It seems apt on May Day to reiterate Jon Moulton’s alarmist view that “very few recessions of this depth have not ended in war”.
Most commentators agree that today’s economic conditions amount to the worst recession in peacetime; and some consumer behaviour is beginning to mirror that of 50 to 60 years ago.
Although not quite digging for Britain, allotments have become all the rage, homely foods of yore are making a comeback and sewing machine sales are booming. Some stores are reporting a strong upturn in the items of haberdashery (apocryphally named, ironically, from the German ich habe dies und das fur sie) that underpinned the make do and mend mentality of wartime Britain.
But these belligerent parallels are an exaggeration and such talk is careless. Happily, today’s fashion retailers are not selling to customers restricted by their ration books to one outfit a year, or driven to unpicking old jumpers for wool to knit new clothes.
“Stick to your knitting” is, incidentally, a most topical edict for the retail sector today and defines the underlying success of many of its winners. After a devil may care decade of ready debt, the days of reckoning have arrived for many of the loosely woven, unstrategic diversifications and acquisitions that it inspired. All the pre-packs and administrations in the news illustrate how management attention is totally refocusing on the core of the business to restore its health – or salvage its survival.
However, “stick to your knitting” does not mean “don’t innovate” or “don’t diversify”, as last week’s announcements from Tesco
and Amazon go to prove. Each company’s overseas sales, combined with non-food and non-store sales (for Tesco) or non-media sales (for Amazon) are approaching half and three quarters of their respective group revenues.
The common strand that knits both of these retailers’ multi-faceted expansion around one strategic pattern is their understanding of, and obsession with, their customers. Amazon has even dubbed itself “Earth’s most customer-centric company”.
Empires assembled by retailers enjoy no more guarantee of immortality than those created by sovereign states. Many conglomerates, with questionable strategic rationale,were put together with pomp and brought down by circumstance; some ignobly (remember Facia?), some, more recently and inculpably, by global economic factors beyond their control.
However, deconglomeration, unless triggered by distress, is unlikely to see as much action as it would in less credit-crunched times. But FMCG companies like Sara Lee are setting a break-up lead that more multi-fascia retail groups will doubtless follow.
In Kingdom Come, a novel by JG Ballard, whose death was sadly announced last week, a shopping mall cements one of his famously dystopian views of the world. He for one would have relished any thought of the retail blanket coming unravelled.