What SMEs can learn from the decline of big retailers
9 min read
07 November 2018
'Classic' high street retailers are in trouble, but growing SMEs don't have to be.
Now we’ve got through Halloween and Bonfire night we can steamroll straight ahead to the Christmas season.
Whether we’re materialistic or not, we can’t deny the cultural influence of Christmas.
High street giants such as Marks & Spencer and John Lewis have become synonymous with the Christmas countdown through their epic advertisement campaigns.
And whilst we may be getting all warm and fuzzy with impending Christmas joy, the big retailers that pour millions of pounds into these festive ads certainly aren’t.
Why? Because they’re experiencing trading downturns across the board.
Some of the most iconic and long-standing British retail chains are reporting declining profit figures, facing the threat of closing stores, and some high profile executives are even stepping down.
Let’s look at the high-street ecosystem more closely…
Marks & Spencers slides down the retail mountain
The clothing, food and homeware retailer is set to close an estimated 100 shops by 2022.
Sales were down 2.2% for the last six months, and food sales fared even worse, dropping to 2.9%. Clothing and homeware sales reported a similarly dismal 1.1% decline.
“Trading conditions for the remainder of the financial year will remain challenging. We are expecting little improvement in our sales trajectory.” – Marks & Spencer
Now before SME retailers heave out a sigh and say, ‘If M&S isn’t doing well, how can we hope to survive!’. – Well, you can, and by learning from their mistakes.
New Look, a ‘value’ high-street brand that’s not delivering the goods
Similar to M&S, the high-street clothing brand is facing a similar threat of en-masse store closures, as well as a 3.7% sales slump up to 22 September this year.
“Clearly the wider retail environment remains challenging and we are not expecting that to change anytime soon.” – Alistair McGeorge, New Look
Not exactly words of steely optimism from New Look’s executive chairman is it?
John Lewis chairman steps down today
Sir Charlie Mayfield, the chairman of John Lewis, has announced he’s stepping down from his position today, and will officially leave by 2020.
Funny that this date coincides with the store closure plans of many high-street retailers?
“He has been at the helm over many years of growth at the business, but more recently John Lewis has struggled to cope with rising costs, higher business rates and a weaker pound.” – BBC News
His announcement comes as a probable result of the shocking 99% fall in half-year profits the stores experienced in September this year.
The overall profit decline for the brand has been notable, revealing a fall from £95m to just £1.2m during the last 6 months.
What can SMEs learn from these high street failures?
Once upon a time, budding entrepreneurs, and especially those in the retail industry, would look to industry giants such as John Lewis with admiration.
But now, in the digital age, nationwide high street chains are more the out-dated ‘dinosaur’ in the room of British retail.
“Big, heritage brands just look dated, slow and lack an image of innovation.” – Jeremy Schwartz, Pandora
Now before you balk at Schwartz’s comment about bulky old high-street brands, the man has worked for high street stalwarts such as Sainsbury’s and the Body Shop (formerly it’s Chief Executive), so I think he knows a thing or two about the difficulty these brands are experiencing in trying to modernise to suit the contemporary consumer palette.
“Customers are looking for both authenticity and modernity, unbelievable value but also luxury.” – Jeremy Schwartz, Pandora
Does his comment sound a bit contradictory? Well, for SMEs making authentic products based in Britain, there is a global demand for brand authenticity and craftsmanship:
“British goods are definitely high on quality. But they are also high on price. So it was about making it competitive enough to match the world market. British products have a lineage, they have a history.”– Siddharth Shankar, Tails Trading
British goods still have valueTails Trading CEO Siddharth Shankar says British products rule Read more
Keep original but keep up with digital trends
So what other advice do the likes of Schwartz have for retail SMEs offering quality British made products who have a physical as well as an online presence?
“Choose one particular product category and really go to town, create a ‘palace of couture’, but also offer value basics. The alternative is slow, or even accelerating decline.” – Jeremy Schwartz
SMEs can and must hold on to their brand originality. Whilst consumer spending habits have changed, and whilst customers can go online for a ‘quick-fix’ experience, traditional retailers can do more to put further thought into the customer experience within their stores.
“There are hundreds of High Streets in Britain but only one has a got Harrods on it. I think there’s a message there.”
– Richard Hyman, retail industry expert
If you have any sort of physical store, check out the article below to find out how your SME can compete with online retailers.
Brand consistency and valuing your cornerstone customer base
Whilst the high-street has been ‘shopping around’ and seeking to change their brand identities to deal with the decline in high-street spending, (cue Marks & Spencer’s unsuccessful attempt to go ‘young and trendy’ in its clothing brands), they instead risked alienating their cornerstone customer base, namely the largely female over 55’s looking for practical, comfortable and high-quality clothing.
You can learn from their misguided move. If you offer a singular good or service, all the better.
– Structure your branding and it’s associated messaging around what you offer, don’t dilute your message or outreach to keep up with trends if you have a committed audience that buys what you sell.
Instead, expand upon and accelerate it instead using digital tools like social media to reach them better.
“Don’t go clutching at a series of fashionable straws to appeal to every sort of customer, if you do this, you won’t reach any of them well.”
If you know who exactly engages with your ads, products, or services, you can design strategies that encourage them to engage even more.
Link social to your retail site
Also if you do have a physical store, don’t let all the chat about the ‘death of the high-street’ make you feel ashamed of it. Instead use social media to link your physical retail space with your customers online, and make it a destination for them to engage with and visit.