Yorkshire retailers must control costs and focus on the marketability of their goods and services as they seek to maximise revenue opportunities in the run up to Christmas, KPMG’s Jonny Marston warns.
KPMG’s recent analysis of insolvency notices in the London Gazette shows it has been a challenging year for the sector so far.
Between April and October, 56 retail businesses nationwide became insolvent – including high street staples Jaeger, Joy and Jacques Vert, and jeweller Theo Fennel.
The tough trading environment is also suggested by the latest KPMG retail sales monitor, which found that UK retail sales decreased by 1% year-on-year in October.
Jonny Marston, restructuring partner at KPMG in Leeds argues that retailers should not underestimate the challenges they face this December.
“For bricks and mortar businesses in particular, increased competition and the cost pressures caused by the devaluation of the pound have made the need to boost profits in the run up to Christmas even more acute,” he said.
“As a first port of call, retailers should be looking at how they can manage their costs. Exiting underperforming stores, or renegotiating rents isn’t an option during the Christmas rush, but there are a number of short term tactics that can be used.
“Effective staff planning, for instance, will ensure enough people are on shift to meet demand but efficiently, especially during discount-driven sales surges, while carefully managing inventory and discounting products at the right time will help retailers maximise sales of excess stock.
“Black Friday has played a role in the stagnation of sales revenue and profit margins, but mounting cost pressures, such as in fulfilment, – as well as the overarching economic situation – have also had a significant impact.”
But alleviating short term cost pressures is only half the battle. Marston also advises retailers to look ahead to the new year now:
“What the retail landscape will look like in 2018 is unclear. Currency fluctuations could see input costs continue to climb, with additional pressure coming from future National Living Wage increases,” he said.
“As part of broader strategic considerations for next year, retailers need to focus on which products, stores and channels are profitable and decide what to do with those that are not. This could lead to inventory rationalisation, with the decision to retire underperforming products, or close poorly performing locations, made as a result.
“It’s also more important than ever for retailers to look at their sales channel mix. It might be that their balance between bricks and mortar and e-commerce isn’t fit for purpose in today’s market.
“It’s no secret the pace of innovation and shifting consumer preferences means technology is playing an even more important role in the retail world. By undertaking a robust and critical review of their business sooner, rather than later, retailers can avoid being left behind.”
Marston said: “While retailers can do little to change the minds of customers intent on spending less, they can at least be sure they are doing all they can to persuade them that what they do spend, they are spending in the right place.
“At this stage, with three weeks to go until Christmas, there’s still plenty to play for.”