 people with 577 supermarkets and 377 convenience stores.

What's it like to work in Sainsbury's - Trainee Manager Scheme - Round Table

Past Pledges vs Hired:

However its hard to take this seriously in the current climate when past promises are not being delivered on, according to research by the Financial Mail:

Sainsbury's, Tesco and Asda collectively pledged to create 67,000 jobs between 2008 and 2010. After gathering information from annual reports and data filed at Companies House the research suggests that only 28,217 jobs were actually created permanently as they shed existing jobs through efficiency drives and cycles... so the actual amount of jobs created was just 42 % of the positions pledged. This created a short fall of 38,783 of the jobs promised, which has some critics understandably cynical about the jobs that will be created over the next couple of years.

There's no doubt that supermarket retailers are hiring in significant numbers and there is growth in profits year on year. There are lots of opportunities for young people who shouldn't just view it as it as a dead end job. There are so many different roles for young people either through apprenticeship schemes or for graduates coming into the sector. I think the 'Youth Can' initiative is an excellent way to engage with young people and get them in to careers in retail, debunking the preconceptions and myths that retail jobs are just low level, unambitious stop gaps.