We’re almost at the halfway point in January and pundits in most sectors have had their say about what the year ahead is likely to hold.
For retailing, however, this seems like a very good time to make a guess at the way in which events will unfold, because only now are we reasonably aware of how individual companies have performed over Christmas.
So, here’s a simple prediction based on pure prejudice about the way in which retailers operate. Retail designers, shopfitters, project managers and strategy consultancies (whatever they may be) are in for a lean time. Conventional wisdom tends to say that if you have a programme of refurbishment or store upgrades, then, when the economy tightens, you have to grit your teeth and keep going. If you don’t, then your competitors will forge ahead, mopping up whatever business is out there to be done.
Sounds like common sense; something along the lines of: “When the tough get going…” – well, you know the rest. Except that it fails to take into account the batten-down-the-hatches, short-term mentality that characterises UK retailing frequently. Almost as soon as a couple of weeks elapse, in which like-for-like numbers are behind the previous year, boards convene to try to work out how to deal with what is always an unexpected downturn. And, if top-line growth is not materialising, then cost-cutting is the next item on the agenda.
This can mean a number of things, with anything from staffing levels to IT investment likely to be subject to close scrutiny. But, among the many savings that can be made, cutting design and build/rebuild programmes out of budgetary agendas is going to yield a tangible benefit almost immediately.
And good news. This kind of capital expenditure cutback feeds straight into the bottom line, making up for compromised selling margins and fewer customers. It could be seen as removing one of the riskier elements from retail finance and certainly provides a temporary breathing space. However, in the long term – think maybe six months from now, if store portfolios are allowed to degrade, then remaining competitive may prove tricky.
This is a time for retailers to be brave and ensure that store environments are not compromised. After all, interiors are the bit that shoppers see that should influence them into easing the purse strings. The trouble is, making this case to concerned stakeholders is really, really difficult. So, for those in the business of providing us with fine new shops, 2008 will – at the very least – be different from last year.