Mark Casci: Landscape shows hard times for retail are here to stay

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For most the truest sign of the end of the yuletide period is the taking down the decorations.

But for some, business journalists included, the true end of Christmas comes now, as our retail giants enlighten consumers and investors as to how they have fared in this most crucial of trading periods.

Mothercare store - PRESS ASSOCIATION

Mothercare store - PRESS ASSOCIATION

This week is very much retail week, as our own Morrisons, along with Tesco, Marks & Spencer, Ted Baker, Mothercare, AO World, Majestic Wine and a plethora of others update the market on how Christmas treated them.

Already the picture is looking like a mixed bag with Next, a retailer the subject of so many challenging headlines of late, reporting an improved performance, bolstered mainly by growth in online sales.

However Debenhams, another staple of the British high street has endured a more torrid time and issued a profit warning, followed quickly this week by Mothercare.

Both of these retailers are household names, once home to year-on-year growth and unmanageable queues at Christmas sand sales time.

General view of the Next retail store at Marble Arch. Pic: Louisa Collins-Marsh/PA Wire

General view of the Next retail store at Marble Arch. Pic: Louisa Collins-Marsh/PA Wire

However, like the banking industry, they are falling foul of a marketplace which, in just a decade, has turned on its head.

The expression adrenaline junky used to be reserved for the mildly psychotic few who enjoyed base jumping or big game hunting (I am sure you can make a living from this, but I am not sure how great).

However it now refers to a plethora of industries and the world of retail in 2018 is squarely in this category.

With online retailers increasingly ruling the roost and time-poor consumers increasingly opting to do their shopping from their arm chairs, the old model of selling better or cheaper goods than your competitors is consigned to history, along with many business leaders who never got to grips with the modern world.

Marks & Spencer has sold its retail business in Hong Kong  Picture Jonathan Gawthorpe

Marks & Spencer has sold its retail business in Hong Kong Picture Jonathan Gawthorpe

More troubling is the predicament many consumers have found themselves in during 2017 seems to be set to carry over in to this year, with shoppers increasingly pressurised by higher costs in terms of their purchasing power.

According to the IGD, a mere quarter of shoppers expect to be better off this year, with 28 per cent expecting worse off and the remainder largely unchanged from last year.

A landscape promising growth and opportunity it is not.

Spending, for the foreseeable future, is likely to be muted, as inflation keeps surplus cash in pockets rather than tills.

What can be done in terms of helping ameliorate this for retailers there seems little external measures that can improve matters.

The prospect of at alterations to the way we trade as a nation an unquestionable reality as we march towards our exit from the European Union, it is vital that additional tariffs of any form be avoided if we wish to see our high street giants remain able to offer consumers goods and services at a price they can afford.

The move towards retaining at least aspects of and at best total membership of the Single Market and particularly the Customs Union which we saw at the end of 2017 will help this. It will displease the extremist wing of the political class but, as all true businesspeople know, nobody walks away from a negotiation happy.

However the Brexit talks cannot be used as an excuse by any business. As Next has shown people are still willing to buy goods and even in this most complicated of landscapes it is one where money can be made.

However, for the meantime at least, the tough times are here to stay.

As Paul Martin head of retail at professional services giant KPMG puts it, retailers are facing a “cocktail of geopolitical and economic uncertainty, ongoing margin pressure and structural changes driven by technology and changing, consumer behaviour”.

Suddenly base jumping is sounding like quite a relaxing way to spend time.