Certain retail groups must be living in uncertain times. The categories that could be under threat include apparel, footwear, travel, books and DIY. This is demonstrated by the decline in popularity of Pumpkin Patch, further eroded by the announcement that the company’s CEO is resigning and leaving the group.
Placemakers in the DIY business seem to be a skeleton of their former selves, despite the holding company having a foothold in the construction and related industries.
The travel industry must be feeling the pinch, with traditional travellers exploring their own travel and accommodation needs and booking them online.
The book industry has been discussed previously, but it is very apparent that this retail group is receding despite what some commentators suggest is a temporary blip.
The Pumpkin Patch example
So what are the reasons for the decline, and are they a serious threat to both the retail and property markets? Let’s consider the “reasons”. In the case of Pumpkin Patch, their share price has fallen to an all-time low. Shareholders have abandoned the brand, which must be under threat of disappearing. Can it survive? Well it can, but resuscitation is required urgently with a clear market statement that the Company is addressing the issues, and has identified a solution and is eliminating the “gangrene” which has spread rapidly. It’s not going to be an easy fix. A comparison could be the closure of Kirkcaldie and Stains that we addressed last week, where the owners said “enough is enough” and have exited with a good replacement strategy. Maybe it’s time Pumpkin Patch did the same, but hawking the problem publicly will not help the sale price!
Placemakers ignoring signals
Placemakers falls into a similar situation. Once the leader of the DIY business, it misplaced its trust in the “trade” rather than the “retail” business and has all but been overtaken by competitors. There may be a solution at the end of the line, but it seems that they have lost too much ground to recover to any position of strength. It’s an example of a retailer ignoring the signals and not understanding the direction in which its market was heading - allowing competition to sneak in underneath the radar and take business away.
Transparency within the travel industry
The travel industry is awash with agents all offering the same product, but under different banners. How do they actually make any money? The industry must be due for a correction, driven we believe by the increase in potential customers being exposed to online opportunities, and the intelligence of aging consumers who have a good understanding of getting around the Internet. Some agencies are, however, using the online marketing wisely, making travel offers that appear tempting, but in reality are no better than what can be obtained from any other source. There’s no doubt, the travel industry is driven by marketing and online service. There will be a correction in this group but certain savvy operators will survive.
Early prognosis enables retail opportunities
We have discussed books previously, and we all know how exposed that industry is versus online buying. However, regardless of the examples given, it is apparent that in almost all categories there is an opportunity for survival if the prognosis is identified early enough. Pumpkin Patch misread its market and stayed too long in the upper quartile pricing regime, alienating its market potential. Cutting profit to improve sales is not always a sanctuary that retailers want to explore, but that may be the only solution for this group. The performance of Briscoe Group in the past few years is testimony to how you match your price expectations with those of the customer. All categories have, however, one common theme: "identifying with the market".