Retail analysts and consumers alike sat up and paid attention last week when John Lewis, often seen as a bellwether of the British high street, reported its results for the first six months of its financial year. The group announced that profits had more than halved, in part down to restructuring costs to accommodate the continued rise of online shopping, but inflationary pressures driven by political uncertainty were blamed for dampening consumer demand. Chairman Sir Charlie Mayfield also added his voice to the chorus of other business leaders calling for clarity from the Government over the Brexit position, but the challenges facing traditional retailers have been around long before the EU referendum.
Looking to the supermarket sector, Tesco will report its next results in October and industry data has suggested a trading upturn, but it was only two years ago that it announced a write-down of £7bn, including £4.7bn of charges for the change in the value of its property and land on which it would no longer develop. The retailer was seen as the most aggressive of the UK supermarkets during the period of ‘land grabbing’, either identifying land for future projects or to prevent rivals from muscling in on their territory. For Marks and Spencer, it’s hoped that the new head of the struggling clothing division will revive it at a time when the business is fighting to maintain market share against online rival Asos. Food sales, relied on by investors to balance the clothing arm, have not exactly been flying. On the other hand, Next has pushed up its full-year sales and profit forecasts, saying it has managed to withstand the inflationary impact of a weak pound.
Inflationary pressures aside, e-commerce has long been blamed for the demise of bricks and mortar, though the two are not incompatible and can benefit each other – Amazon’s acquisition of Whole Foods is (potentially) evidence of that. A finalised Brexit deal may bring some much needed stability, but it will be years before anything clear-cut and the smart retailers are looking closer to home to determine both the current and emerging issues. This is particularly true for those focusing on customer behaviour as, at the end of the day, it’s getting them through the virtual or physical door and to buy that really matters when it comes to the bottom line.