H&M announced its latest designer tie-up last week, this time with Jimmy Choo in perfect match of one of the best-performing value fashion players and one of the most luxurious shoemakers.
Recession should mean a boom time for value retailers on both sides of the Atlantic, as consumers seek out better deals, but have the bargains been snapped up as predicted? In value general merchandise in the UK, the departure of Woolworths has had a huge impact, both in terms of the £1.7 billion of sales that came into play and also the 800 stores available for younger and nimbler competitors to expand into. The variety value players, both with fixed-price and multi-price models, have seized this opportunity with the most enthusiasm, increasing like-for-like sales and opening new stores. Home Bargains, B&M Bargains, 99p Stores and Poundland have together taken well over 100 of the sites.
In the US, similar players have also been performing strongly, without the assistance of a disappearing big competitor. Kohlberg Kravis Roberts, the private equity house, recognised the value in Dollar General’s 8222 stores, acquiring the company for $6.9 billion in June 2007. 99p Only prides itself on being ‘The Right Store…Now More Than Ever!’ and, with $1.2 billion of sales last year, it is hard to contest.
Wal-mart, the largest retailer in the world, prides itself on its value model. Its president recently spoke the ‘fundamental shift in consumer attitudes and behaviour’ and the ‘new normal in which people are getting smarter about saving money’.
In value clothing, the larger players in the UK have clearly outperformed the market, Primark and New Look, in particular. While their growth has slowed compared with recent years, and also for some grocers that sell clothing, their like-for-likes are still the envy of many in retail. In America, where the fast fashion value model is arguably less well-developed, there have been strong performances from value players. The ‘off-price’ model, which is more prevalent in the US, has been doing well. TK Maxx in Britain has grown comparable store sales by 3% in the year to date.
However, while value has outperformed, it has not been paradise on either side of Atlantic.
A number of value-focused players have recorded negative like-for-like sales or have gone out of business. In Britain, value fashion has been littered with failures, most recently Bay Trading and before that players such as Select, MK One, Ethel Austin and Pilot. These companies suffered from the wrong proposition and often the wrong operating cost structure. Value does not simply mean cheap, it means low price, good store ambience’s, an interesting range, fashionability and the right economic model.
Customer behaviour has undoubtedly changed, with affluent consumers starting to peruse Poundland and Lidl’s lobsters. ‘Scrimp and splurge’ is becoming the norm for many consumers, cutting back generally in order to splash out occasionally. This phenomenon will undoubtedly drive the direction of the value sector on both sides of the Atlantic in years to come.
Sport England, the publicly funded body responsible for distributing cash to grassroots sport, seems to be scoring a few own goals.
