Author: Ken Gunn, 14 December 2017

There is a long held adage in retailing that ‘Sales are vanity and profits are sanity’.  And yet it is common for commentators to focus on top line sales growth at this time of year rather than what’s happening to the bottom line.  As profit allows businesses to sustain occupational costs, pay off debt and invest for the future, the obsessive reporting of sales growth can hide, rather than reveal, the future.

This year is no exception, with many news articles trumpeting that digital has once again beaten the high street in the race for growth.  For example, the latest Retail Sales Monitor for November, compiled by the British Retail Consortium (BRC) and KPMG, showed that in-store sales of non-food items dropped 3.7% on a like-for-like basis in the three months to November.  Online sales were up 6.5% and accounted for a 27.3% share of total non-food sales.

Impressive though these online figures sound, the overall result of Black Friday sales was very modest like-for-like growth of 0.6%, compared to November last year.  With weak consumer confidence, combined with falling real earnings due to rising prices, shoppers appear to be cutting back on discretionary spending but maintaining their spend on food and drink.

Christmas shopping on the sofa

We have known for many years that technology enables us to do less of the chores, so that we can experience more of the fun things in life.  For many, Christmas shopping on frozen high streets is as much a chore as the weekly grocery shop, making an evening’s armchair surfing with a glass of wine while watching TV, a highly compelling alternative. 

Interestingly, CollectPlus reported that returns on unwanted purchases peaked on 1 December, with fashion amounting to 42% of all returns,  So while online offers great convenience, the consumer still struggles to find what they are looking for, with the costs of unwanted purchases inevitably eroding retailers’ profits. 

Looking forward, it is likely that online will continue to increase its share of a very modest uplift in spend this Christmas, with the inevitable last minute ‘man-dash’ coming to the rescue of many high streets.  With rising costs and stagnant sales, the New Year will be a challenge for many retailers.  Landlords must pay close attention to weekly sales reports using tools like FSP’s STAR service and, with one or two casualties likely, review occupier strategies and rental sustainability.  

Christmas shopping

There is a successful long term future for town centres but this lies in providing great experience, great customer service and in satisfying consumers’ needs for instantaneous purchases.  Delivering this will require landlords to invest in strategies which focus on improving high street profitability and not just sales.

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