How well-timed tweaks to business strategy have allowed some retailers to shine through a difficult trading environment
The British retail sector, like the wider economy, is being put through the mill. Twin hangovers from Brexit and the pandemic have merged nastily with staff shortages, inflation and, in general, fairly tepid demand.
Naturally, the Great British Summer has played its part, with squally showers overruling sunny days for much of the early part of the summer. This has dampened demand for goods that traditionally sell like hotcakes when the weather warms up. The latest figures from the British Retail Consortium (BRC) tell the whole story.
British Retail Consortium data 2024
The latest survey evidence reflects this patchy outlook. According to the CBI, retail sales volumes fell last month, with a balance of minus 28% of respondents reporting increases compared with +8% in May.
Sales were reported to be “well below average” for the time of year, with orders down and unsold stock up. Even online sales had a bad month, with a whopping balance of 45% of shops reporting declines.
This pain was mirrored by the latest British Retail Consortium (BRC) data, with sales down 0.2% in June versus a healthy increase of 4.9% 12 months before. Food sales were up, albeit sluggishly, while non-food (ie everything else) slumped just under 3% year-on-year.
In general, shop owners expect better news to come, but not that much better.
Responding to the news, Alpesh Paleja, CBI Interim Deputy Chief Economist, said:
“Consumer fundamentals are improving, with inflation now at the Bank of England’s 2% target and real incomes rising. But it’s clear that households are still struggling with the legacies of the cost-of-living crisis, with the level of prices still historically high in some areas.”
Meanwhile, Helen Dickinson, CEO of the BRC, essentially blamed the weather and looked ahead to brighter days:
“Sales of weather-sensitive categories such as clothing and footwear, as well as DIY and gardening were hit particularly hard, especially compared to the surge in spending during last June’s heatwave. Electronics sales had a better month as football fans cheering on their national teams upgraded their home entertainment systems and people replaced their pandemic purchases. Retailers remain hopeful that as the summer social season gets into full swing and the weather improves, sales will follow suit.”
A high street institution gets it right
While the broad economic picture is mixed and consumers wobbly, the pain is not spread evenly. That’s because some retailers, big names and small, have set themselves on a path to profitability regardless of what the world throws at them.
One is that darling of the High Street, Marks and Spencer, or M&S to its friends, which has benefitted tangibly from some well-timed tweaks to its strategy.
In May, it published what analysts described as “glittering” results, as tills rang to the tune of £8.2bn, an extra 13% in the year to 30 March. Even stripping out the effect of new store openings, like-for-like sales were up 11.3%.
High fives all around. These numbers would be the envy of just about any business, but as the saying goes it takes an awful long time to become an overnight success. So what happened?
According to chief executive Stuart Machin, this is just the most recent of 12 consecutive quarters of growth resulting from a bold new direction for the business. “Two years into our plan to Reshape for Growth we can see the beginnings of a new M&S,” he said, adding, “We are becoming more relevant, to more people, more of the time.”
According to an insider at M&S, the vision is to become the UK’s most trusted retailer, with “exceptional quality” at the heart of the offer to customers. Sounds good, what else?
Well, the food model has been “edited” with a “concentrated supply base”, meaning the range is prevented from becoming too elastic while there is a tight rein on the number and nature of suppliers. The broader lesson here is to keep your eye on where stock comes from and whether that process can be improved.
At the same time, effort is made to keep the range fresh and inviting, but with a price promise to not break the bank. The ‘Remarksable Value’ range, launched in 2019, is meant to reflect M&S quality perceptions with prices benchmarked against high street rivals. This range enjoyed 34% growth in the most recent figures.
The approach also fed through to the healthier ‘Eat Well’ range, with prices dropped on half the products under this banner. This translates to appealing to core customers, understanding their needs and delivering products that get them in the door, potentially with breakeven goods or loss leaders.
Meanwhile, in the back office, a series of improvements have helped maintain margins. In August 2023, M&S acquired its principle logistics provider Gist, a move which has delivered “greater than expected savings and a rapid payback on invested capital”.
Long-term supplier commitments and “joint efficiency plans” reduced the cost of goods, while the rollout of a new forecasting and ordering system improved the availability of lines without increasing cost, and a new operations programme called ‘one best way’ has created productivity benefits.
Elsewhere, in the clothing department: “Clothing & Home’s transition to a new trading model includes buying more deeply into core lines,” said the spokesperson, “translating fashion trends into greater newness and concentrating supply with strategic partners and a faster supply chain.
“This is resulting in improved perceptions in style, quality and value, and reduced promotion and markdown. Market share increased to 10.0% (from 9.6%) in Clothing and 3.7% (from 3.55%) in Food in the 52 weeks ending March 2024.”
Green shoots and silver linings
M&S isn’t the only retailer doing well right now. Beauty Pie, a cosmetics buying club, has enjoyed steep growth by leveraging a subscription-based model, offering high-quality beauty products at lower prices by cutting out middlemen.
Fashion brand Coach launched its Coachtopia sub-brand this year, which reimagines its products using excess waste materials, and opened concept stores featuring repair and alteration services. The approach not only aligns with consumer values but also adds value through sustainable practices.
Primark has invested £100m on store renewal and a click-and-collect service, while the Fragrance Shop launched AI-powered fragrance-creating kiosks, allowing customers to fashion their own scent in-store.
Wolf & Badger, a fashion marketplace, has exemplified the optimal use of multi-channel retail in this trend, finding customers in hard-to-reach places by pushing products via every available route to market.
It sells through in-store, digital, and online marketplaces. This strategy has paid off, with Wolf & Badger chiming with a diverse customer base and driving a stratospheric growth rate of 108%.
Lessons from successful UK retailers 2024
What all these success stories have in common is a commitment to renewal, combined with a laser-like focus on core principles. Smart investments designed to appeal to customers and generate a near-term return are just as important in turbulent economies as they are when the going is good.
The trick, then, is to research, plan, and identify opportunities that all but guarantee growth – easy to say, sadly less so to do.
At Freshminds, we provide the retail sector with on-demand consulting expertise, either at the analytical or expert level. So, no matter what your business requires, we’ll get it done. To find out more, read our sector page here.
You can also read more of Freshminds' own in-house retail trend analysis below.
