Over the weekend, I was asked to talk to a small retailer who has seen trading collapse and offer some advice about how to manage.
In quite different circumstances, I have some bitter experience of that. It got me thinking, and here are some thoughts on trading and survival that might be helpful:
1) it is often said that ‘cash is king’ and that’s never more true than now – it won’t be the most profitable who survive, it will be the best financed.
2) for that reason, consider your sources of funding now. Banks, investors, the government Business Bank – all are potential sources of vital liquidity, but all take time – don’t wait until it is too late.
3) You are going to end up managing cash outflows in a very granular way, and it isn’t fun. Deciding which suppliers get paid is a serious test of your values and your resilience. Start thinking now about your priority list.
4) And by the way, if you say you are a people business, make sure your people get paid, first.
5) Finally, a warning. Read some articles on ‘wrongful trading’ and don’t ever take supplies, loans or other debts that you know you can’t pay for – bad things will happen if you do.
I’m sure there are other tips out there – share yours in the comments, to help the community, please.
In a strategy workshop with a retailer last week, we started to describe our brand as ‘the experts in …’. And now I’m wondering about that word expert.
If you are a specialist retailer and regard yourself as providing expert advice, a carefully curated range and colleagues in store who can guide and support customers, ask yourself an important question: Is that actually true, in the real world, for actual customers?
In my video game retailing days a frequent frustration was that a lot of our store was essentially just plastic game boxes. It was often easier to find reviews and detailed information on a game by looking it up on Amazon, on your phone, whilst standing in store.
I was reminded of that by visiting Majestic for the first time in a while this week. I love the Majestic brand and business but in my local store a refit has seen them, incredibly, remove almost all of the ‘blurb’ cards giving details on different wines – reducing the experience of choosing one to being much the same as in a supermarket.
Which retailers deliver expertise really well (and not just through interaction with colleagues, but through POS and store design?). And which, on the other hand, only think they do?
As we hit the end of January and ‘Brexit day’ I did a bit of digging on business life after Jan 1 2021 (I’m unrolling a thread from twitter here).
A worked example – do I need a visa to go to a meeting in Italy after Jan 2021?
Let’s check the Government advice first… “You may need a visa or permit to stay for longer, to work or study, or for business travel” says the government site.
The Italy advice page offers no additional information but links directly to the Italian Foreign Ministry and Interior Ministry pages about travel.
And the Italian Foreign Ministry page offers an interactive Q&A which provides the correct answers on visa requirements for business travel from the UK.
As they apply today.
No mention of post Brexit travel. So there it is. In a nutshell, all of that boils down to ‘nobody knows’. Fair enough, because it is still to be negotiated. But when the Govt PR machine fires up with “business has had years to prepare”, this is the reality. No business can today know with certainty that they can even attend a meeting in their own subsidiaries in EU countries in 2021 without paperwork and checks. There are plenty of ways that can all be sorted out, but let’s not pretend it is sorted already.
When I grew up in Fife in the 70s and 80s, Kirkcaldy was top dog amongst the local towns. Even then, it was not quite what it had once been as the coal and linoleum industries had faded. Nonetheless, with its distinctive, imposing Victorian stone buildings and sense of dour permanence it was a place we visited regularly, in a time when no-one in Kirkcaldy would have given a second thought to visiting the upstart new town where I lived.
We went for occasions. The cinema, the annual Fair, pantomime at the Adam Smith theatre.
And yes, some of those occasions were shopping related. It was in Kirkcaldy that I stood, bored witless in BHS whilst my mum shopped.
Kirkcaldy was where you would go to visit an actual book shop. For a while, a musical instrument shop in one of the back streets was mecca for any of us with rock guitar fantasies, although it was frustratingly full of people who could really play.
These days, it is fair to say that Kirkcaldy’s grandeur is faded. The M&S has gone. The Debenhams closes any day now. The High Street wears its vacancies like gaps in a row of teeth, and the smaller units are more and more a cavalcade of charity shops and outreach centres.
In this, the town shares the same fate as many up and down the country. The story is familiar. Economic hardships, low hours contracts and the death of old industries mean there is less money and less confidence about. High rents and rates and the constrictor-squeeze of the internet giants mean retailers slip away. Kirkcaldy became a poster child for this decline when an entire shopping centre just yards from the High Street went up for sale last year with a £1 reserve price.
I made a passing reference to the town in a piece a month or so ago, pointing out that if you only do store visits in London, a trip to Kirkcaldy was likely to be a shock to the system. As I wrote it, though, I realised that it was a few years since I’d walked that street myself, and so just before Christmas I went back.
I found plenty that I expected. Signs of poverty abound. That shopping centre (which sold in the end for £310k) remains in a near-death state with only 2 or 3 units occupied. There is something genuinely eerie about walking through a largely unoccupied centre, more zombie apocalypse than retail apocalypse.
But I also found something I really didn’t expect. Because throughout the town there are signs of hope, and evidence of the local community fighting hard to retain the intangible importance of a strong town centre.
There are popups and independent stores galore including a farm shop and even a couple of coffee shops cocking a snook at the Costa opposite.
There is a covered market, of a sort, and market stalls popping up outside (and sometimes inside) the empty stores. Check the press coverage and it is clear the town authorities are trying their best to encourage new retail business, taking sensible looking action on parking charges and investing in infrastructure.
So is all going to be well for the community in Kirkcaldy? Not necessarily.
There is plenty that still needs to go right. The High Street still needs those big anchor brands. Not only has it lost M&S and Debenhams, but the venerable department store along the street looks vulnerable too.
There is also more that could be done in partnership between the council, landlords and tenants. The market could be made into something much more enticing; pop-up stores could fill gaps and, in an ideal world, gradually the mix of charity stores would be reduced a little.
There might be no helping the £1 shopping centre now, but repurposing it into flats and offices could indirectly support the reinvention of the High Street itself by boosting the local economy.
Talk to anyone expert in this kind of reinvention and they will tell you that it is very hard indeed. Bringing all the interested parties together is like herding cats at the best of times, and planning laws and council powers are rarely enough to allow the positive intervention a dying high street needs. It is here that government can help – towns like Kirkcaldy don’t need token central government investment, they need laws and processes changed so that obvious, sensible active management of the high street can happen more quickly.
That’s easier said than done. Give local authorities much greater planning powers to determine the type of shops, rents and lease terms that their High Street needs and you risk killing off the commercial property market altogether. Balance, and careful thought will be needed to get the formula right.
But talk to determined local retailers like the frustrated, passionate and business-savvy employees of Debenhams, angry at the avoidable end of a great brand and you sense the energy that could be put to work rebuilding.
We are a stubborn lot, us Fifers. Kirkcaldy is not done yet.
Yesterday I hit the ripe old age of 50 (thanks for the many good wishes) and today I have an announcement to make.
My abiding interest is in how retail and hospitality brands can cope with the new multi-channel, always-on world of the consumer. I’ve seen what happens when they don’t and I’ve also seen the reward that follows from getting your response to the new economy right.
The regular flow of big brands now getting into trouble and disappearing is a tragedy. I want to do what I can to help brands succeed rather than be undone by evolving consumer needs.
As part of that, I’ve done something I never thought I would – written a book.
In Reinventing Retail I try to capture some of the challenges that brands face today and also distil out from a long career (and more than a decade at the Board table) some of the pragmatic things leadership teams can do to ensure their businesses don’t just survive, but thrive.
I’m thrilled to be published by the excellent folks at Pearson and even more thrilled to have received some terrific endorsements for the book from both business leaders and leading thinkers.
Reinventing Retail comes out in June – I’ll follow up with some pre-order links and even some extracts from the book over the next few weeks – watch this space!
If I can lay claim to being world class at anything, it is procrastination. There is always another tweet to read, or cup of tea to be made.
Human nature, of course. But retail news this week has gotten me thinking about how getting distracted and taking our “eye off the ball” can be not just a personal challenge but a corporate one too.
In the week when the UK CMA finally shut down any idea of a merger between Sainsbury’s and Asda, a lot of the commentary has focused on the extent to which this merger approval process, coupled with the challenge of digesting the earlier acquisition of Argos, might have led to a period where the core Sainsbury’s business has gone “off the boil”. Twitter is full of pictures of half-stocked shelves and other supermarket faux-pas.
I have no idea whether Sainsbury’s under-performance of the wider market for groceries in recent quarters is actually related to leadership team distraction, but I certainly recognise the danger. I’ve seen several otherwise successful businesses go into ‘sale mode’ where they are either looking to change from one PE owner to another or perhaps float on the stock market and immediate start showing all the symptoms of having lost sight of the key drivers of business performance.
At the other end of the spectrum, distraction is also a huge challenge for businesses which are under-performing already. A leadership team spending all day in meetings with banks and advisers about refinancings or a CVA is not spending time on turning the core operation around.
On the face of it, it seems odd that these corporate events can so distract a big retail or hospitality business from its core mission. After all, these businesses employ thousands of people and the corporate restructuring or M&A stuff probably only involves a few dozen in the centre.
It is easy to throw rocks at businesses showing the symptoms of “distraction disease” – if you’ve built a team where the absence of close attention from a few senior people causes the wheels to come off, you obviously haven’t built a very good team, have you?
But I’m not sure it is as simple as that – even the strongest and best-led businesses still seem to be vulnerable to distraction. I think that is often because the “big secret project” the senior team are working on is, in the real world, not secret at all – and distracts not just them but hundreds of other leaders around the business who inevitably begin to wonder what change will mean for them and their friends.
I wonder if the best response to the dangers of business distraction is to call it out directly. Be as open as possible about the “big secret project” but also engage the wider leadership of the business in an explicit conversation about the dangers of distraction and the need for everyone to help each other stay focused. As with many cultural negatives, distraction thrives in the dark. The self-aware leadership team that shines a light on the topic will probably do just fine.
There is a secret club in retailing. Its membership is made up of CEOs, chairs and other senior leaders who have been responsible at some point for signing a huge cheque for a new website build. Millions of pounds have been spent, months or even years have passed, and in the end the new site looks pretty much like the old one, and seems to generate the same headaches and have the same limitations too.
Unfortunately, it isn’t a very exclusive club. There are a long list of retailers who have been down the same path, and as I wrote here, the club includes a lot of members from the public sector and other walks of life too.
So why are so many retail web development projects so expensive? Let’s consider 3 worked examples:
You want to open a small e-commerce site with a few hundred products, integrated blog and social media content and you want it to work on both desktop sites and mobiles.
You are bigger than that, a small to medium sized retailer with 50 stores and you need a website to sell through too. You have similar requirements to the example above but might need a few more bells and whistles like returns management or integration with your CRM platform.
You are a large retailer and you want to re-platform your existing website. You have all the same requirements as above but you also need more extensive integration into your other systems (especially warehousing and financial systems) and you want to offer omnichannel services like collect and return in store, so you need integration into your store systems too.
So what do you do in these 3 scenarios, and how much does it cost?
In scenario 1 you will hire a local web developer who will build that for you on one of dozens of available templates, and it will cost you no more than £10k to get it up and running.
In scenario 2 you will step up to one of the cloud based platforms like Shopify or Magento for the added security and established code base and end up spending a few hundred thousand to get up and running.
But in scenario 3 you have arrived in the world of the Enterprise vendors. You’ll set up a big internal project team, use external consultants to help you write your requirements up and then implement a solution from one of the technology giants – a Salesforce, SAP, IBM or Oracle. And the bill will be millions. I’ve signed a £10m cheque for a web project, and so have many other members of the club.
The big question for me is why that third scenario suddenly costs potentially 1000 times more than just getting an e-commerce site up and running?
There are, inevitably, good reasons and bad.
The good reasons are things like scale, speed, security and that all-important integration with other key systems in the business. A modern retail brand will stand or fall by its ability to deliver a seamless service across all channels and so an out-of-the-box e-commerce site will not do the trick.
But I suspect there are a bad reasons too. The most familiar to many who have lived through these projects will be the huge desire that an established business has to customise technology ‘to fit how we do things’ rather than changing business processes to fit with new technology choices. I’ve seen the requirements-gathering process alone in a major retailer take nearly a year, with all the associated consulting costs, and result in hundreds of pages of customisations each of which will then add to the cost and risk of the project. I’ve even seen a finance team in one business virtually grind a project to a halt because they didn’t want to change the timing of daily reporting.
All of those requirements will sound vitally important to the business teams demanding them. Each one of them, however, is contributing to the business having a higher cost base than their pureplay competitor who simply built their business around what their technology could do.
I also observe that often the final decision about a web project is made by a boardroom full of people with very little understanding of what technology should cost. Even the technology team themselves might have grown up building point-of-sale and warehousing systems and might not be as comfortable with web technology choices. It is a dangerous scenario when the person around the table with the best instinctive understanding of costs and choices is the vendor.
The solution to all of this? There are things all of us can do to avoid being trapped into the £10m (or even £100m) website development project. Technical teams need to be clear about the options available, and particularly alert for those smaller solutions which might grow to be able to fulfil omnichannel requirements. It should not be a knee-jerk reaction to reach for Gartner and a list Enterprise vendors.
And at the same time business teams, and particularly leadership teams need to be ready to approach the development of new digital capabilities with an eye on flexibility, and on how to get the desired outcome for the customer in the fastest and most nimble way.
And finally, it is incumbent on the Boards of retail businesses to ensure that they have around the table enough understanding of technology at least to interrogate the various options in front of them. I’ve seen Boards forensically interrogate a single store opening, largely because the process and the analysis was familiar to them, but then nod through a huge technology project with far less scrutiny.
A great website and integrated omni-channel capabilities should be a powerful asset for retailers today, not a headache.
Amidst so much discussion of retail and hospitality businesses desperately looking to shrink (through store closures, CVAs or even administration) it is worth reflecting for a while on how they got too big in the first place. There is a cautionary lesson here for those brands which are currently small and fast-growing but which might be the ‘troubled retailer’ stories of 2025.
The psychology of over-growth is pretty easy to understand. You started a retail business with family or friends and found an audience. Your business grew and you built a management team around that growth. Now you have 50 or 60 outlets around the UK, you turn over nearly £100m and you are generating a decent positive cashflow from the business. What next?
There are plenty of people around with ideas about what that next step might be. Corporate finance advisors, dealmaking lawyers, industry analysts and potential investors are all telling you that you have a winning model and that you should double down. If 50 stores is a good business, what would 100 be like? Or 200?
It’s fashionable these days to blame Private Equity investors for a lot of the over-extension we’ve seen from retail businesses, and it is true that the PE investor naturally looks for step-change growth opportunities and will be much less interested in a ‘steady as she goes’ business. But I’ve seen plenty of IPOs in recent years where businesses sell their equity onto the public stock markets which are based on the same tantalising glimpses of step-change growth.
And before we comfort ourselves by blaming investors of any variety, how much press and analyst coverage of retailers begins with how many stores they have and how many new ones they have opened this year? It’s no wonder that growth becomes a beguiling topic for founders and business leaders.
And at some level, that might be a good thing – investing capital in a strong brand in order to make it bigger and take it into new markets can be very profitable, create many new jobs and bring the brand to lots of new audiences. I see brands in the retail and hospitality sectors which are absolutely ripe for that kind of expansion, even in today’s challenging markets.
But there are a couple of pitfalls that founders and early investors should watch out for:
1) Your growth plan might make complete sense to you, but if you are one part of an industry sector where everyone is chasing the same growth, you can’t all win. The Casual Dining sector is a salutary warning about what happens when everyone has the same ‘open 100 restaurants’ plan.
2) There is, obviously, a significant executional challenge in growing a business, and most particularly when that growth is into new territories overseas. Even though your business has grown already to what it is today, you may need different skills, resources, advisors and networks to take the next step.
3) Finally, there is the reality of your brand – can it actually stretch to the bigger scale you are considering. Brands based on design, or with particularly niche target markets or with strong regional roots just might not stretch to a bigger scale. Some of the high street CVA and restructuring stories emerging in 2019 look awfully like businesses which should have stopped at 50 to 100 outlets and have simply expanded beyond their market.
So is growth a bad thing? Not at all. But as a founder or shareholder in a business which is considering an IPO or a sale to a PE investor based on the allure of doubling your store-count, you are choosing to forgo the cash the business generates today and instead to invest some of that in the growth plan. Just like any other investment, it is worth considering that choice carefully.
There is an incredibly important point in this article for anyone running a consumer facing business. I’ve seen a good deal of schadenfreude online about the Army being duped into spending £113m on a website – but let’s focus on the fact that the article states it was “three times budget – meaning it was budgeted at £38m in the first place. 5 minutes on the website tells you that it is basically a big wordpress site, which should have cost a few hundred thousand at best and taken a month or 2. Consider how that procurement decision is made, and it is obvious that part of the problem is that no-one making it understood what they were buying or what it should cost. Sadly, I see the same thing happening in retail and hospitality businesses all the time – a whole chain of executives from IT project lead to CEO who simply don’t know what they are buying, and an aggressive vendor who therefore has the information edge. There is a big club of high street brands that have made the same mistake the Army has, and we need to reflect on how to get enough digital knowledge into our businesses to stop it from happening.
OK, it was early in the morning and I hadn’t had any coffee yet, but I confess to being particularly irritated by yet another reference in some political tweet or other to the ‘Deep State’ and its nefarious plans.