Archive for the ‘Retail’ Category

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What do you want to do today? How about starting off with a nice coffee and at Harris + Hoole’s coffee shop, a bit of yoga, followed by some shopping at a trendy boutique followed by lunch at a Giraffe restaurant, and then off to the supermarket complete with a ‘Euphorium’ and something called the ‘Bakery Project’. If that all appeals to you, that might mean you would like a visit to Tesco’s new leisure and shopping destination in Watford. But here is some bad news for Chinese shoppers who fancy a similar experience in downtown Beijing. Tesco might be trying to do something big in the UK, but its plans are quite different in China. Is this the company’s opportunity to re-establish itself as an irrepressible force of nature, or is this Tesco giving up on the dream of creating a global super supermarket?

Around a year ago, research firm IGD waxed lyrical about Tesco. Of the world’s four largest retailers, (Tesco sits at number three in that list) IGD predicted the UK company was set to benefit the most from globalisation. It said: “Tesco’s international markets, particularly China, Turkey and India, will be a key element in driving their long-term growth and returns. The company will try to replicate its successful concepts in the UK, such as Express stores and Clubcard rewards scheme, in other countries.”

Well, the quest for world domination seems to be on hold. The company was probably right to pull out of the US. Its Fresh and Easy venture was like a black hole draining it of money. But the timing was awful. It moved into the US just as the world’s largest economy entered its worst recession since the 1930s. It exited just as the US economy appeared to be recovering. Maybe Tesco will be back, maybe it has learnt from its initial foray into the US, and will be back, but this time redoubtable. Maybe…

In China, Tesco has agreed to a joint venture with China Resource Enterprises. It has opted for a 20 per cent stake in the venture, throwing in its 130 stores, to form part of a 3,000 store empire. From a distance of several thousand miles it rather seems as Tesco has chosen to give-up on advancing its brand name; has given up promoting the Tesco business model worldwide, and has opted for a very logical and sensible joint venture rather than trying to create a truly global giant retailer.

As for Blighty, the problem faced by the company is that already has a massive share of the UK retail market. Maybe in creating a retail destination Tesco has chosen the only way it can expand in a market where it already has such a strong presence. Perhaps this approach can translate into other territories, and Tesco will be back in the US and via its partner in China, in the world’s second largest economy but this time as a pioneer of retail/leisure destinations.

But frankly it does rather look as if the dream of creating a global retail super heavyweight is over.

© Investment & Business News 2013

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If you live in a grubby old house, and there is a dead mouse on the kitchen floor do you blame the cat for killing the mouse, or do you say the problem is a bit more serious than that? The High Street has some problems. This weekend the ‘Telegraph’ paraphrased a government minister saying the High Street was dead. The solution, however, is not to make online retailers pay more tax any more than killing the cat will solve the problem of a mouse infested house.

It is little harsh to say that Nick Boles, the planning minister, said the High Street was dead when what he actually said was :“People’s shopping habits are changing very fast as a result of the rise in internet shopping and changes in lifestyle and working patterns.” He continued: “We need to think creatively about how to help town centres thrive in this new era. We want to encourage local councils to concentrate retail activity into the prime shopping streets in the heart of their town centres and adopt a more relaxed approach to underused retail frontages.”. See: The traditional high street is dead, says minister

It might be more accurate to paraphrase him as saying: “The High Street is dead long live the High Street.”

So Mr Boles wants to see more unused retail space turned into homes. He is surely right. We don’t have enough homes in the UK, but we do seem to have an abundance of retailers struggling to make a living. And if more people lived on the High Street, maybe we would see new stores opening up to cater to their needs.

But Sainsbury’s and Morrisons’ big idea is to tax online retailers. Last month Sainsbury’s boss Justin King said: “The burden of taxation in the UK falls very heavily on bricks-and-mortar retailers versus internet only retailers.” He said: “For every pound that we have saved [as a result of corporation tax cuts] we have paid around £2.50 extra in other taxes, primarily business rates. If the tax burden falls ever more heavily on those businesses that have real presence that is something that has to be addressed.”

But does that sound like sour grapes to you? Isn’t one of the key USPs of internet retailers that they don’t need expensive high street positions? Instead, for them, position on Google is more important than the real position defined by bricks and mortar.

To tax online retailers more, seems ever so slightly as if Justin King wants to follow the tactic adopted by a previous King, a certain King Canute.

© Investment & Business News 2013

Fancy a glass of wine? Have this then, I bought it from Majestic last week, it is called ‘Chateau North of £20’. Fancy a coffee? Well let’s go out then and buy a cup of ‘Capper Expensive’ from Costa Coffee.

For Majestic and Costa, and indeed for Costa’s parent company Whitbread, these are good times.

Pre-tax profits at Majestic were up 2.1 per cent. Sales of fine wine priced more than £20 rose by 9.2 per cent. For that matter, English sparkling wines were up 200 per cent. Majestic’s boss Steve Lewis puts the popularity of its fine wines down to all those cookery programmes.

At some point in the distant future, if archaeologists discover an old copy of the ‘Radio Times’ circa 2013, do you think they will conclude we are a nation of cooks, who put home cooking, fit to grace any restaurant accompanied with fine wine, above all else?

As for Whitbread, sales in Q1 were up 3.1 per cent, with like for like sales across its Costa Chain up 8 per cent during the 13 weeks to May 30. The group plans to open 300 new Costas this year.

© Investment & Business News 2013

Britain is a nation of shopkeepers, or so claimed Napoleon Bonaparte. It was not meant as a complement. It appears that today, the UK is a nation of online shoppers. It is not so certain that it is a nation of online shopkeepers, however.

By 2018, claims the Centre for Retail Research, online retail is set to account for 21.5 per cent of total retail sales in the UK, from 12.7 per cent today, which is the highest online retail share in the world.

That may not be such good news for jobs. The Centre for Retail Research says that job losses could be around 316,000 compared to today, as total store numbers will fall by 22 per cent, from 281,930 today to 220,000 in 2018.

A number of retailers have discovered a High Street presence can complement online sales. Customers are going into John Lewis, for example, and then going home and buying products from the John Lewis Web site that they saw in the store. Some even go online while they are in the store. But the numbers speak for themselves. “With such a high number of transactions carried out online, retailers with a strong web offering now need just 70 high street stores to create a national presence compared to 250 in the mid-2000s,” says the Centre for Retail Research.

In many ways the move from High Street to online illustrates both the opportunity and the challenge. Online shopping opens up a market for what is called the long tail. Someone specialising in a niche product can find that their web site promotes their products to a global audience, making it viable for them to sell their wares, whereas in the pre-Internet days the numbers were just not there to justify making the effort, or investing money for such a business.

On the other hand, online shopping is creating fewer jobs than it is destroying, and not all former sales assistants can work in coffee shops. As we move further towards Internet sales, it will be even easier for companies to plough their profits into subsidiaries where corporation tax is lower, which is yet another reason why global cooperation in taxation is so essential.

© Investment & Business News 2013

Was it down to bad weather or was it more ominous than that? UK retail sales fell 1.3 per cent in April after dipping 0.6 per cent the month before. Of late the news on the UK economy has been okay. Not brilliant that is for sure, but much better than we have become used to. So dipping UK retail sales rather goes against the grain.

Chris Williamson at Markit said: “The picture may not be as bad as the headline data suggest. The ONS reported that poor weather contributed to a particularly steep drop in food store sales, mainly supermarkets, which slumped 3.8% below levels of a year ago, down to their lowest since December 2003.

Supermarkets reported especially poor sales for items such as garden furniture, blamed on bad weather.”

Maybe he is right, but just remember that average wages in the private sector fell 1.3 per cent in the year to March.

That is not good; it is awful. It is quite hard to see where sustainable recovery for the UK will come from when wage increases are lagging so far behind inflation; when our main export market – the Eurozone – is in depression, and when the government is trying to rein in spending.

It could always try to get house prices up. That may not solve any of the underlying threats to the UK economy, but it will at least create the impression that things are getting better.

Maybe that is the answer. When all else fails, why not strip the UK economy of its clothes, and say to the markets, dare you point out our nakedness?

© Investment & Business News 2013