Rising costs and our failing ability to pay them means retail must change, says Neil Gillis

As Eskimos have thousands of words for snow, so it would seem that economists have as many descriptions for recessions. ‘V-shaped’, ‘U-shaped’, ‘Bath-tub’ and the current favourite ‘Double-dip’ are just some of the visual images used to describe our economic prospects.

As a retailer, I am not sure that any of these accurately reflect the changes we are about to go through. All of these images suggest a return to a previous state of normality, which just isn’t going to happen. ‘Normal’ has gone for good.

We have enjoyed a decade of economic growth that has been built on low inflation and high consumer spending. Both of these, in turn, have been driven by the Chinese economic miracle. High quality, low-cost goods have flooded into Western economies and we have paid for these with services of one kind or another. Many of these are financial services, but not all - bizarrely, we earn £4bn a year from exporting our services as architects, for example.

Buyers coming back from sourcing visits to China though will confirm that this situation is changing rapidly. There is certainly commodity inflation feeding through, but these things are cyclical and are quite capable of going down as quickly as they went up. The more significant change is the evolution of the Chinese economy. Chinese parents do not want their children to follow them into factory work. They would like them to be bankers or architects. So over a period of time the cost of our imported goods will steadily rise and we may find it harder to pay for them with our services.

In thinking about how this will impact on the retail environment,

I recalled a conversation I overheard a few weeks ago at Matalan. A customer was buying some clothing but was unsure it would fit her child who was not with her. She commented to her friend that she would buy it anyway and if it didn’t fit just bin it because it was only a fiver. Those days of disposable retail are going and the trading landscape will change dramatically.

As input prices gradually increase and our ability to pay them gradually decreases the nature of retailing will change. Consumer purchases will be more considered and characteristics like product performance and longevity will become more important. To persuade the consumer to part with their precious cash will require more than a factory-printed fluorescent 80% off swing ticket. It will need product benefits, emotional engagement and persuasion. In short, it will require a greater emphasis on salesmanship rather than just pricemanship.

This is a change I welcome. In our own business we have recently invested more than £1m in store training together with programmes to encourage our people to experience the products they sell by undertaking outdoor activities with the company.

It helps the company to deal with an increasingly difficult trading environment but it also makes the jobs within retail, at every level, more skilled and ultimately more rewarding. Who knows, perhaps we can persuade more of our brightest graduates to start a career in retail rather than becoming bankers or architects.

Neil Gillis is chief executive of Blacks Leisure