'Difficult trading conditions offer a good opportunity to accelerate renewal'

On the face of it, little has improved since my last column. We’re still seeing double-digit inflation, rising interest rates and spiralling energy bills. 

And we’ve seen three different prime ministers since then. Add to that a falling pound and a faltering economy and things look pretty bleak. 

Confirming the negative feeling across the UK, PwC’s most recent consumer sentiment survey showed another drop in confidence, albeit perhaps less than we might have expected as the energy price cap announcement temporarily staved off the pressure on some households.

“In the last economic downturn, those that acted quickly and invested well not only secured their immediate future, but also positioned themselves for longer-term success”

But it’s not all doom and gloom for the retail industry. Strong players are taking this opportunity to find growth through acquisition, while others are finding ways to share fixed costs or consolidate.

As a deals partner for more than 20 years, I advised many businesses in the last economic downturn. Those that acted quickly and invested well not only secured their immediate future, but also positioned themselves for longer-term success. In fact, some of the best-performing deals were done in the last recession. 

Many will approach this uncertainty by looking to reduce costs and scale back. But arbitrarily cutting investment is not a long-term approach.

Difficult trading conditions often present a good opportunity to accelerate renewal, particularly for those that take a strategic approach to investments.

As struggling chains close, new or ambitious chains can expand. We saw this in the last recession when Woolworths failed and closed more than 800 shops. 

While at the time that left a hole in the high street, now 90% of its old stores are occupied, giving expansion opportunities to retailers such as Poundland, Iceland, B&M and others.

Elsewhere, retailers are taking this opportunity to expand. Next, for example, is acquiring or investing in complementary brands to put on its Total Platform online and even offer to its customers physically in some stores.

Not only has this helped diversify Next’s offering, but it has also allowed smaller brands to piggyback on Next’s infrastructure and customer reach.

We’re seeing businesses from overseas take advantage of a weaker pound, making foreign investment an attractive proposal, with Authentic Brands recently acquiring Ted Baker in the UK and Reebok globally as it seeks to reinvigorate well-known legacy brands. 

Similarly, Sephora – which acquired Feelunique in 2021 – relaunched in the UK last month through a new-look Feelunique website and the intention to open a London store in spring 2023. It will be fascinating to see how Sephora performs, as the ‘lipstick effect’ returns.

Others are taking this opportunity to acquire their own supply chains for security and certainty. I was pleased to be part of the team that helped Marks & Spencer recently purchase its logistics provider Gist in a bid to take control of its end-to-end food supply chain. 

This is one part of M&S’ current actions to restructure its portfolio to meet the way customers now shop – for example, by opening more food shops in better locations – and provide better customer services by getting greater control over its food supply chain.

“Covid-19 showed us how agile and resilient organisations could be, with those who responded quickly and correctly setting themselves up for future success from a more substantial base”

Whatever the position retailers currently find themselves in, the UK will remain an attractive market if they can weather the storm.

But even for those that are unable to invest – or find investment – right now, recent experience suggests navigating a crisis can be more straightforward than you think.

Covid-19 showed us how agile and resilient organisations could be, with those who responded quickly and correctly setting themselves up for future success from a more substantial base. 

Whether it’s acquisitions, collaboration or consolidation, the market still offers opportunities for those willing to look hard and be creative.

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