• Have retail sales figures from the British Retail Consortium (BRC) and the Office of National Statistics (ONS) ever been more contradictory? The BRC seemed to take glee in declaring that June was “the worst on record”, their figures showing that total sales for June were down -1.3% (-1.6% like-for-like). The equivalent figures from the ONS painted a totally different picture, with year-on-year retail sales values in June actually growing by +4.1% (with volumes +3.8%). No prizes for guessing which narrative our media “friends” latched onto. Which to believe? The ONS are the official numbers, although they do appear unbelievably strong. Why the huge discrepancy? The BRC numbers are only a sample of the retailers that they represent, so underperforming large retailers (M&S, Debenhams, HoF, Arcadia?) must be disproportionately weighted.
  • Strong annual figures from both Hotel Chocolat and Watches of Switzerland. Hotel Chocolat reported a 14% rise in sales to £132m for the year ended 30 June and confirmed that profits are also on track. An additional 16 new stores were opened across the UK and overseas over the course of the year. In its first year since listing on the London Stock Exchange, Watches of Switzerland saw pre-tax profits nearly treble to £20.1m in the year to April, on the back of a 22.5% rise in revenues to £773.5m. The group, which comprises Mappin & Webb, Goldsmiths, Watches of Switzerland and Mayors in the US, opened seven new showrooms (including two flagships) during the year and refurbished 11 existing stores.
  • At the opposite end of the value spectrum, Poundland reported revenue growth of 1.6% to €920 million over the half year to 31 March 2019. Over the period, there were six new store openings and five relocations to larger stores, extending the network to 875 sites. Growth was driven as much by range expansion (especially clothing) and broadening of price points as by physical expansion.

Stephen Springham, Head of Retail Research:

Some excellent research from our close companions at CACI this week, quantifying one of our hobby horse topics - the relationship between stores and online and the fact that the two often work in collaboration, rather than conflict.

According to CACI, online sales more than double within a store’s catchment. Their research shows that across the UK, total online sales are 106% higher within a store’s catchment. And this figure varies by product category – 124% in sportswear, 127% in fashion and 154% in consumer electronics. In simple terms, by maintaining a store-based presence, a retail brand can double its web-based sales.

Furthermore, they calculate that online makes up 20.3% of total consumer spend (our figures show 18.0%, but I’m not going to quibble as we’re on the same page) and of this over 50% is still influenced by a physical store. The multi-channel element of online (as opposed to pure-play) makes up 10.7% of consumer spending, broken down between ‘Click & Collect’ – 2.2%, ‘Showrooming’ – 3.6% and ‘Inspired by a Store’ - 4.9%.

Further evidence that debases the hackneyed but still sadly prevalent notion that online is simply killing the high street. The narrative on that needs to change, if it hasn’t already.

But, of course, this research does fly in the face of a current retail market seemingly dominated by CVAs, store closures and portfolio rationalisation. Make no mistake, the UK retail market is definitely over-supplied and this needs to be addressed. But the solution is much more complex than simply taking a hatchet to the store estate. Closing stores may bring instant cost savings (often necessary), but this needs to be put into wider context, particularly the impact that a closure may have on the online platform.

Next have already flagged this. In their enlightening ’15 Year Stress Test’, they work on the assumption that around 20-25% of trade from a closed store will transfer to another physical outlet within the portfolio. But zero will transfer online. Again, the notion that a retailer can close stores and expect online to simply pick up the slack is woefully misplaced. While Next is providing the theory, Mothercare is in many ways the practice. Its physical footprint has been substantially reduced following its CVA – and its online business is declining in the mid to high teens.

Above all else, CACI’s research underlines the fact that the role of the physical store is changing and expanding. In the past, a store it was something where you bought stuff. What is it now? A showroom? A place where you order goods? A fulfilment centre where orders are picked up? A showcase for the brand?

All of above. And a lot more.