Shifting sands
Published: 17 January, 2007
As the retailers' trading statements begin to roll in, industry analysts are picking over the bones of Christmas 2006. Overall sales were up but it is becoming clear that the benefits were not evenly spread and there have been both winners and losers within the retail sector.
Already more than 600 shops have come back to the market as the December Quarter Day and tough Christmas trade took their toll, and The Greeting Card Group and Music Zone both went into administration.
PricewaterhouseCoopers was appointed as the administrator of the Greeting Card Group, which traded as Card Warehouse and Cardfair from about 500 stores across the UK.
Venture capitalist Lloyds TSB Development Capital pulled the plug on struggling music retailer Music Zone, which traded from 104 stores. The company had expanded rapidly in 2006 through the acquisition of more than 40 of the former MVC stores. Deloitte & Touche has been appointed as administrator.
Charles Miller, head of in-town retail at King Sturge, says landlords are moving fast to take back the stores, and he did not rule out further corporate failures. "Further fall-out is likely in the first half of 2007. The polarisation between winners and losers will be more pronounced than ever. Key winners are likely be Tesco, J Sainsbury, Marks & Spencer and John Lewis. Key losers are likely to include generalists caught in markets increasingly dominated by specialists - for example, Woolworths and WH Smith."
Although sales were up, pedestrian traffic was down, implying that those shoppers who did venture out actually spent more. Retail Traffic Index figures from the retail research group SPSL show that UK in-store footfall for December was down by 2.3 per cent on the 2005 level. December shopper numbers rose by 34.8 per cent against November 2006.
Dr Tim Denison, director of knowledge management at SPSL, charted a roller-coaster ride for retailers in the run-up to Christmas 2006. "Tracking how retail traffic levels built up over the course of December was enthralling as we saw the complex interplay between consumers and retailers," he says.
"Many of us had anticipated a slow start to the month, on the back of a tough November. This proved to be the case with shopper numbers down by 5.1 per cent year-on-year in the first week of the month."
But this late start to Christmas is becoming more common, according to Denison. "Progressively over the last eight years our data have shown shoppers taking to the streets later and later; partly because they may have been waiting for retailers' nerves to crack, but partly because many now prefer to do some of their gift searching and early shopping online."
And for some retailers there was worse to come.
"The build-up to Christmas never follows a smooth trend, and this year the wobble came between the 12th and the 15th, when the gap in the numbers of shoppers against last year began to grow again," Denison remembers. "To their great credit, many retailers had either planned their campaigns exceptionally well or were on the ball enough to react to the situation. Whatever the case, by the end of Week 3 advertising and promotional campaigns had stepped up very noticeably, with some stores, particularly in the fashion sector, deciding to go to full Sale. These actions seemingly did the trick: consumers became fully engaged and Saturday 16th was the busiest day in the run-up to Christmas and kickstarted a frantic, final full trading week of shopping.
"Perhaps the most unexpected part of the December story was left right to the tail end of the month. The last minute crush in the stores on the 23rd-24th simply failed to materialise, but instead happened after Christmas! Despite a shorter trading week this year shopper numbers were up by +0.5 per cent in the final week of the month compared to last year."
So what conclusions can be drawn from this? "This behaviour could simply be seen as the latest round in the consumer-retailer act played out every year," says Denison. "But it might also suggest something more concerning to retailers: a growing proportion of shoppers are feeling mounting economic pressure and are resisting frivolous and impulsive non-Sale spending."
The 0.25 per cent hike in interest rates immediately after Christmas will prove a further test to retailers' already-frazzled nerves.
