The aftermath of the festive season brought drama, as a clutch of high street retailers collapsed. But how did the retail industry perform overall? Rebecca Thomson reports.

Waitrose delivered one of the better grocery performances but the market was tough

It has been a busy month for retail pundits - just when they thought they’d have a break from coming up with pithy quotes on the market, another business went into administration.

Blockbuster, Jessops, Comet and HMV all collapsed in the few weeks before or after Christmas, while Marks & Spencer’s general merchandise offer and Morrisons hit the headlines with poor sales growth. But it wasn’t all bad. Christmas 2012 was the end of the line for some, but for others it brought strong performances and hopes of a rosy 2013.

John Lewis and House of Fraser both performed well, and lingerie retailer Boux Avenue delivered a storming 79% like-for-like sales growth. Phones 4U exploited the trend for giving tablets as gifts, delivering 15.8% growth, and Dixons fared well too with an 8% like-for-like increase.

The picture is perhaps not as bleak as January’s spate of administrations at first glance suggests, but there’s still not much room for manoeuvre - when there’s little overall growth in the economy, those doing well will generally be making gains at the expense of others.

As Fat Face chief executive Anthony Thompson says: “I believe the market is very difficult, and it won’t get materially better in the short term. The margin for error is very low - that was definitely the case this Christmas.

We are all having to work harder.”

Which makes it all the more important for retailers to be clever about their strategies. A strong multichannel offer, a clear point of difference and an open-minded approach to innovation must all feature in a retailer’s repertoire.

“This Christmas online became very important,” Thompson says. “Last year 14% of our customers used our deliver to store service - this year it was 40%.”

Multichannel’s time to shine

Christmas 2012 was the year multichannel really hit home. For those without a well-formed cross-channel offer it was a struggle - HMV is of course testament to that. But those that have historically invested in multichannel, such as John Lewis, tended to do better. “Multichannel seems to have come of age,” says OC&C partner Tom Gladstone. “It has been another fantastic Christmas for online.”

Standout performances also came from clothing retailers Hobbs and White Stuff, as well as Fat Face.

Thompson says the retailer invested in its online offer in the last year - the retailer achieved 65% year-on-year online sales growth.

“Some of the specialist retailers did very well,” says Gladstone. “They’re putting lots of effort into developing those channels, plus it’s just how the customer wants to shop now and retailers are recognising that.”

Neil Saunders, managing director of analyst firm Conlumino, says a survey by the business of 22,000 consumers in the run-up to Christmas showed 17% of people questioned used click-and-collect over the period.

“The figure doesn’t tell us the volume of goods bought via click-and-collect but it’s certainly higher than I would expect,” says Saunders.

Online growth

The fact that online is a big deal is hardly breaking news but the web’s effects on retail were thrown into stark relief during December and January.

The figures back this up. BDO market analyst Callum Butterfield said online sales provided a greater proportion of sales in December than retailers were expecting.

He says: “In December 2012, internet sales were 10.6% of all retail sales, a fall of 0.1% from November 2012 but an increase of 1.2% compared with December 2011. The proportion of sales made online this December did not follow the normal pattern between November and December. Internet sales usually fall at a much faster rate between these two months than seen this year.”

Online hasn’t just affected how retailers must get their products to market - it has changed the products themselves. “All four administrations - Comet, Blockbuster, HMV and Jessops - were in categories where online has meant people are changing what they buy,” says Gladstone. “Online is changing not just how they shop, but what they buy.”

It’s easy for people to look back and say they saw this coming but the Christmas 2012 period was significant because the state of affairs that the industry has been talking about for so long really started to become reality.

The changes of the last decade are beginning to have a more profound impact on who’s in business and how business is conducted.

And things are now changing faster than ever before - it wasn’t so long ago that a mobile shopping channel was unheard of. Last year, according to IBM, 14.2% of online shoppers made purchases on their mobiles on December 3 (Cyber Monday), compared with 9.7% on the same day in 2011.

Mobile still represents a tiny proportion of overall sales but it’s growing quickly enough to take some retailers by surprise.

Food fights

The online trend might not come as a surprise but what was perhaps less predictable was the difficult grocery environment. It’s normally the stalwart sector of retail - in previous years, no matter what happened, grocery generally continued to perform well.

However, this year things look set to change. The economic environment is tighter as consumers continue to keep a sharp eye on what they’re spending on food, and inflation isn’t helping.

As Saunders says: “With perhaps the exception of Waitrose, the performance of the grocers has been lacklustre.”

While it’s true that Tesco has done well to turn things around after last year’s disastrous Christmas, he says much of the performance was achieved with promotions and price cuts - the food environment isn’t as good as it has been in recent years.

Saunders says: “People want to enjoy themselves but there is a lot of food waste at Christmas and people seem to have assessed what they buy and bought a bit more closely to their requirements.”

Consumers have also shopped around a lot more. The middle market is where the bulk of food is purchased, such as Asda and Sainsbury’s, but customers are also buying some items at Waitrose and M&S after getting whatever they can at the deep discounters such as Aldi and Lidl.

All of this is making market share harder to hold on to, and this struggle is likely to continue throughout the year. Saunders says: “Christmas is probably a bit of a microcosm of what we can expect for 2013 - food will remain a very challenged sector.”

It might seem as though 2013 will bring more of the same but for any retailers that have been waiting to see how the market develops, it looks as though this will be the year for action.

It’s no longer enough to pay lip service to changing shopping behaviour. If Christmas 2012 is an indicator, it’s time to start reacting to the evolving environment and pre-empting how shoppers will behave in the coming years.

The OC&C Christmas 2012 Trading Index

Predominantly Store-based
Retailer% change in like-for-like sales 2012Weeks of PeriodPeriod End% change in like-for-like sales 2011Movement 2012 on 2011
Boux Avenue³79.4%824 December -
Phones 4U³15.8%4.531 December -
Robert Dyas¹14.7%824 December7.4%
John Lewis (John Lewis Partnership)⁴13.0%529 December6.2%
Blue Inc Stores (Blue Inc Ltd)12.1%45 January9.0%
Aurum Holdings³9.0%813 January -
QD (Buyright, Lathams, Cherry Lane Garden Centres)¹8.2%3.524 December5.7%
Dixons Retail PLC8.0%125 January-5.0%
N Brown (Group)7.9%1912 January2.0%
The Entertainer (Stores Only)⁴7.6%529 December4.7%
Dreams³7.2%47 January -
House of Fraser¹6.3%65 January11.1%
Burberry Group (Retail)6.0%1331 December13.0%
The Works Stores Ltd³6.0%4.531 December -
Debenhams¹5.0%55 January6.5%
Waitrose (John Lewis Partnership)¹²4.3%724 December3.8%
New Look¹3.7%1429 December3.6%
Original Factory Shop¹3.6%66 January4.2%
JD Sports (Sports Fascias)¹3.2%75 January2.3%
Booker3.1%164 January6.5%
Argos (Home Retail Group)2.7%185 January-8.8%
Moss Bros Group³2.7%2412 January -
The Perfume Shop2.4%45 January4.5%
Cooperative Group (Food stores)¹²⁴2.2%35 January3.1%
Dunelm Group¹2.2%2629 December3.8%
Ryman³2.0%824 December -
Tesco (UK)²1.8%65 January-1.3%
Topps Tiles (UK)1.6%1329 December-4.2%
OC&C Store Weighted Average1.6%n/an/a-0.4%
Iceland³1.5%931 December -
Majestic Wine¹1.1%731 December4.0%
J Sainsbury²0.9%145 January2.1%
Halfords (Retail)¹0.4%1511 January-4.8%
British Retail Consortium Average¹0.3%4.531 December2.2%
Marks and Spencer (Food)0.3%1329 December3.0%
H Samuel (Signet)-0.5%929 December1.4%
Thorntons (Own Shops)-1.3%1412 January-4.2%
Marks and Spencer (All Categories)-1.8%1329 December0.5%
Morrisons Group²-2.5%630 December0.7%
Greggs-2.9%55 January5.1%
French Connection Group Plc³-2.9%2412 January -
Marks and Spencer (General Merchandise)-3.8%1329 December1.8%
Homebase (Home Retail Group)-3.9%185 January-2.6%
WH Smith (Retail)¹-5.0%2020 January-5.0%=
Ernest Jones (Signet)-5.5%929 December2.3%
Mothercare Group-5.9%1312 January-3.0%
JD Sports (Fashion Fascias)¹-7.9%75 January-0.7%
Methodology: OC&C has used the shortest reported period of like-for-like sales during the Christmas period. Excludes results where the shortest reported period is greater than 26 weeks. Periods vary significantly between retailers therefore care should be taken in interpreting the results. Definitions of like-for-like may vary between retailers but principally refer to same-store sales. Where possible figures relate to trading in UK / UK & Ireland. Figures are stated as reported - no decimal place indicates rounding at the reporting stage. Figures are for like-for-like growth in sales excluding VAT unless indicated otherwise.
Notes: 1. 2012 period length differs from 2011; 2. Excludes petrol; 3. No 2011 LfL available; 4. Like-for-like change in sales including VAT; 5. Company reported approximate figures; 6. Weighted by most recent reported annual revenue

 

The OC&C Christmas 2012 Trading Index

Internet and Direct
Retailer% change in like-for-like sales 2012Weeks of PeriodPeriod End% change in like-for-like sales 2011Movement 2012 on 2011
Fat Face Ltd (Online only)³65.0%55 January -
Hobbs (Online)³60.2%105 January -
White Stuff (Online)³52.0%65 January -
House of Fraser (Online)¹48.0%65 January124.0%
Phones 4U (Online)³47.3%531 December -
Fortnum & Mason (Direct)³45.0%531 December -
John Lewis (Online)⁴44.3%529 December27.9%
Debenhams (Online)³39.0%185 January -
Waitrose (Online)³37.0%724 December -
ASOS³34.0%531 December -
Kitbag (Findel)¹19.0%1622 January2.0%
Tesco (Online)18.0%65 January14.0%
The Entertainer (Online)⁴17.7%529 December36.7%
OC&C Direct Weighted Average17.4%n/an/a14.5%
N Brown (Online)³17.0%1912 January -
Tesco (Direct)³16.0%65 January -
Cooperative Group (Online electricals)¹15.2%35 January18.4%
Ocado¹14.2%66 January16.0%
Express Gifts (Findel)¹13.3%1622 January11.1%
Next Directory (Next plc)¹11.2%824 December16.9%
Marks and Spencer (Multichannel)³10.8%1329 December -
Findel plc³10.2%1622 January -
Shop Direct (Group)5.0%629 December9.0%
Mothercare (Direct sales)0.9%1312 January-2.2%
Kleeneze (Findel)¹-9.1%1622 January-1.2%
Methodology: OC&C has used the shortest reported period of like-for-like sales during the Christmas period. Excludes results where the shortest reported period is greater than 26 weeks. Periods vary significantly between retailers therefore care should be taken in interpreting the results. Definitions of like-for-like may vary between retailers but principally refer to same-store sales. Where possible figures relate to trading in UK / UK & Ireland. Figures are stated as reported - no decimal place indicates rounding at the reporting stage. Figures are for like-for-like growth in sales excluding VAT unless indicated otherwise.
Notes: 1. 2012 period length differs from 2011; 2. Excludes petrol; 3. No 2011 LfL available; 4. Like-for-like change in sales including VAT; 5. Company reported approximate figures; 6. Weighted by most recent reported annual revenue