Retail Ready To Bounce Back: Here’s What 6 Of The UK’s Biggest Chains Say

BARCELONA, Spain — For the retail sector, fears of a global recession and of consumers battening down the hatches amid the cost-of-living crisis have proved largely unrealised. And while caution remains about the impact of inflation and ongoing uncertainties about the war in Ukraine and complex supply chains, the UK’s retail chains are preparing for growth.

And that includes real estate.

Despite a torrid few years, the mood among many UK retailers is surprisingly upbeat, but what can the property sector expect as the impact of the pandemic is largely left behind and online sales have peaked and even regressed?

Bisnow reports on location from Barcelona, where the world’s top retailers gathered for the annual World Retail Congress. Here is what some of the UK’s biggest retailers had to say on stage about the future of retailing and their businesses.

Frasers Group CEO Michael Murray: More Acquisitions And Expansion Via Sports Direct

Frasers Group CEO Michael Murray said that discount sportswear and equipment operation Sports Direct is the most scalable of its formats as it looks to expand into Europe, while he anticipated more brand acquisitions this year.

“What we have done with the UK and Ireland doesn't really exist in Europe but it is also expensive to develop an elevator position within a new country," he said. "Sports Direct is definitely the most scalable, because we can align with a smaller number of key brands, so long as we can find the right locations.”

“The sports brands were obsessed with direct to consumer, but that's changing and the focus is back on stores. It's very expensive to open their own stores, especially in second- and third-tier cities,” he added.

Murray has been at the helm of the multi-format UK business as it continues to expand from discount sports through Sports Direct, with multiple sports and fashion brands acquisitions, plus the purchase of the ailing House of Fraser.

“We have reinvented the [Sports Direct] business after the emergence of online but changing a very successful business model was very difficult. So when we decided to 'premiumise' the business we decided we had to change the group, which is where the acquisition of House of Fraser fitted,” he said.

That purchase “nearly killed us”, he said. “It was a nightmare, especially as we were changing our own businesses at the same time. It was a big bet at the time but it put us into a different marketplace with brands, which helped us diversify the business.”

The company has divided its approach into sports, premium and luxury, using the same platform but different retail formats.

“Our shareholders were very patient, especially once they saw the green shoots,” he said.

“It's been in the DNA of Sports Direct for years [to buy a brand]. Our criteria is, is it a brand to benefit the business like Jack Wills? Does it help our business? And does it help our distribution? I think there will be a lot more in the coming year.”

The company has also invested heavily in its Flannels and Frasers department stores, with Murray pointing to large stores in nondestination locations as a concept that “had become very unproductive over a certain size, especially in smaller cities”.

“The productivity per square metre of space falls, so you start not investing and cutting corners,” he added.

As a result, the retailer has closed stores in cities typically of under 100,000 people and started introducing features such as a separate entrance and dedicated floors for Sports Direct to optimise the space.

Despite his bullish viewpoint, Murray stressed that it is a challenging backdrop for retailers, and he said that all retailers have to “keep that in mind” when thinking about any strategy.

“When looking at an acquisition, the first question is whether the business or the brand is broken. For Jack Wills, for example, it was the overextended business and costs, which can be fixed,” he said.

Primark CEO Paul Marchant: Government Needs To Back High Street

Primark CEO Paul Marchant called for the UK government to help bring the high street back to “being the vibrant place it needs to be”, as he outlined Primark's ongoing commitment to bricks-and-mortar retail.

“We are seeing it with some local authorities and I'm not sure there is enough recognition of retail as a massive employer, which also creates careers, and also a place to socially interact,” he said as he insisted that Primark would continue to expand its store estate.

“The more we can do to work with government, local authorities, the better, and we saw how effective working closer together benefited us during Covid,” he said.

Primark continues to trade exclusively through its stores, although the retailer has embarked on a 25-store trial for click-and-collect, for select products. Marchant said that 32 London stores have now been added to that trial.

“While we don't have a transactional website beyond a small trial, we are very socially connected, with a strong community who want to communicate with us,” he said.

The relaunched website is now available in the UK, Ireland, Germany and Spain and includes a store stock checker.

“We've been very clear, that our operation model means a home delivery service just doesn't work for us. But we have extended the click-and-collect proposition. And for us the average basket has been higher,” he said.

Primark currently has around 420 stores and recently opened another Spanish store, in Toledo, bringing its Spanish estate to 57 stores. The company is also growing in France, Italy and Portugal, and it has 17 outlets in the U.S. after opening in Buffalo, New York, most recently.

“I am very proud of our bricks-and-mortar. There is a real opportunity to bring the high street back,” Marchant said.

Marks & Spencer CEO Stuart Machin: Focus On Innovation And Right Locations

While the closure programme for Marks & Spencer stores has captured the headlines, CEO Stuart Machin was unapologetic about the strategy and also insisted that far less reported are the new store openings happening at the same time.

“Closing stores is a big decision, which always makes the news headlines, meanwhile we have also been opening new stores. Those decisions are important as we try and modernise the business,” he said.

He said that the realignment, closing larger stores in legacy locations and opening more food stores, while revamping its estate, was about “protecting the magic of our heritage”.

“We should be the most trusted brand in the UK, putting product at the heart of everything we do," he said. "Some of the bold things we try and do mean remembering that at M&S it was never about premium, instead we need to go back to our foundations of great product at the best price. It’s about going back to your core, heritage and core purpose.”

However, in terms of modernisation he cautioned about employing technology without considering the consumer.

“I'm the person challenging technology. When it comes to supply chain I want to move fast but I worry about whether our colleagues can keep up. Then I look at the Sparks [loyalty] card moving to the app only, and I worry about our customer and the impact of removing that card. Our customer panel was also confused about whether Sparks and the app were separate,” he said.

JLP Chair Dame Sharon White: Common Sense Capitalism

Dame Sharon White, the under fire chair of the John Lewis Partnership, told the World Retail Congress that she remained “positive and constructive about the industry” and maintained that John Lewis staff “have been incredibly supportive” regarding the recent changes in the organisation.

White said that 60% of the retailer's customers shop online with JLP and added: “Our customers have responded very positively as we’ve worked in flexible ways”.

She also noted the shift in the working models, with more people working from home and some keeping their pandemic shopping habits, like going to stores during the week.

“While we see people going back to shopping like in the pre-Covid times, we don't think it will go back completely”, she said.

JLP has come under fire since rumours of the management seeking outside investment for the first time in the company's history first surfaced, but White insisted that being purpose-led is a key factor for the organisation as she highlighted her public sector background.

“Values really matter to us," she said. "We serve 20 million households. We try to run the business in a fundamentally caring way. We try to show that a common sense capitalism can still thrive.”

The Body Shop Former CEO David Boynton: Embrace Purpose

“This is the perfect time for retail to embrace a sense of purpose,” said David Boynton, outgoing CEO of The Body Shop. In his five and half years as head of the company, Boynton said that the company had been purpose-led but that it had been challenging and a “wild ride”.

However, he said that they found “a way to be consistent.”

Boynton outlined The Body Shop’s trajectory to reconcile with legendary founder Anita Rodick’s legacy. She opened her first store back in 1976.

“Anita wanted to make things differently, she was against the culture that made women feel terrible about themselves”, he said. Her vision included natural products, packed in a simple way that communicated directly with consumers.

The turning point for the company came in the 2000s when she decided to sell to L’Oréal, which brought about an identity crisis and Boynton acknowledged the “loss in brand power” and the use of heavy discounts to drive sales.

Now owned by Brazilian group Natura & Co., “It’s about rediscovering our purpose. It has enabled us to make choices since the loss of Anita, we were able to say ‘it is this’ or ‘it is not this,’” he said.

The Body Shop is now B Corp certified, has reorganised its portfolio of stores, redefined its product families and categories and, most importantly, put people at the centre, Boynton said.

The company has also adopted the open hiring model from Greyston Bakery, giving an opportunity for workers that simply apply and reach the top of the waiting list. The Body Shop first tested the approach in a distribution centre and then started applying it to the stores.

JLP Deputy Chair Rita Clifton: Think Beyond The Department Store Box

In an era where the future of department stores has been consistently called into question, retail and brand veteran Rita Clifton said that the sector needs to think outside its own parameters in order to survive.

“For so many categories, they are blurring into each other. If you are too focused on what you think you are, you end up being a Nokia or a Kodak. If you feel category-bound then you restrict yourself,” she warned.

Instead, Clifton said: “You need to think about what makes you different. It's much better to start with the customer, then the channels. You also need to do your sums very carefully if you are going to be catchment-based, rather than destination-based.”

She said that investors are driving the sustainability agenda because they expect businesses to future-proof themselves and said that for retailers, rather than trying to tackle everything regarding sustainability, “you find your high points for differentiation”.