Whilst shoppers may be deserting the high street in favour of cheaper, faster alternatives out-of-town, the fact that retail costs are rising by 21 per cent and sales by 12 per cent, raises the issue that retailers may also be finding the high street too expensive…
As always those retailers fortunate enough to have a pivotal impact on some high streets are able to aggressively renegotiate leases and rents. This week, for example, sees the deadline set by Sports Direct for landlords to accept either sales-based rents at its Republic fashion chain or sharp rental cuts, thus causing landlords to share some of the risk of operating in a declining channel.
However, retailers’ “average” sales conceal wide variations. These are partly product-based – jewellery, for example, has done much better than appliances in the past four years – but they also reflect changes in shopping channels. These changes make it increasingly difficult for retailers to account for sales by channel
The alternative ways of shopping explain why, as Julie Carlyle, head of retail at Ernst & Young, says “retailers are struggling [with] how to put this in their accounting”.
In addition, the high cost of home delivery vs the £5 fee per drop, will need revising upwards to reflect actual-cost reality in the accounts, or credibility will suffer...
The result is that store groups are coming under pressure from investors and analysts to be clearer about the contribution online sales make to underlying sales performances. With some retailers adding online sales to their traditional outlet like-for-likes, and accounting separately for online growth, there is an increasing pressure to satisfy analysts’ (and suppliers’) needs for insight on where the business is coming from, and going to….
By the same token, suppliers need to be able to spell out the contribution made to a retailer's bottom line by their combination of margin, free credit, trade funding and deductions, in order to arrive at accurate and defensible payments of performance-based reward.
Whilst some stakeholders may simply be interested in overall sales and the bottom line, and the marketers focused on consumer lifetime value, in these unprecedented times accurate measurement of reward for risk remains crucial.
New ways of defining assets, factoring in show-rooming and shopper value will need to found.
Meanwhile, it is only by examining a credible return on the capital tied up in the business, compared with available alternatives, that a sufficiently robust picture emerges, sufficient to justify additional investment by all stakeholders, amidst all of the uncertainty…
As always those retailers fortunate enough to have a pivotal impact on some high streets are able to aggressively renegotiate leases and rents. This week, for example, sees the deadline set by Sports Direct for landlords to accept either sales-based rents at its Republic fashion chain or sharp rental cuts, thus causing landlords to share some of the risk of operating in a declining channel.
However, retailers’ “average” sales conceal wide variations. These are partly product-based – jewellery, for example, has done much better than appliances in the past four years – but they also reflect changes in shopping channels. These changes make it increasingly difficult for retailers to account for sales by channel
The alternative ways of shopping explain why, as Julie Carlyle, head of retail at Ernst & Young, says “retailers are struggling [with] how to put this in their accounting”.
In addition, the high cost of home delivery vs the £5 fee per drop, will need revising upwards to reflect actual-cost reality in the accounts, or credibility will suffer...
The result is that store groups are coming under pressure from investors and analysts to be clearer about the contribution online sales make to underlying sales performances. With some retailers adding online sales to their traditional outlet like-for-likes, and accounting separately for online growth, there is an increasing pressure to satisfy analysts’ (and suppliers’) needs for insight on where the business is coming from, and going to….
By the same token, suppliers need to be able to spell out the contribution made to a retailer's bottom line by their combination of margin, free credit, trade funding and deductions, in order to arrive at accurate and defensible payments of performance-based reward.
Whilst some stakeholders may simply be interested in overall sales and the bottom line, and the marketers focused on consumer lifetime value, in these unprecedented times accurate measurement of reward for risk remains crucial.
New ways of defining assets, factoring in show-rooming and shopper value will need to found.
Meanwhile, it is only by examining a credible return on the capital tied up in the business, compared with available alternatives, that a sufficiently robust picture emerges, sufficient to justify additional investment by all stakeholders, amidst all of the uncertainty…
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