Be huge or be niche to en­joy suc­cess in this re­tail cli­mate

Yorkshire Post - Business - - BUSINESS -

TWO VERY dif­fer­ent re­tail­ers re­ported a strong in­crease in prof­its this week.

As the UK’s biggest re­tailer, Tesco has enor­mous clout and is ben­e­fit­ing from the fact that what­ever hap­pens to the econ­omy, peo­ple still need to eat. Tesco bucked a grim start to the year for the re­tail sec­tor with a 28 per cent jump in op­er­at­ing prof­its.

The out­come was helped by a strong end to the year in the UK, with fourth quar­ter like-for-like sales up 2.3 per cent – a ninth straight quar­ter of growth.

On a bot­tom line ba­sis, pre-tax prof­its leapt to £1.3bn from £145m after one-off costs weighed on the pre­vi­ous year’s re­sult. Tesco’s full-year re­sults showed gen­eral mer­chan­dise and non-food sales re­mained under pres­sure over the year, fall­ing by 0.4 per cent amid a tough re­tail mar­ket, al­though shop­per de­mand re­mained ro­bust for food, with sales up 2.9 per cent.

Con­sumers may be cut­ting back on big ticket items, but food is an es­sen­tial.

Peo­ple are also opt­ing to treat them­selves at home with su­per­mar­ket lux­ury ranges rather than go­ing to a restau­rant.

Tesco’s chief ex­ec­u­tive Dave Lewis has led Tesco’s fight­back after sales and prof­its were ham­mered by chang­ing shop­ping habits, the rise of Ger­man dis­coun­ters Aldi and Lidl and a 2014 ac­count­ing scan­dal which plunged the re­tailer into the worst cri­sis in its near 100-year his­tory.

Mr Lewis, who joined shortly be­fore the ac­count­ing scan­dal was un­cov­ered, first sta­bilised Tesco, then got it grow­ing with a fo­cus on more com­pet­i­tive prices, stream­lined prod­uct ranges, bet­ter cus­tomer ser­vice and much im­proved sup­plier re­la­tion­ships.

The £3.7bn pur­chase of food whole­saler Booker is his bold­est move yet, providing Tesco with ac­cess to the faster grow­ing ca­ter­ing seg­ment of Bri­tain’s £200bn gro­cery mar­ket.

The group, which com­petes with Sains­bury’s, Asda and Mor­risons, said it is firmly on track to de­liver its medi­umterm tar­gets which in­clude cost sav­ings of £1.5bn.

At the other end of the scale, Asos op­er­ates in a nar­row niche mar­ket – fash­ion con­scious twenty-some­things who want to em­u­late their pop and film star he­roes.

Asos has no stores – it is purely on­line – and this taps into the younger gen­er­a­tion’s shop­ping habits.

Asos notched up its high­est num­ber of web­site vis­its – at over a bil­lion over the half year.

The firm said work is cur­rently un­der­way at its Barns­ley ware­house to in­crease the stock hold­ing ca­pac­ity. This will in­crease ca­pac­ity by a fur­ther 10 per cent to 22 mil­lion units.

Asos has an­nounced plans to in­vest a fur­ther £14.5m in its Barns­ley ware­house over the next 12 months.

The money will be spent on restau­rant up­grades, locker rooms, re­lax­ation spa­ces and the cre­ation of a well-be­ing cen­tre. Asos will also spend money on on­site au­to­ma­tion, in­creased of­fice space and a new car park.

Asos has in­creased its pop­u­lar­ity with the launch of same-day de­liv­er­ies in Leeds and Lon­don – a ser­vice that its fash­ion con­scious cus­tomers love.

The group, whose high-pro­file fans in­clude singer Rita Ora and former US First Lady Michelle Obama, has also been boosted by a new ‘try be­fore you buy’ ser­vice, giv­ing cus­tomers the op­tion of or­der­ing cloth­ing from its Barns­ley ware­house, try­ing it on at home and only pay­ing for what they like rather than hav­ing to seek a re­fund.

Asos ap­peals to fash­ion lov­ing twenty-some­things and this ser­vice al­lows them to use their own homes as a chang­ing room.

The firm said its heavy in­vest­ment is bear­ing fruit, with shop­per vis­its to its site up by 25 per cent year-on-year, av­er­age or­ders up 8 per cent and a 2 per cent rise in the av­er­age bas­ket size.

The group is po­si­tion­ing Asos to be the world’s num­ber one des­ti­na­tion for fash­ion-lov­ing twenty-some­things.

In this bit­ter cli­mate for re­tail, you have to be huge or niche to make a de­cent profit.


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