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Retail FreeView - Can Halfords shift up from the granny gear to improve its cycling proposition?
1. June 14, 2012
Verdict Retail FreeView
A synopsis of retail news and opinion About us
Verdict is a retail information
This week highlights how necessary it is for retailers to be constantly generating new growth initiatives specialist within the Informa Group.
and finding new customer touch points – there is no room for complacency in retail today. H&M is With almost 30 years' experience,
launching another designer tie up, Debenhams and Sainsbury’s are extending their multi-channel Verdict publishes unrivalled
reach, and Ted Baker’s investment in international expansion is paying off. Meanwhile Tesco is trying independent analysis. We provide a
complete picture of the UK and
to recover the ground it has lost to competitors in the UK with new investment in stores and customer
increasingly the international retail
service. No retailer can afford to stand still.
arena, helping retailers,
Maureen Hinton, Verdict Practice Leader manufacturers, service suppliers,
analysts, and consultants to fully
exploit opportunities within the
“It’s not a surprise that Clinton Cards has been sold to American
industry.
Greetings. It was an aggressive bit of business, but American
Greetings had lost all confidence in the management and wanted Latest analysis
to protect its UK sales outlets.”
• John Lewis | Verdict Company Briefing
Patrick O’Brien, Verdict Principal Analyst on BBC News, June 7
• Primark Clothing | Customer Insight
• Footwear Retailing in the UK | Verdict
“Menswear sales are holding up during the recession because it’s Market Report
been a very difficult economic climate, and men are more
• Waitrose Food & Grocery | Customer
interested in looking good at work and for when they’re going for
Insight
interviews. They want to look the part and invest in good suits. Men
are being far more influenced by celebrities such as Gary Barlow • UK Out Of Town Retailing
and David Beckham more frequently donning suits. In the past 10 • Womenswear Retailing in the UK |
years, we have seen a move away from casual towards a smarter,
Verdict Market Report
well-dressed look.”
Sarah Peters, Verdict Lead Analyst in Retail Week, June 1
Web: www.verdict.co.uk | Tel: +44 (0)20 7551 9664 | Email: enquiries@verdict.co.uk
2. June 14, 2012
Verdict View
Can Halfords shift up from the granny gear to improve its cycling proposition?
By Andrew Stevens, Retail Analyst
Halfords had a difficult 2011/12 as revenue declined, Halfords has identified six groups of bike customers: Secondly, Halfords lags behind in terms of staff
and the start of 2012/13 looks bleak with disappointing parents, family cyclists, leisure cyclists, sports and fitness expertise. If you go to any local bike shop or national
sales. This has especially been the case in cycling, cyclists, traveler/commuter cyclists, and enthusiasts. specialist such as Evans or Cycle Surgery, you will be
Halfords' only growing retail division last year. It has The two groups that the company feels it should invest served by bike enthusiasts who are keen to talk about
announced a new objective to be "the best bike shop in targeting – traveler/commuter and sports and fitness cycling. This enthusiasm is the reason why many smaller
in town"; however, intense competition on range and cyclists – are sensible choices, with an average annual bike shops still exist, and is a fundamental reason why
price mean that it will struggle to capture the UK's spend of £184 ($286) and £206 ($320) per year per Halfords will struggle. Furthermore, online specialists
broad cycling tastes. cyclist within each respective group according to have the scale and the reduced overheads to be
Halfords' own research. By focusing on these core able to offer massive discounts, spend-and-save offers,
In its most recent set of results, Halfords announced a segments, Halfords will be able to create a well- and reduced prices on last year's products, something
decline in annual retail sales of 2.3%, contributing to a targeted positioning; however, it runs the risk of that Halfords is unable to do.
decline in group revenue of 0.3% for the year to March alienating a large proportion of cyclists by not focusing
31, 2012. Leisure was the only retail division that saw on some of the customer groups that it has previously Unfortunately for Halfords, without being "the only bike
growth in the year at 5.0%, driven largely by a strong been unable to attract. shop," or "only a bike shop," it will struggle to achieve its
performance in cycling where like-for-like trading objective of being "the best bike shop in town." While
increased by 9.7%. Over the past few years, there has been vast growth its Boardman and Pendleton ranges will be subject to
among pureplay online cycling specialists such as demand during the 2012 Summer Olympics due to the
Cycling is an important revenue generator for Halfords, Wiggle.co.uk and ChainReactionCycles.co.uk, as well pull of the athletes associated with them, Halfords is
and indeed one element of its new three-pillar as strong multichannel players such as Evans Cycles likely to find itself in the same place again next year,
strategy is to become "the best bike shop in town." and Snow + Rock's Cycle Surgery. While these retailers' unable to keep up with the peloton as its competitors
However, with current trading for the start of its core offerings appear to be positioned at the more continue to grow.
financial year – two months to May 31 – being very serious end of the market, their vast ranges appeal to
disappointing especially in the cycling and leisure many.
divisions, it is questionable whether this objective is
achievable. Halfords faces competitive pressure from As well as impressive ranges, these specialists have two
the value proposition offered by supermarkets, the vast key attributes that Halfords is far away from matching.
range and discounting offered by online specialists, Firstly, Halfords is unable to secure multinational
and the niche offer from "local" bike shops. brands: the big names that "pull in the punters" from
the casual cyclist to the semi-professional racer.
Web: www.verdict.co.uk | Tel: +44 (0)20 7551 9664 | Email: enquiries@verdict.co.uk
3. June 14, 2012
News Review
Clothing & Accessories
the Netherlands and South Korea. Further international stores are planned
By Kate Ormrod
for Ted Baker in the US, Canada, and Asia, which will help to mitigate poor
consumer confidence and squeezed disposable incomes in the UK.
H&M to launch collaboration with Maison Martin Margiela
Swedish clothing retailer H&M has announced plans to collaborate with
French avant-garde designer label Maison Martin Margiela. The collection, UK department store to roll out Wi-Fi across 167 stores
consisting of men’s and women’s apparel and accessories, will launch on Debenhams has announced plans to launch free Wi-Fi across its entire UK
November 15, 2012 in 230 stores worldwide and also online. Prior to the store network, in conjunction with telecommunications company O2. While
Margiela collaboration will come an accessories collection with Vogue competitors Marks & Spencer and John Lewis have already begun to roll this
Japan fashion director Anna Dello Russo, called AdR for H&M, on October 4, technology out, Debenhams will have the widest Internet coverage of any
2012, indicating that H&M is shortening the designer collaboration cycle. department store in the country. The rollout follows a successful trial in three
department stores in the UK, with the retailer’s app also proving popular,
The collaboration will enable Margiela to raise its profile considerably, achieving 1 million downloads. This move will allow consumers to browse
although it is somewhat surprising considering the label has historically never online in any of Debenhams’ 167 UK stores, and access information on
sought to become mass-market and has never even advertised before – products such as size availability, and special offers. It further cements the
indicating that it is quite a coup for H&M. The announcement has once multichannel approach needed in retail today and blurs the line between
again ignited consumer interest in H&M’s designer collaborations, and with online and instore shopping, changing the way consumers shop.
renewed success after last year’s Marni range and the earlier Versace
collection, these one-off collaborations are expected to continue for the
foreseeable future.
Food & Grocery
By Cliona Lynch
Ted Baker revenues grow due to international expansion
Tesco continues to struggle as l-f-l sales remain negative
British clothing brand Ted Baker has reported a 14.6% increase in group
Tesco has now posted its fourth consecutive quarter of declining like-for-like
revenues for the 19 weeks to June 9, 2012, with retail revenues being the
sales as it admitted that the changes it had implemented in the 13 week
largest contributor to overall growth at 16.2%. Wholesale revenue growth
period to May 26 – including store refurbishments, additional staff, and its re-
was at 8.9% against strong comparatives, and was driven largely by the
vamped “everyday value” range – have yet to reap rewards. International
continued growth of the retailer’s US wholesale operations. International
markets for the retailer have performed relatively well, with Ireland posting its
expansion is both a driver of growth and a priority for the retailer; indeed,
first quarter of growth since 2010, and Fresh & Easy in the US continuing to
average square footage increased by 12.0%, driven mainly by new space in
deliver growth for the group.
the US, Spain, Ireland, and Japan, and concessions in department stores in
Web: www.verdict.co.uk | Tel: +44 (0)20 7551 9664 | Email: enquiries@verdict.co.uk
4. June 14, 2012
News Review
Tesco points to high levels of couponing in the UK market as a key difficulty. product, Ocado and indeed Birdseye would need to be careful, restricting
While competitor activity in this type of promotional activity is strong, Tesco’s the number of animations on the website so as not to distract customers.
weaknesses extend beyond this. The six point plan to change Tesco’s However, the animations will be useful for both Birdseye and Ocado as they
fortunes remains relevant, but the ability to turn a ship as big as Tesco will seek to draw attention to particular products, something that is more
hinder a quick turnaround in fortunes. This update represents a steady difficult to do online than it is instore.
performance but the ability of the grocer to rectify weaknesses in the UK
market will not be evident until later in 2012.
Electricals & Entertainment
By Matthew Rubin
El Corte Inglés announces major price cuts
Spanish retailer El Corte Inglés has announced a major price cutting
Sainsbury’s enters e-book market
initiative across its department store food halls, convenience stores,
Sainsbury’s, the UK’s third largest supermarket chain, has made a surprising
hypermarkets, and supermarkets. Almost 5,000 grocery and health and
entrance into the e-book market with the acquisition of HMV’s shareholding
beauty products will be discounted by around 20.0% in a move toward a
in Anobii, an online retailer of e-books. Sainsbury’s purchased the stake for
more permanent lower pricing policy for the retailer. All fresh produce will
just £1 ($1.55), as the Anobii venture was loss-making for HMV. This
be subject to a weekly price review, while other grocery, household goods,
acquisition gives it a 64% stake in the company. Despite having a relatively
and cosmetics will be reviewed fortnightly, and while the retailer
low profile in the UK, Anobii is popular in Hong Kong and Germany, and has
appreciates it may not always be the cheapest, it has said it is sure that
a library of 60,000 e-books and over 600,000 users worldwide. The grocery
customers will react, resulting in a gain in volumes. While the move appears
retailer has stated that the deal supports its drive into the growing online
to be measured from El Corte Inglés, it must be wary and learn from the
and digital entertainment market. The acquisition also enables the retailer to
example of Tesco, which recently announced wide-reaching price cuts
become more competitive with rival Tesco, which already has its own e-
across its food and grocery ranges, only to be stung by a decline in profits as
book site. However Anobii’s use of social media, allowing members to rate,
sufficient volume was not generated. The frequent review of prices should
review, and share their choices with one another, both on the site itself and
help El Corte Inglés to monitor its margins closely, and enable it to react
on a number of other social networking sites, differentiates it from
quickly if necessary.
competitors.
Ocado and Birdseye team up for online “gondola end” Dixons Retail to launch range with Tinchy Stryder
Pureplay online grocer Ocado has teamed up with frozen food European electricals retailer Dixons Retail has collaborated with UK rapper
manufacturer Birdseye and design agency jkr in order to develop animation Tinchy Stryder on a range of products including headphones and travel
for Birdseye’s products on the retailer’s website. It is a move away from the speakers under its own-brand label Goji. The collection, called Goji Tinchy
traditional packaging shot used for online grocery shopping, and the short Stryder: On Cloud 9, will launch headphones in mid-July 2012, with the travel
animation features the Birdseye mascot – a polar bear named Clarence – speakers launching later on in the year, and both will be available in
when a consumer hovers over a packet of Birdseye fish fingers. While
arguably the animation would draw a consumer’s eye to a particular
Web: www.verdict.co.uk | Tel: +44 (0)20 7551 9664 | Email: enquiries@verdict.co.uk
5. June 14, 2012
News Review
Currys and PC World stores and online. This complements the existing Goji same period, now at around €56m ($70m). Atlantic is part of Grafton PLC, a
range of headphones and iPad cases. The retailer is clearly trying to group that operates several fascias in the Home & DIY sectors across Ireland
emulate the success of rapper Dr Dre’s Beats by Dr Dre premium and the UK, and Grafton is keen to re-structure the Atlantic business in order
headphones, which launched in 2006 and have proved popular in the UK, to maximize its potential for survival. It is likely that the retailer will have to
with stockists including HMV, Argos, and Dixons Retail itself. This new range close some of its eight stores as part of the examinership process; however,
provides Dixons Retail with increased exclusivity for its private label Goji, and this hinges solely on the agreements made between the high court in
the retailer will be able to utilize Tinchy Stryder’s celebrity status and Ireland, Atlantic’s creditors, and any potential investors.
endorsement to raise brand awareness and boost sales.
Home & DIY
By Andrew Stevens
Joint Dobbies and Tesco store in planning phase
Tesco has submitted plans to build its first supermarket store alongside a
branch of Dobbies, its garden center subsidiary. The store, proposed for
Kings Lynn in Norfolk, UK, will have a single entrance, allowing customers to Stay in touch
visit both retailers, which will be joined by a restaurant operated by Dobbies.
If planning is approved, it will be a unique store for both retailers and will be
an indicator for Tesco as to whether the concept is viable for further Contact us to see how we can help
expansion of the format. Dobbies currently has 32 stores across Scotland, Tel: +44 (0)20 7551 9664
England, and Northern Ireland, so any collaboration with Tesco would vastly Email: enquiries@verdict.co.uk
improve the retailer’s ability to expand into new locations.
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Atlantic Homecare files for examinership LinkedIn
Troubled Irish DIY retailer Atlantic has filed for examinership, stating that Twitter
upward-only rent reviews on its existing leases have meant that it has
struggled to maintain control over its operating costs. Indeed, the retailer Sign up to our emails for news from the UK and across the globe.
has made a loss since 2007, and its turnover has declined by 44.0% in the Verdict FreeView
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