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Blood On The Retail Market. Recession Will Soon Start Claiming Big Name Casualties

November 18, 2008

Blood On The Retail Floor. Recession Will Soon Start Claiming Big Name Casualties I’ve been to Waitrose recently, the one on Finchley Road, North London, not far from Swiss Cottage, and I suddenly noticed how expensive everything there is. Much more expensive than in other supermarkets, like Morrison, Tesco or Sainsbury’s.

I never really paid much attention before to the prices in Waitrose, the supermarket chain where I shopped a lot in the past. I sort of accepted that Waitrose – just like food departments in Marks & Spencer – were charging me more for a supposedly better service and a higher quality of certain products. Certain products, I stress, because most of the ready meals in Waitrose and M&S were never really very good.

But times have changed now. Everyone, including yours truly, has started counting the pounds and pennies, because they no longer come as easily as they did before. And for some people, like bankers and lawyers and City brokers, they’ve stopped coming in altogether. As we say in Russia: my eyesight has started to fail me – I haven’t seen any money lately.

Anyway, I bought several items in Waitrose and, after paying at the check-out, approached a group of managers and shop-assistants who were merrily chatting at the Customer Service counter. They do like to chat to each other, staff members of Waitrose, and sometimes they even get carried away and shout and laugh very loudly, probably imagining that it entertains the customers.

‘Hi there, everyone,’ I said, addressing no particular staff member. ‘You know what? I strongly suggest that you cut your prices. Otherwise you’ll go down in the next few months. Don’t think that you can survive by relying solely on your customers’ loyalty.’

They all looked at me in bewilderment. Who is this strange man, their collective gaze seemed to be saying. What on earth is he talking about? We are the leading name in retail and groceries. We’ll never go down.

I didn’t wait to hear their spoken response – if there was any – and walked away. I remain convinced that if Waitrose, as a chain, does not adapt to the new market conditions, it will pay a high price for it, with stores closing down and thousands of employees laid off. Because you can’t continue to operate in the same manner during a recession as you did when times were good and customers were prepared to pay whatever you asked them to.

John Lewis, the group that includes Waitrose, is suffering already, with sales falling across the country. Even its flagship store in Oxford Street has seen sales tumble by 9.7 per cent in the first week of November. That could spell disaster for the group during the pre-Christmas period.

John Lewis’s directors are claiming that economic uncertainty and grim weather were the main reasons for their bad performance in November. I beg to differ. I think that it’s the reluctance of the corporate men running John Lewis to adapt to new conditions of a recession-hit market. Despite all the talk of discounts starting early this year, prices on items of clothing and groceries in John Lewis and Waitrose remain very high. That flagship store in Oxford Street continues to resemble a large brightly-lit storage depot that is offering less choice than in the days when things were done in a good old-fashioned way, with no hideous overpriced designer labels on offer and with many items sold at reasonable prices throughut the year. In those days John Lewis did not adopt aggressive selling methods and did not market and advertise itself like McDonalds or some fizzy drinks company. It had a certain style about it and depended on its own brand for clothing and most other items.

John Lewis is not alone in this reluctance to accept the new market realities. Marks & Spencer, I am told on good authority, is suffering a heavy downturn in sales, both in its department stores and in its food sections. I think that clouds on the M&S horizon began to appea with the appointment of Stuart Rose, who, in my opinion, is not a good strategist and does not really understand retail trade. He was supposed to have turned around the fortunes of the group at a time when consumers were buying everything that was thrown at them, even if they didn’t need it. But as soon as the economic climate changed he proved to be a very average administrator, who will obviously have to be replaced as soon as possible for the company to stand any chance of survival.

Marks & Spencer as a chain needs to be transformed completely and pricing has to be adjusted to the realities of the new recession. The food departments and stores of M&S, just like Waitrose, need to readjust to these realities. Prices have to go down but quality has to remain high, or even go up. Chinese-made goods have to be gradually rejected and better quality items have to be put on sale. Profits have to be slashed, otherwise the market itself will deal with the retail giant in its own ruthless way, wiping out many of its stores.

And there’s one more thing M&S has to do: it has to stop opening Express mini-stores and pushing small shops out of business. It had better quickly wind down these mini-stores and let small businesses revive the retail trade in their area. Otherwise the mini-stores will go bankrupt.

The time for the triumph of the so-called budget – I call them reasonably priced – supermarkets has arrived. Morrison is doing brisk business and so is Lidl and Tesco, although Tesco will probably suffer, due to its exposure overseas and its insistence on being all things to all people. No one in their right mind will pay extortionate prices for groceries simply because the stores where they are sold look a bit fancier and a bit more accommodating.

And department stores that don’t offer value for money will suffer. Harrods will probably change hands and the new owners will have to redesign it and make it more affordable, because at the moment it looks hideous and sells overpriced goods. The vibe in Harrods is absolutely unbearable and some of its departments look distinctly vulgar and pretentious. Selfridges, the other giant superstore, would have to adapt too, as it will no longer enjoy the luxury of certain types of shopper coming in and blowing staggering amounts on everything, including vulgar clothes and useless trinkets and gadgets.

Designer shops will have to start selling quality clothes that are not made in the sweatshops of the developing world, and their profit margins will have to go down. Otherwise they’ll simply collapse.

There will be blood on the retail market next year. But the consumer will benefit in the end. And that will definitely be a turn for the better.

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One Response to “Blood On The Retail Market. Recession Will Soon Start Claiming Big Name Casualties”

  1. Kate Crane on November 20th, 2008 3:57 pm

    I think the problem with the whole of JLP and not just Waitrose is the perception that they don’t give value for money. However, the stuff they sell is of very decent quality that generally lasts, and it’s not always expensive, contrary to popular opinion.

    Unfortunately, I don’t have a Waitrose near me but I do use Ocado – which I know is not part of the JLP but they sell Waitrose groceries. The Waitrose Own Brand stuff is very good and not all that expensive. But then, you see, I don’t generally buy ready meals and have never been a big one for that sort of thing. Their ingredients range provide things I use at reasonable prices.

    Possibly, it will become more of a treat shop than it used to be, but the reason tha their prices can be higher is better quality of ingredients and the fact that they have high standards eg using free range eggs in many things. However hard my pocket is hit, I don’t want to be cutting corners buying battery eggs.

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