Builders' Merchants News
Home
Menu
End of the road for traditional retail business models?
Published:  02 August, 2018

Are we at a retail tipping point, asks Steve Halford, Group Managing Director of The Crystal Group. Could trade be next?

It could have been any time this year, things have been so bad in retail, but in the middle of July Poundworld administrators announced the closure of 80 more shops and the loss of 1,000 jobs. The administrators have been trying to find a buyer for the business since June. One potential buyer bid £1.

It’s a risk you’d expect of a retail business model based on low prices. But the turmoil isn’t confined to the bottom end. Many mid-market and premium retailers are suffering too.

M&S cried off a trading update at its July AGM. After a string of disappointing results and the start of a big store closure programme, commentators said that had M&S any good news it would have shared it.

Earlier this year, the John Lewis Partnership (JLP), owner of John Lewis and Waitrose reported a steep fall in annual profits and cut staff bonuses for the fifth year running. JLP’s chairman Sir Charlie Mayfield said the difficulties on the high street were not short-term, but a generational change.

Not all retailers are suffering, some are doing very well. Aldi and Lidl are thriving, Ocado the online grocer is doing well. But the biggest are forming defensive alliances with greater buying power. Tesco bought Booker, Amazon bought Whole Foods, the Coop is buying Nisa, and ASDA is buying B&M. Retailers large and small, who bet their current business model was robust enough to see them through, are up against it.

What’s happening and why?

Retail has sleepwalked into a wall of rising costs, slower consumer spending and changing buying behaviour as more is spent online. The writing has been on this wall for close on twenty years, but if you’ve sunk your money in tangible bricks-and-mortar, and you’re making money, it’s hard to see intangible online business models for the threat they are. We see what we want to see.

It’s not all gloom, particularly if you are changing your business model to take account of the new way we buy. Much has been made of the fear that people, tradesmen and homeowners, would come into their store, do their research and check the price, then order online. Depending on the market, that is happening, but in many markets, and increasingly with home improvements, people are doing the opposite. In windows, people are researching online and then coming in-store to see and handle the product and ask a few critical questions before buying.

These are the days of Omnichannel. Merchants with trained knowledgeable staff, online configurators so ordering is simple and quick, and showrooms that show product to advantage with a range that makes sense from the buyers’ perspective are cleaning up.

Builders’ merchants’ sales of bespoke PVC-U windows, doors and conservatories to this market are surging. They’re growing fast because Crystal has made it exceptionally easy for merchants to sell what was once a complicated bespoke product, and because it’s easy for merchants to sell when their choice, range, quality of product, service and way of selling matches how trade customers and homeowners increasingly want to buy.