There is nothing to beat actually making a purchase, in store or online, if you really want to know how a retailer is performing.

There is nothing to beat actually making a purchase, in store or online, if you really want to know how a retailer is performing.

This has become ever more important in an age when the army of analysts and the media are presented with professionally prepared spin intended to market companies in the same way as politicians. My colleagues and I spend a disproportionate amount of time on the road digging out real information.

An increasingly prevalent pattern is emerging where the online experience exceeds expectations while the in-store experience disappoints. Naturally there are always exceptions, such as the unsolicited package of socks and boxer shorts delivered to me by a leading UK online player.

Having returned the unwanted items with an explanatory letter of complaint I received no response beyond a series of monthly invoices claiming payment. These invoices escalated by their “very reasonable” APR of 39.7% and culminated in them threatening legal action. This is one retailer that will not be benefiting from my custom in the future.

We are of course looking at an uneven playing field. On the one hand store-based retailers have a legacy of onerous fixed property costs and must endeavour to make a profit in order to pay the next quarterly rent bill and avoid administration, even if this entails cutting staff and sacrificing service. In contrast, online retailers have the luxury of not needing to make a profit and in many cases boast an operating model that is not sustainable – the extreme being the model for online grocery.

Valuations are based on a multiple of sales, the theory being that those sales and market share will be translated into profit at a later date. There is a madness in this theory that is reminiscent of recent banking practices.

A fascinating battleground is the low-margin consumer electronics category, where pure-play growth appears to be stalling as suppliers categorise the internet as a device that encourages trading down and devalues their commitment to product development and brand building.

Thus, some brands are distributing selectively and giving store-based specialists better terms. Earlier this year, Dixons claimed that Amazon was only 7% cheaper, whereas several years ago the differential had been more than 20%.

However, Dixons’ renaissance has not been reflected in my own store visits. Admittedly my local Currys (Plough Lane, Wimbledon) is not one of its better stores, but service remains questionable – particularly making initial contact and product information, the latter being focused on special deals and warranties.

In many product categories choice seems illusory, there being one heavily promoted brand with back-up stock and numerous other choices that turn out to be for display only.

I for one would not be backing a Lazarus-style return from the dead for Comet or joining the queue to look at Best Buy. The inherent low-margin structure and the dominant global brands have always loaded the dice against the retailers, while the endemic product price deflation demands strong top-line volume gains.

  • John Richards, retail consultant, McQueen