On the Seventh Day

The thorny issue of retailers trading on a Sunday in the United Kingdom reared its head again recently. The government has taken consultation on the issue of whether or not to increase trading hours on a Sunday and is expected to introduce new legislation shortly to extend opening hours on this day.

Traditionally Sunday has been viewed in the United Kingdom and elsewhere as “a day of rest”: for workers, traders and shoppers. This harks back to ancient times, where religious conventions tended to dictate the behaviour of citizens and society. In the past century and in many countries, right up to today, trade unions also have had a powerful influence on the issue of trading on a Sunday – particularly in Europe.

In 1994, The UK changed the legislation and allowed retailers with floor space of over 3,000 square foot, to open for six consecutive hours between 10am and 6pm. This was a contentious issue with many interest groups such as religions and workers arguing vociferously against this move.

However it probably fell in line with what was happening with regard to people’s lifestyles and behaviour at that time. In the area of sport for instance, Saturday was always regarded as the “sacred” day for matches and events. This began to changes in the 1990s with major sports shifting some of their most attractive games to a Sunday. The English Premier League, Rugby Union cricket being to the forefront in this regard. People’s leisure activities also changed. Many viewed Sunday as a good day to “chill out” and get away from the pressures of work. Shopping became an attractive proposition for many and since the 1990s Sunday has proved in broad terms to be popular with shoppers – particularly at critical times in the year such as the lead-up to Christmas.

What happens elsewhere in Europe? Interestingly in major economies such as Germany and France, we have seen a more restrictive and conservative approach to this issue.

Sunday as “a day of rest” has been built into the French constitution since 1906 – a legacy of the socialist tradition. It is only in 2015 that the French government has begun to loosen the restrictive legislation on trading hours on a Sunday and is allowing limited opening hours in so-called “international tourist zones” in Paris. Areas such as the Champs-Elysees and Monmartre are a good example where many tourists visit and some find it surprising to day the least that stores are not open and available for business. Some out-of-town shopping malls are also being considered for more liberal opening and closing hours of business. The power of the unions has also influenced policy-making in this area over the decades. The present French government, hit by a poorly performing economy, see more liberal trading hours on a Sunday as an opportunity to stimulate employment growth and generate more revenue.

Germany also has been quite restrictive in its approach to Sunday trading. It introduced legislation in 1956 which gave limited retail sectors permission to open. Only four Sunday’s in the year could be used for trading. However both federal and regional policy makers (Landers) can apply different approaches. For instance Bavaria, which has a strong Catholic ethos and a strong union presence has been influential in restricting the opportunities for trading.

Despite the secularisation of countries in Europe and a drift away from people practicing religious behaviour, we still see a conservative approach in many countries in Europe.

What are we to make of the pending legislation in the UK to further liberalise trading hours on a Sunday?

In the 1990s we did not have online shopping. This phenomenon has mushroomed in the past decade and more importantly provides the shopper with “24/7” access to shopping. No bureaucrat, legislator or religion can prevent shoppers from engaging in such an activity at any time or day of the week.

For many people, shopping is about leisure and socialisation and getting away from the mundane aspects of the working week. It is a form of therapy for some. Is it not inevitable that we will see even greater liberalisation in this area of Sunday trading?

The proposed legislation in the UK still provides workers with the right to opt out and if victimised, they can take the offending retailer to court.

We arguably live in a “flexible world of work”. People increasingly work on zero or part-time contracts. Many are transients i.e. between jobs or careers. For instance retailers make plentiful use of students and older people to staff their outlets. These individuals are not necessarily seeking permanent and pensionable positions with such retailers.

We live in a mobile and multi-cultural age. People travel more and as noted earlier can find it infuriating to see shops closed on a Sunday.

What’s not to like about this move to more liberal trading in a Sunday?

Over to you!!

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WHAT CAN I BUY FOR 25P?

More than you might think!

We are familiar with discount retailers such as Aldi and Lidl operating successfully in many parts of Europe. Since the start of the global recession back in 2008 or thereabouts, these retailers have made inroads on the more established retailers such as Tesco, Carrefour, Ahold and so on.

We are also used to harsher versions of discount retailing such as Poundland. This retailer has made great play of its ability to offer items in its outlets for one pound sterling.

In a wider context many of us have flown with EasyJet, the low-cost airline originally established by that Greek entrepreneur, Stelios Hajl-Ioannou, in 1995. Along with Ryanair and other smaller European airlines it has redefined the price of airfares for many people in Europe.

Since this launch, Stelios launched further “easy” concept businesses such as easyGym, EasyHotel, EasyBus and easyMobile. One or two earlier concepts such as easyCinema have fallen by the wayside. In early 2016 he launched what might be described as the ultimate discount retail concept store: “easyFoodstore”.

The basic principle behind this value proposition is that it offers around eighty items in its spartan stores for 25p. The retailer’s slogan is “No expensive brands. Just food honestly priced.”

Frozen foods, tinned food and dry food in general make up the merchandise that is available in the store. The concept takes the term “spartan” to even more extremes than the likes of Aldi and Lidl. A recent article described it as WA grim, concrete warehouse-like space, no bigger than a small corner shop, which more recalls a Soviet-era ration store than the glossy aisles of today’s supermarkets. (Daily Mail; February 3rd, 2016).

So far the shop has attracted many different categories of shopper; from charity workers to families and people who simply urn up to gawk at the concept.

The concept was undoubtedly prompted by the change in shopping patterns that has been brought about by the recession. People generally have become more conscious of the need to save money on their food shopping and have become more responsive to low-price operators and bargains than ever before. People shop more often and make smaller purchases than before. Stelios tried to launch this concept in 2013 but failed to get planning permission.

At the end of February the special price point of 25p will move upwards to 5op. At present it does not carry fresh food or fruit and vegetables.

The new store is being supplied by Euro Shopper, a brand produced by Dutch non-profit buying alliance AMS.

In a recent article published by Retail Week (10th February 2016) it described it as looking more like a stock room than a shop.

What future does this concept have? Plans are afoot to open similar stores and to increase the number of items (SKU’s) carried in the store. The price of items will rise as mentioned earlier. Will people come in sufficient numbers and buy in sufficient quantities to generate a meaningful profit for the operation?

If it lasts for a year or so, will it provide a viable threat to Aldi, Lidl and the “Big Four” food retailers? The trend in the last couple of years is for the latter retailers to reduce price and engage in price wars in order to be as competitive as possible.

Some people feel that Aldi and Lidl are beginning to trade up to more expensive items. Aldi recently introduced some champagne brand and more expensive wines to its product range. Is it possible that they will leave a bigger “space” at the bottom end of the discount spectrum? Is it possible that the easyFoodstore could step up to the plate and address this potential gap?

In its present state, this is unlikely. Carrying around 100 items is not going to send the pulses racing among shoppers. People are likely to put up with spartan shopping conditions and facilities as long as they can make some meaningful purchases across a range of product categories. Aldi and Lidl typically carry around 3,000 to 4,000 items in their stores. The likes of Tesco, Morrisons, Asda and Sainsburys carry many thousands of items more than that.

If we “buy into” the Wheel of Retailing theory we would accept that Aldi and Lidl trading up to more expensive items is proof that such a concept still applies. What if easyFoodstore gradually moves its prices up and increasing its product range to a point where it is clearly charging less than Aldi and Lidl? It is too early to say what might happen. Let’s review it again in a year’s time.

What do you think?

 

Customer service, self-service or poor service? Take your pick

Self-service has been around for decades in virtually all areas of the retail sector. As retailers continuously seek to reduce costs, speed up operations and generally become more efficient, self-service presents an attractive option. It reduces the need for as many personnel to man the outlet. It empowers customers to proactively select and process payment for their purchases. In the case of the latter, self-service checkouts address this aspect of shopping and have been around since the end of the last century: that’s still only sixteen years ago!

On the face of it, what’s not to like about such technology? However the reality may be different. A couple of weeks ago I wanted to purchase a couple of magazines in W.H. Smith at Glasgow Airport. I went to pay but saw no one manning the tills. On closer inspection I saw about eight self-service checkout “thingies”. All of them were in use. Some had queues of three to four people. I saw some people using them comfortably. Others however looked puzzled and frazzled by the experience. I was a fully paid-up member of this latter category.

I am a self-confessed technophobe and immediately looked around for someone to help. I eventually spied an employee who came over to me. His first action was to ask for my boarding pass. After reading about the controversy over this a few months ago, I refused and asked him what it was required for. With practised ease he informed me that it had nothing to do with saving money on taxes but all to do with “collecting information on shopper’s habits so that “we can sell products that are relevant”. I looked at him cynically. He looked at me in the same way! He processed the payment on my behalf, sending a strong signal that he thought I was somewhat retarded.

My point of this anecdote? I found it difficult to see any material benefit to the shopper in this exercise? Even people who had no problem in using the technology still took as much if not more time processing the payment as if they had to deal with a manned till. People still had to queue for these checkouts. Some, like me, found it to be a frustrating experience. In one or two cases, I noticed that the technology had difficulty processing notes and in one or two cases, kept on returning the currency note in question to the shopper.

No doubt, retailers will tell us that shoppers will get used to the technology and in time it will become “second nature” to them. No doubt also, technology will continue to improve and will reduce the “wrinkles” associated with inaccurate scanning of data or rejection of currency notes.

No doubt also, the retailers will make some efficiency savings as a consequence of reducing and perhaps eventually eliminating manned tills and checkout staff.

In an era of ever-increasing use of technology and technology convergence, I could be accused of being an idealist or “dreamer” if I was to suggest that we reverse this trend and hark back to the days when such staff were there to deal with this mundane aspect of shopping.

That said, I left the W.H. Smith outlet questioning whether any benefits that existed lay fully with the retailer and not the shopper. Indeed with the problems that were encountered by some of the shoppers and the need to call on a staff member to deal with the payments, hinted at the possibility that for the present at any rate, the customer service costs may be higher than originally anticipated. Personally I would like to see the option of having one checkout which was manned by an operative in that situation.

Despite my cynicism and frustrations, I recognise that this technology is here to stay.

Two sides of the same coin at M&S?

Marks and Spencer continues to return disappointing sales and profits. In January 2016 it announced that its present CEO, Mark Bolland, will stand down in April. He will be replaced by Steve Rowe, who currently holds the post of Director of General Merchandise.

The Christmas period did not bring much joy to the company. Sales across its merchandise division dropped by around 5% when compared to like-for-like figures. Unseasonable weather and major promotional activities were identified as the main contributors to this position.

By contrast online sales and in particular, performance in the food section of its business introduced some form of counter-balance: sales held up well in the latter category while online returns increased by approximately 20%.

Herein lies the conundrum in my view. What business is M&S in? It operates in two distinct and separate areas: clothing and food. Over the past number of years the results have been consistent: consistent that is in terms of their predictability. Clothing and merchandise consistently underperforms while its “Simply Food” division generates very healthy sales.

It begs the question as to whether Marks and Spencer has any real future in fashion retailing.

At first glance the obvious answer is that it has. Throughout the 1970s and 1980s it was consistently portrayed as one of the iconic UK retail fashion brands: generating high quality merchandise at reasonably affordable prices. The advent of “fast-fashion” retailers such as Zara, followed by other “leaner” retailers such as H&M, Next and so on. These retailers in many ways have re-defined the way retailers operate: driving costs down, generating affordable and trendy fashion and constantly generating new designs (admittedly through replication rather than through originality). M&S would appear to be constantly reacting to these changes, without necessarily making any advances.

Despite introducing a range of new brands such as Autograph, Indigo and Per Una, it still struggles. Perhaps the introduction of so many brands has led to confusion in the minds of its target market?

Should it remain in the fashion retail business? Should it “bite the bullet” and concentrate instead on its very successful Simply Food division? In the latter case M&S has consistently proved to be innovative and creative when it comes to introducing new food categories such as salmon shells and Santa sponges.

In my view it may be too drastic an option to pull out of the fashion sector. It is experiencing some growth with its online sales division. There is also an opportunity to draw some synergies between the two divisions. In the case of rewarding loyal shoppers for instance it can make greater use of vouchers which can be redeemed across the two divisions. It is also likely that other retailers such as Tesco, Sainsbury’s and Asda will also step up to the plate with more attractive food options and provide a sterner test of M&S’s ability to retain its success in this sector. By putting “all its eggs in one basket” it may leave itself open to even greater threats over the coming years.

In the case of the fashion sector, M&S in my view needs to adopt a more focused segmentation strategy. Who does it currently appeal to? Some commentators argue that by trying to appeal to all ages, genders, shapes and sizes, it falls into the trap of having no distinctive appeal to any one segment of the market. Will young, professional females shop in the same store as their mothers and grandmothers? Probably not. It has to redefine its product offering in the fashion sector. By doing so, it may capture a point of differentiation that it currently appears not to hold.

On a positive note it appears as though its improved supply chain strategy has led to improvements in cost management in particular. Indeed some commentators have argued that the complexities and previous rigidity with regard to managing the supply chain has created more problems that the lack of impact with its different brands.

In summary M&S has a split personality. It has a “good side” and a “bad side”. The latter needs some major treatment. Maybe the next CEO will succeed where others have failed.

Amazon: The biter bitten?

The various theories built around the concept of the wheel of retailing seem to be bearing fruit in the case of Amazon. In November it opened its first ever physical retail store outlet in Seattle in the USA. On the face of it, this would appear to be a contradiction in terms. Amazon has been the “trailblazer” in the area of online retailing and has set the standard for others to follow. Retailers across the different categories have embraced “e-tailing” as shoppers appear to flock to this channel. Now the circle has turned full circle: rumours indicate that Amazon might open over 400 stores in the USA alone, in the coming years.

Retailers such as Waterstones are expressing concern at the likely impact that such physical stores would have in the UK market.

Why the about turn to this strategy? For years Amazon has never physically met any of its customers. Instead, due to the power of the “big data” that it collects on the purchasing patterns and habits of its customers, it has been able to provide a value proposition that is customised to individual needs. It has involved its customers in the process by encouraging them to post reviews of books, movies and other product categories. This has been of enormous help to others in determining what items they should buy. From a marketing perspective it also provides the opportunity for Amazon to “shape” and direct its customers to particular purchases. Why should they revert back to the traditional way of selling books and other complementary products? Especially when it would appear as though opening physical outlets will add to the overall cost of the value proposition and potentially make it less price competitive?

Initial evidence would suggest that Amazon is attempting to harness the detailed data to provide a store experience that is more attuned to the preferences and requirements of book purchasers in particular. The Seattle store highlights books that have received top ratings and reviews on the online channel. Thus it can be argued that it provides shoppers with a pleasant in-store experience that is built around items that are relevant to them.

It also has long moved away from being a simple bookseller: books make up a small percentage of its overall product offering on the web. It can be argued that opening some bookstores will have a negligible effect on its overall sales on the online channel.

Amazon will be attempting to change the face of physical store book selling. For instance shoppers can choose a book and leave the store without have to pay for it at a checkout desk. Technology will ensure that the amount charged for the item will be automatically transferred from the customer’s account to Amazon.

Maybe Amazon are not going “off the rails after all”. There is evidence to suggest that sales of paperbacks and hardbacks are increasing in the UK (Retail Week). This is the first time that such an increase has been tracked since 2012. One of the largest booksellers in the UK: Waterstones, increased the number of stores over the past two years. It is worried about the likely arrival of Amazon to this market.

How are we to assess this development? Perhaps it reinforces the importance of retailers increasingly moving to an “omni-channel” approach; where shoppers can in theory benefit from an integrated and seamless experience across different retail channels. I would welcome some comments on this move by Amazon. Over to you!