Whether it’s the general merchandise giant down 20 per cent last week, the department store whose impressive sales growth came to a halt or the already beleaguered furniture retailer whose sales have halved compared with a year ago, everyone’s had a terrible fortnight.
The weather hasn’t helped, particularly in fashion. But anyone who thinks this is just down to a couple of sunny weekends is kidding themselves. The banking crisis has rattled shoppers – they are cutting spending on things they don’t need to buy and spending less on the things they do.
What’s striking now is that almost everyone is affected. Even upmarket retailers that have ridden out the downturn until now have suddenly felt the effect of bankers losing their jobs; every retailer is going to have to ride this out.
No one knows how much worse things will get. At the time of writing, the US government had yet to agree its funding package to shore up the country’s banking system, but even if that is resolved, it will take a lot more to quell the feel-bad factor among UK shoppers.
Honest Tel
Sir Terry Leahy is always worth listening to, but his comments this week – as Tesco revealed a characteristically resilient performance – were unusually frank.
Yes, shoppers are trading down, he said, out of Organics and Finest and into cheaper brands, and yes, some have deserted Tesco for the more obvious value credentials of Aldi or Lidl. Clothing is hard, Leahy admitted, although he played down talk that Tesco is finding the going harder than most.
As ever, Tesco has responded ferociously – whether it be with discount brands or£15 suits. Its brand strength, international spread and, above all, its intuitive feel for the customer should mean it emerges in the winners’ enclosure.
In fact, the downturn presents Tesco with opportunities – for example in banking, where current accounts and mortgages are a real possibility. And why not – Tesco’s brand equity is infinitely stronger than the discredited banks.
Above all, Leahy’s philosophy should be any retailer’s guiding principle during the downturn: listen to customers, understand what’s worrying them and adapt accordingly.
No comments yet