Sales Up Survivors
So UK retail sales are up by a ‘whopping’ 0.6% in December.
What were we all worried about?
I think, though, that rather than high-fiving and laughing in the face of recessionary Armageddon, we should be asking ourselves questions about what we are measuring and why.
As we’ve seen this year, sales are important, the City react to sales trends like nothing and no-one else.
They are like an economic bellweather and if you get your story wrong, it can result in millions of pounds of company value just disappearing overnight.
So how happy should we be about retail sales performance in December?
Well they are sort of about delay of the inevitable.
It means consumers will have bought stuff that they probably wont need again for a while.
It means that retailers, whilst they will have collected in some cases some much-needed cash, may well have done it at a loss.
It will be interesting to see how sales track in the first quarter – my prediction is that they will be very noticeably down (as consumers completely stop discretionary spending outside of sale periods).
This is very important with many retailers’ rent due at the end of the first quarter; this could mean the perfect storm of no profits and no cash, and therefore maybe no business.
Paul Bainsfair tweeted today: ‘Topline is Vanity….Bottom line is sanity’.
This is a very real threat. Companies are going out of business and we’re now seeing it with alarming regularity – take Kodak and Saab for example.
So my advice to retailers would be if you have to cut, cut but make sure that you are still going to be able to make money, and that, in parallel, you have a range of quick to market ideas ready that are about innovation, leveraging technology, enhancing the retail experience, and training and motivating shop staff.
No one is too big to fail. But the real questions retailers should be asking themselves now is: can you be fast enough to survive, and how do you plan to get the balance right between the short term and the even shorter term?