What determines a retailer’s success?

The recent administrations of BHS and Austin Reed which come hot on the heels of Brantano, Blue Inc, Phones 4U, American Apparel all the way back to Woolworths and Blacks Leisure in 2008 and 2009 respectively are a harsh reminder of the challenges of modern retailing.


Who would have thought that such icons as BHS and Austin Reed would be in the state they are in? Austin Reed has not one but two Royal Warrants to its name. So what has gone so horribly wrong to result in hundreds of shops set to close, and thousands of people losing their jobs and perhaps their pensions?

Along with the Centre for Retail Research (CRR) we track these closures but the CRR also tracks the employment impact. Since 2008 the CRR has identified that from 2007 to April 2016, 358 companies with 27,824 shops and 262,972 employees have gone bust!

To put that in context then the number of affected shops equates to more than sixteen Birmingham city centres!

So what causes so much blood-letting on the high street and could it have been forecasted? Who is to blame – the consumer? The supermarkets? Business Rates? Landlords? Parking charges? The internet? Amazon? The banks? The companies themselves? Their investors? The list goes on …….

For me there are three core attributes to a company and its performance that can be broken out and interact;

  • Well founded?
  • Well funded?
  • Well managed?

So you might have a retailer who is all three or they be might be poorly founded, funded and managed, or a mix of the three to differing degrees of strength.

So where would you place BHS in light of all the headlines?

BHS was founded in Brixton in 1928, so you could argue that it was well founded. With regards to funding, its most recent and relevant data is that it was bought by Philip Green in 2000 for £200m and sold for £1 last year. In the meantime significant debt was raised against the business and significant equity extracted. So it would not be unreasonable to assume it was badly funded for the benefit of the business and its employees, but well-funded for its owners. In light of this style of management then ethically it was badly managed and then most recently sold onto a group with very little, if any retail experience. You can then do this analysis against every other retailer who has failed or indeed who is alive.

Management and funding are a key components, and the two that deliver success or failure. The ability to change as Darwin put it is key – be it the invention of the internet, the motor car or mobile phones.

“It is not the strongest of the species that survive, nor the most intelligent, the one most responsive to change.”

Charles Darwin

Change is inevitable, change is constant.
As Benjamin Disraeli rightly said.

So when one looks back at Woolworths you could argue it failed to change and it became irrelevant to modern consumer needs and aspirations.

Phones 4u built a business around access to networks which its competitors operated and over which they had no control. Others expanded so rapidly that their race for space led to over rented properties which killed their profitability and others have succumbed to mass market discounting which is a race to the bottom or a fight to the death.

Austin Reed is a case in point. Most of us would think of a company with considerable history, prime shop locations and two Royal Warrants to be aspirational and premium.

It is not Austin Reed that chose to compete with the likes of TM Lewin and Charles Tyrwhitt selling four shirts for £100 and sometimes £80 and suits for £199.

This is ironic because Austin Reed founded the business in 1900 to provide ready to wear Saville Road standard clothing off the peg. It is also a sign of the times that Austin Reed’s great grandson, Nick Robertson, was a co-founder of ASOS which is valued at more than £1.5 billion!

So, many factors are at play and of course location is another one. As we have all seen over the last 50 years the number and type of shopping (and now eating/entertainment) destinations have increased significantly.

Consumers are now really the kings and queens of the ‘high street’ and will not tolerate being ripped off, poorly serviced or indeed going unrewarded for their custom.

We have more cars in the country than ever before. At the end of 2012 there were 34.5 million registered cars which is nearly one car for every two head of population and even higher when you take out the too young and too old to drive. So the consumer will travel virtually or physically to the ‘sites’ that have the excitement, the value, the service and the aspiration they seek.

Analysis of two ‘department stores’ BHS and Debenhams shows this point around location, but of course you don’t have the luxury of moving with the times if you are in a 25-year or sometimes longer lease! They both have a similar number of stores but their profiles, when you analyse them against the LDC Health Index of these locations, are very different.


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So there are many moving parts to a retailer and what drives success but I believe it comes down to an understanding of their Founding, their Funding and their Management. Everything else works around this.

Food for thought!

Have a look at the fast expanding food and beverage retailers and see how they fare and especially focus on the funding and what is driving their expansion. To be continued…

One thought on “What determines a retailer’s success?

  1. Insightful analysis as always Matthew – thanks.
    That famous Charles Darwin quote is being used frequently by observers of the turbulent UK retail market – the latest being Brian McBride in his keynote at yesterday’s Retail Forum event. There are several other quotes attributed to Darwin that could also be interpreted as relevant to the current UK Retail sector, not least “Great is the power of steady misrepresentation” which in the age of instant digital global communication and where one of the key drivers of purchase is peer group recommendation, reflects the reputational damage that misrepresentation spread to tens of thousands in minutes through social media, on any aspect of product quality, price, customer service etc. can have on a retail brand .Although potentially hugely damaging to share price, footfall and sales, it’s almost impossible to control.

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