Why there is still hope for the high street
Poundland chief’s upbeat message for high
EVERY week it seems Britain’s high streets edge closer to extinction. Over the past seven days alone, Debenhams has crashed into administration and new figures revealed we have almost 2,500 fewer stores than last year.
No wonder speaking to most retail bosses these days feels like running a drop-in therapy clinic as they list their problems and woes.
Most, that is, but not all. Former Asda boss Andy Bond, who now runs a group of 2,451 discount stores across Europe, is among a small group of executives utterly convinced there is light at the end of the tunnel for bricks and mortar shops.
Bond ran the supermarket giant for five years after having built the George at Asda fashion business following the departure of its founder George Davies. Bond left Asda a decade ago.
Today his responsibilities include overseeing Poundland, as well as advising online clothing phenomenon Missguided. So he’s perfectly placed to make his case.
‘The thing to ask yourself is this: Do you believe that 100 per cent of shopping will be online at any point
in the future?’ Bond says. ‘Most people would answer no. Online retail growth is slowing and so there must come a point when the shift online has happened; where we reach a point of equilibrium between online and the physical shops again.’
It’s a compelling theory. Bond says one hard truth that will hold back online retailers is the soaring cost of new technology needed to keep pace with the digital revolution.
‘When [online shopping] first started, bluntly, a Mickey Mouse website was fine,’ he says. ‘But the costs of attracting new customers are escalating dramatically. Meanwhile, the cost of running shops, rent in particular, is coming down.
‘Suddenly, when that balances out, it won’t be cheaper to buy goods online any more,’ he suggests.
Such optimism perhaps explains why speculators such as hedge funds are suddenly taking an interest in ailing Debenhams. Bond’s view is a pragmatic one, even if he’s not prepared to put a timescale on the moment online will reach its peak, which even optimists believe is still five or ten years away.
Meanwhile, Bond is unravelling his discount retail group from the implosion of its South African parent Steinhoff 16 months ago. His chains include 800-store Poundland as well as its subsidiaries in Ireland and Spain, trading as Dealz, and clothing stores trading as Pepco in Poland, Slovakia and Romania.
It was once part of a conglomerate controlled by South African billionaire Christo Wiese who had bought chunks of British businesses as diverse as Iceland, Virgin Active and New Look. He even considered buying Debenhams and BHS. Poundland and the rest of the group are now controlled by the group’s lenders after a painful financial reorganisation of the ownership structure, through no fault of the chains themselves. Thanks to that Bond has, at least in part, already experienced what many other chains are about to go through.
Sitting in a shopping centre cafe somewhere to the west of Madrid, and just yards from his latest incursion into Europe under the Dealz brand, Bond sees a big future in his ‘low-cost, high-value products’.
He spends a week every month in Europe, in part scouting new countries to open stores. In Spain there are ten Dealz stores – strikingly similar to Poundland but with prices starting at €1.50 – with plans to double that this year and open up to 50 more next year.
To Bond, it clearly feels like a lifetime since he left Asda, where he worked with business leaders such as M&S chairman Archie Norman and former Sainsbury’s chief executive Justin King, but he still keeps a keen eye on its movements.
Most recently, his old firm has been back in the news, with competition concerns threatening a proposed merger with Sainsbury’s.
‘It was always going to be very tough to get that through any Competition and Markets Authority process,’ he says, without criticising the plan itself. ‘Of course, it’s not 100 per cent clear yet that it’s not going through. But I’m not surprised about where we are.’
There has been speculation Asda may be bought by someone else if the Sainsbury’s tie-up collapses. But Bond suggests private equity firms – the most likely bidders – might find it ‘very difficult’ to come up with a similar £7.3billion offer and dismissed speculation he might become involved in some way. ‘Never go back,’ he says. The mega-merger attempt is just one of the many retail shocks over the past few years. Despite Bond’s optimism, years of rising rents, property taxes and fierce online competition mean shops are being squeezed like never before.
He admits: ‘There are some longterm, adverse trends. Footfall is in continuous decline and businesses are being squeezed. The weakest ones go first, but it’s not like the weakest ones go and everything is fine. It’s a continuing tightening of the thumb screws.
‘But that’s life. We’re all in a competitive environment and what I need to do is be better in my job than the man next to me. Part of doing that is to stop thinking “woe is me”. The South Africans have a brilliant saying: If you’re swimming in the sea and you see a great white shark, you don’t have to outswim the shark, you just have to outswim the person next to you.’
What I need to do in a competitive environment is be better in my job than the man next to me