Home Featured Successful Retailing?

Successful Retailing?


Anthony Bamford shares his final instalment of a short series for WhichPLM. Anthony discusses strategy, marketing & operational management in relation to retail and fashion. Anthony (MBA MRICS MIWFM MCMI) is a senior interim manager and consultant specialising in strategic management as well as transformation and change.

When I initially did my academic training to become a Chartered Surveyor the prime real estate of any investment portfolio was considered to be what we call the high street in the UK. The next best investment was in offices, with industrial premises being least popular. How times have changed. Due to careful sector entry and divestment of older holdings a company called Seagro is regularly the largest property company on the UK Stock Market. Their portfolio mirrors the rise and strength of eCommerce and consists of many excellently located distribution centres. As with many business initiatives a little bit of luck and correct timing are important factors as the follow up by US retailers into the market segment identified by Tesco’s Fresh and Easy brand demonstrates.

The importance of this to the clothing and apparel sector covers the following three factors; strategy, marketing and operational management. In the latter case the higher number of returns in eCommerce, compared to traditional retail outlet customers, is quite an important issue. As an apparel maker and supplier any innovation to diminish this eCommerce retail margin issue would be welcome. These three factors are also important in the “bricks and clicks” sphere. What are shop units for? Which of the following is the strongest aspect: advertising, literally a shop front, or a place where customers acquire an item in a single transaction? These distinctions are not theoretical when retailers such as Bonobos function to fulfil only the first two elements of these roles.

Last year, in the Financial Times, Jonathan Eley identified the following key approaches to successful retailing in the UK: exclusivity, personalisation, brand, cheapness (low price), dominant position and finally, flexibility. The importance of the sport / leisurewear market remains. Eley notes the aims of brands such as Nike and Adidas to sell both directly and through a strong UK retailer such as JD Sports. Smaller, niche retail players are also expanding into this still vibrant area.

Whether a niche retailer or a major department store, the company’s debt and numbers of shops are important factors in maintaining existence and health. Both in the US and the UK, department stores are in difficult positions often made worse by financial positioning. Here in the UK Marks and Spencer has traditionally owned many of its shops (known as freehold in UK) whereas House of Fraser and Debenhams have rented (known as leasehold in UK). A number of companies have carried out sale and lease backs which tie the company into long lease and rental payment obligations. Again, these are the same decisions and mistakes those in the clothing and apparel supply chain could make, but just as importantly are indicators of the health of your customer in a B2B environment.

As a Chartered Surveyor I was interested to learn recently that the CEO of Paperchase, a successful stationery retailer here in the UK, has the same professional background. He therefore assesses each new potential shop site personally. This level of expertise is clearly helpful in ensuring the ongoing viability of the proposed outlet’s location. A number of retail chains across various sectors including restaurants, food and music (records, CDs etc.) in the UK have struggled to survive through overexpansion or poor operational management in addition to outlet location issues. For example, HMV has been bought out of administration in February saving two thirds of the chain’s shops.

One of the early activities I did in my first job was counting footfall in an English county town shopping high street. In the UK a property tax called rates, based on the rental value of premises is paid by property occupiers (not owners unless they occupy). This tax has become a central point of complaint with retailers since they say the bills are much lower for warehouses where eCommerce businesses have their main property footprints.

Simon Properties in the US is reducing its mall portfolio and investing significantly in the retained core portfolio as both the nature of shopping and the offer have to change to align with customer drivers. In the UK, Intu holds a number of malls in provincial cities that are vulnerable, while for the time being the new major Westfield Malls in London are attracting footfall. New and nearly new malls and shopping centres can support the new customer environment more effectively.

However, even for a major company such as Simon Property Group a $200 million-dollar investment in one mall and $300 million in another, is a substantial sum of money and yet essential to match the customer needs and environment, forming part of a $1.9 billion programme. Yet for the time being this is rewarded through sales per square foot. Fortune also notes the company has adapted to drive sales and footfall as key sectors, such as department stores and apparel retailers having had weak sales.

It is clear that both in the US and UK the drive towards experiential visiting of town and city centre shops continues. In the UK the planning system has hampered what is called mixed development but a combination of successful examples and the clear need that something significant must be done to revive dying high streets and traditional town and city centres has driven a more productive vision and approach. The UK is probably in a stronger position overall. Fortune quotes CoStar Reality Information suggesting there are 2,353 sq. ft of shopping centres for every 100 Americans, compared to 1,636 sq. ft in Canada and a mere 458 sq. ft in the UK.

One of the issues for the UK, however, is the presence of increasingly active local authorities or councils, some of which are acquiring shopping centres and malls, usually within their geographical areas. This goes hand in hand with continuing changes in shopping habits, raising the question of how wise the use of public money in this way is. Furthermore, there is some evidence that on a number of occasions these organisations are the only bidders interested in acquiring the assets.

In my last article, I wrote about strategy. Compared to other aspects of business, property and assets has relatively slow cycles and one of the biggest problems is to get these to synchronise with other parts of the business. To put property and assets along with strategy into context let me share the following. Some years ago, I came across some Sunday paper magazines from the early 1970s. Two short articles struck me, based on a weekly personal opinion column. The first was from a US citizen writing to his UK cousins, imploring them not to let supermarkets and shopping malls alter their country, as had happened in the US. The second was from another non-UK citizen who marvelled at the number of post boxes and post offices the UK had and could not conceive how they were sustainable.

A number of people are credited with saying that humans always over predict the change in the short term and under predict the change in the long term. This makes it essential that long term commitments such as those around property are fully and properly considered.

Lydia Mageean Lydia Mageean has been part of the WhichPLM team for eight years now. She has a creative and media background, and is responsible for maintaining and updating our website content, liaising with advertisers, working on special projects like our PLM Project Pack, or our Annual Publications, and more.Joining mid-2013 as our Online Editor, she has since become WhichPLM’s Editor. In addition to taking on writing and interviewing responsibilities, Lydia has also become the primary point of contact for news, events, features and other aspects of our ever-growing online content library and tools.