[Lex note: it is unusual that I have the luxury of being able to share a transcript of a member’s presentation, however, Steve Bieniek was able to send me just that.  For this reason, I wanted to share Steve’s presentation in his own words…]

Good morning everyone, my name is Steve Bieniek and I specialise in helping small businesses make more profit by reducing the fees they pay various suppliers for card payment services, energy and communications. As I have a number of retail customers I thought I would provide you a brief insight into the current UK retail market.

It has been well reported that the UK high street has been struggling for a while now and with the high-profile collapse of Toys R Us, Maplin, Poundworld amongst others, what is going wrong with the high street?

According to the Office for National Statistics 2,197 retailers became insolvent in the 12 months until June 2018 – a rate of 40 high street shops every week. Retail insolvencies reached the highest quarterly level for six years.

Mike Cherry, Chairman of the Federation of Small Businesses summed it up well, he said:

“Rising employment costs, spiralling business rates and high inflation have begun to wipe many retailers off the high street. Some will have benefited from greater consumer spending throughout the World Cup and a scorching summer, but for too many though, this hasn’t proved enough to survive on our high streets, where mounting operating costs are the norm.”

According to The Centre for Retail Research: In the larger corporate retail sector, 38 UK companies have failed in 2018, affecting more than 43,000 employees. By the end of September 2018, there had been 28 profit warnings, more than for the whole of 2017, and many share prices have fallen sharply.

Why is this happening?

1.Reluctance to Spend

The consumer is definitely wary.

According to Joe Staton, Client Strategy Director at research company GfK, he states:

“the number one concern for people in the UK at present is having enough money to live and pay bills, followed by the NHS. Can anyone hazard a guess what the third most pressing concern is ?……”

“The reason that the consumer confidence number is negative, is because there’s no certainty of a bright and rosy future. The chancellor came out and said that Brexit would make everyone worse off. That has scared people. Consumers are like markets, and if there is any political or financial uncertainty, markets will decline, and consumers are the same.”

With headlines about “no deal”, and [Bank of England governor] Mark Carney talking about house prices falling 30%, consumers start to think: ‘do I really want to be loading up my credit card right now?’

The rate at which Britons are accumulating credit card debt has slowed since the summer, according to Bank of England figures.

Despite a pick-up in wage growth, disposable incomes remain under pressure, especially among younger consumers.

Customers increasingly expect to be offered discounts and will take their business elsewhere if they are not.

 

  1. Rising Costs

Figures from Retail Economics state:

  • Labour costs account for almost half of retailers’ total operating costs — rising 4.5% year-on-year in the third quarter of 2018
  • Distribution costs were up 6.3%
  • Utility prices were up almost 14 %
  • The sector will pay an additional £2bn in business rates over the three years to April 2020 after a controversial 2017 revaluation exercise

The British Retail Consortium states:

“The devaluation of the pound relative to the dollar since the UK voted to leave the EU has also increased the cost of goods such as electronics and clothing, which tend to be imported from the Far East.”

  1. Making online work

The squeeze on profits comes as retailers try to manage the huge structural shift to internet shopping.

According to the Office National Statistics Online sales as a proportion of the total exceeded a fifth for the first time in November 2018

Despite lacking the overheads associated with physical outlets, margins online are typically lower than those historically generated by stores.

Return rates are higher and the operations require hefty investments in logistics.

For established retailers, this poses a conundrum. “If you do not sell to your customers online, then somebody else will,”.

Retailers have poured money into technology but in many cases, the effect so far has been to dilute profitability rather than enhance it. A succession of technical problems has meanwhile highlighted legacy operators’ digital inexperience.

Quick show of hands, who purchased all or part of their Christmas shopping online last year?

[Just about all of us put our hands up!]

How many made a purchase on Amazon?

[Just about all of us put our hands up a second time!]

Amazon is the world’s most valuable business with $800 bn of market value last Tuesday (20% down from $1t Sept 2018)

It comes as no surprise as a few contributing factors like profit income have subsidised the company’s worth assessment. Amazon has recently announced a growth of their Prime membership during the Christmas trading peak period which saw tens of millions of new subscribers joining the programme which offers free two-day delivery service. However, the marketplace is holding fire to reveal the exact figures related to new memberships so more clarity will be available when Amazon reveals the official statistics in a few weeks to come.

  

4.Failure to adapt

Department stores were slow to realise that categories such as fashion and beauty would be disrupted by the internet just as books and music were, and continued to expand physical space even as sales moved online.

UK sale and leaseback deals that concluded in the 1990s and early noughties released lots of cash at the time, but have left the likes of Debenhams and House of Fraser with long, expensive and inflexible leases.

Then there is Black Friday, a US tradition that spread to the UK and is now catching on in Europe and elsewhere. Although the event is more carefully planned these days, and some retailers have scaled back their promotional activity, many executives worry that it is teaching consumers not to buy items that are not discounted. That effect will continue beyond December 25.

5.Other Factors

Consumers are increasingly shopping online, because the roads are busy, and it is a pain to look for places to park and pay for parking.

IMRG – UK’s Online Retail Association states:

in-store click-and-collect has become hugely popular, and now makes up one-in-three sales for those retailers that have both bricks and mortar stores as well as online shops.

Consumers like making purchasing decisions at their leisure online and then saving on delivery costs by dropping into the store to pick up products. Retailers like it because it is much cheaper than using a third-party delivery service.

People are also likely to buy other items in the store when they come to pick up their purchase.

Cuts to cash machine funding and the loss of thousands of bank branches in the last few years are hurting high street footfall all over the country.

So what can be done to improve the lot for retailers large and small?

Staff training and retention: retailers must ensure staff are educated and motivated to sell their products and keep them ahead of the competition. Service and staff knowledge can become THE differentiators on the high street and underlines how important it is for retailers and brands to continually invest in training programs to ensure retail staff are equipped with the tools and information they need. A word of warning for anyone lagging behind in the retail revolution: 69% of consumers claim to know more about a product than the shop assistants, so there’s obviously much work that still needs to be done here.

Omni-Channel: Today’s shopper journey now typically involves over 14 different touchpoints, online and offline, covering multiple devices and channels. Online growth is increasing by around 15% a year, however, 89% of what we buy still involves a physical store.

The Brand Ambassador: consumers are willing to pay a premium in return for the reassurance which comes from expert guidance on options and brand benefits.

Enhance the customer experience: Customer experiences such as in-store demonstrations have a huge impact on the relationship a customer might have with a product, and it may even be the difference between a sale for you or a sale for your competitor. While not every customer engagement on the shop floor will result in a sale, positive interactions are bound to have a powerful effect on how the consumer perceives your brand in the future.

According to Devin Wenig, president of eBay Marketplaces:

“Shopping is as much about entertainment and engagement as it is about utility’’

Better still, creating a ‘destination’ will open the door to increased trade-up and replacement business when the opportunity arises.

Instead of relying on a product sitting on a shelf and expecting it to sell itself, the smart brands and retailers are investing time and money in delivering a more engaging and exciting experience to customers at the point of sale. By doing so, they are delivering value which will create long-lasting loyalty and repeat business – whether that be online or instore.

Review Costs: There are two ways of increasing profitability, sell more product or reduce your costs, both as important as each other, this is where I come in and offer a free review of a number of essential business services specialising in card payment facilities, energy and communications, offering value not only in direct cost reduction but time in resourcing and provisioning, allowing the business owners to concentrate on what they should be doing, looking after their customers.

If you know of a retailer who may benefit from a free review, please let me know and I’ll try my best to reduce their operational costs.

Thanks for your time this morning.

Editor’s thoughts…

There are so many insights to benefit from in Steve’s presentation.  I’d like to highlight a few that resonated powerfully with me.

  • “Customers increasingly expect to be offered discounts…” – is this something we can capitalise upon?  The flipside of discounts is to make them available for a limited time.  This sense of urgency can enable us to shift more products and services even if with a lower profit-margin.  Pricing is always a thorny-issue as discounting is often a “race to the bottom.”  However, strategic discounting within a limited time-frame can be made to work for us all.  One says, “Discount,” the other says, “Special Time Limited Offer!”

 

  • “If you do not sell to your customers online, then somebody else will,” – is this a call to action for our businesses?

 

  • “Then there is Black Friday…” seasonal focal points are here to stay (as they always have been in the Greetings Card business!)  Is this something we can embrace – taking themes to draw customers’ attention to changing opportunities?

 

  • “Consumers like making purchasing decisions at their leisure online and then saving on delivery costs by dropping into the store to pick up products.”  What scope is there for a click-and-collect approach for your sales?

 

  • “69% of consumers claim to know more about a product than the shop assistants,” – this was a real wake-up call for me.  Education is an essential part of any sales and marketing strategy.

 

  • “Today’s shopper journey now typically involves over 14 different touchpoints, online and offline, covering multiple devices and channels.”  Frank Marsh had been discussing the 7 touchpoints needed with our table, at Christmas.  Now we’re hearing it’s 14 touchpoints.  This is yet another reason why having an online presence that can build the know-like-trust effect can save our businesses time and money.  Let’s blog, vlog, and podcast!  If there’s any message we can convey to customers in advance, the means is now readily available to broadcast that message loudly, clearly, and consistently.

 

  • The Brand Ambassador: consumers are willing to pay a premium in return for the reassurance which comes from expert guidance on options and brand benefits.”  I couldn’t really control myself at this point – this is exciting news!  The Boardroom Network is an ideal platform to broadcast your brand benefits, and to build a trusted community of experts.  Look at those words again: “willing to pay a premium in return for reassurance…”  There’s gold in that statement.  Know then that we can help you position yourself as a subject matter expert in your field, establishing you as a credible brand ambassador.  More than that, we can help one another by being very vocal and going public about any excellence we encounter in another member’s products or services – being ambassadors for one another’s brands.  A video camera is always present – so let’s record more testimonials, recommendations, and endorsements!

 

  • “Shopping is as much about entertainment and engagement as it is about utility,’’ – again, great news!  I’m sure there are ways we can ‘demonstrate’ our products and services at The Boardroom Network (an image of Richard Mack waving a branded ice-scraper leaps to mind!  Lynne Henderson often has a tangible item she uses to make her point.  If we don’t have tangible items we can demonstrate, this makes having promotional items even more important – a tangible touchpoint.  Those of us who know Chris Muirhead may even have become collectors of his wide range of cards!  I can also hear Pam Bates’ warning ringing in my ears: “Don’t be boring!”  Let’s add more sparkle to our one-minute presentations, seize the opportunity to present to the whole group as Steve did, and think about how we can take our products and services to our customers rather than expect to just take orders.  It’s about creating a destination, a brand experience, even a tribe of fans!)

 

  • “There are two ways of increasing profitability, sell more product or reduce your costs,” which we all agree with.  Steve mentioned utility costs rising by 14% for many retailers.  I would conclude by recommending we support Steve’s initiative and actively seek to get him the introductions he’s asked for.

To close with Steve’s offer:

If you know of a retailer who may benefit from a free review, please let me know and I’ll try my best to reduce their operational costs.