Value doesn’t just mean cheap

The UK economy has officially climbed out of recession. One of the most hotly discussed topics among retailers now is what’s going to happen to consumer confidence and hence retail performance. I’m cautious, but also optimistic that there are many opportunities in the year ahead.

When reviewing our Christmas trading statement with The Sun, I said that the situation is “unprecedented”. It sounds dramatic - but we do live in interesting times. While confident of the outcome, a lot of factors combine to make this a truly exciting year.

There’s almost no need for a recap, but we have worked through the longest and deepest recession since the 1930s. The economy shrank by more than 4% last year, a raft of retailers failed and unemployment rose to the highest levels in a generation.

Things are looking better though. The economy is growing - a bit - house prices are rising and colleagues in retail are confirming that a recovery is taking hold.

It is now the nature of that recovery that’s centre stage. Ernst & Young talks of “a bumpy recovery”, while the BRC describes an “air of caution” as consumers pay off debt rather than shop.

Reports like one cheerily called “Ain’t no sunshine” from Citi, note consumers’ cash flow will be constrained in 2010. New economic headwinds arrive, VAT, the strong dollar and shipping rates contrive to put prices up while fears about higher taxation and interest rates mean people spend less.

Coupled with the uncertainties surrounding this year’s general election, Citi says this spells a period of underperformance for retailers. This view seems to be reflected in the sector’s share prices right now.

Certainly it’s challenging, but frankly I can’t remember a year in retail that hasn’t been. And what’s great is that challenges force innovation from which our customers and businesses will benefit.

In particular, this year customers will seek value and companies need to be creative in finding ways in which they can make their offer attractive.

It won’t necessarily be low prices, because even though price competition is still critical, in the era of net-enabled transparency just being cheap is not sustainable for most high street retailers. Today, customers will find things cheaper elsewhere.

One of the areas of value we are keenly focused on at Halfords is service and expert knowledge - something that I believe will be increasingly sought after in 2010.

The growing complexity of the many technical and mechanical products we sell means customers want advice from the time they start researching online, to the point of purchase in store and often for a period after the sale as well. They also want range and availability, and many of our products need fitting too.

There’s no point buying cheap if it’s the wrong product or you can’t get it to work. So offering service, expert knowledge and fitting adds huge value for customers and will be a key differentiator for us in the year ahead.

David Wild is chief executive of Halfords