July 2011 Archives

As predicted I had just packed my Villebrequin's (great brand in my mind), bucket and spade and good book and my Inbox was bombarded with CLG policy documents on planning and local government finance. 

To most people this would trigger feelings of mild depression as the realisation hits that summer will be spent deliberating over how complicated Government might make its equalisation mechanism and whether the sequential test will be robust enough to prevent a migration to out of town development. I don't mind admitting I am actually pretty excited by the prospect. If I can't get excited about reforms as fundamental as this to our sector then I'm in the wrong job. The strong emphasis on a pro development agenda has certainly stirred up a bit of a hornet's nest which again has to be a good sign. Government wants people to engage with the planning system, and the media is a way of raising interest in the subject (ok, Planning is not the Daily Mail but you can only live in hope..).

From the parochial to the global the biggest threat to being interrupted wading through byzantine business rates policy over a Kelly's ice cream on the beach is the apocalyptic (or is it cataclysmic, not sure what Obama is now calling it - whichever is worse anyway) impact of the US defaulting on payments. 

The view from Mark Meckler, one of the founders of the Tea Party movement who seem to be holding the balance of power on Capitol Hill, does not seem in particularly moveable. When asked whether there was a role for compromise his response was pretty robust - "We've been compromising for decades and that's why we're $14.3 trillion in debt now.  We have compromised our way to the edge of fiscal disaster." Is this rhetoric politicians recklessly using their position to peddle a political ideology irrespective of the impact on the man on the street, or is this more of a political crisis than an economic one?

As always there are differing views but as we discussed in last week's blog the twin impacts of uncertainty and confidence can in themselves have a serious affect on the economy. At least the press team at Treasury won't be scratching their heads for increasingly nebulous explanations of poor economic performance.

Ph

ilippa Latimer, Public Affairs Manager at BCSC, looks across the channel to the Eurozone and the dangers to consumer confidence.

Right now, the global economy is tiptoeing dangerously close to a similar precipice. The IMF this week demanded the EU shore up the Eurozone or face potentially catastrophic consequences. It is for national governments and economists to judge exactly what those consequences could be. The default of the PIGS? The collapse of the Euro? The end of the financial system as we know it? A double dip recession? A depression? Who knows? Perhaps, we'll get away with it all. This morning's German/Franco alliance seems to have calmed people - for now at least.

Of note for us operating in the UK retail sector, the European nightmare scenario has had (to date) very little coverage in the mainstream media. Read the City AM or the FT and you will no doubt have been breaking out in hot sweats for weeks, months - terrified of the impending economic slump/thump. Meanwhile, the rest of the country seems blissfully unaware about the possible consequences of the sovereign debt crisis. The flame of fear is yet to be ignited.

Given Collins' statement about the impact of the Lehman collapse, perhaps in an odd way we should be breathing a sigh of relief at the distracting hysteria that has engulfed the media over the past fortnight. While all eyes have been fixed on Westminster, Scotland Yard and Wapping, there have been few reports of the nightmare that is unfolding in Europe.

There is a real risk that once the hysteria about Murdoch and his motley crew has passed, the media vacuum will have to be filled, and perhaps the Eurozone crisis will finally get the 24/7 coverage that it deserves. This could spark the very thing that our economy cannot take right now - a crash in consumer confidence. August looks set to be a very tricky month. Tricky for the officials in Europe, but tricky for our UK retailers too. We should all brace ourselves for a stormy summer.

I'm often told, with some glee, that the property industry shuts down in August as senior figures hibernate to their second homes in France, Spain or, for the more parochial, Cornwall. So from this I am assuming it's almost time to pop the kettle on, re-stock the biscuit tin, put my feet up and watch to clock tick down until September 1 when our tanned colleagues will reappear, even more gleeful I imagine, full of new ideas... That's the fantasy, the reality, no chance. 

Why? Government has a habit of dropping a few bombs, normally in the form of reviews and consultations, just before Ministers go on their school holidays, which this year is next Tuesday (if you're sad enough to watch the parliament channel then you'll know the analogy between the Commons and a school playground isn't far off). 

So what are we expecting as our members lay dormant abroad and MPs reengage with unloved constituents throughout the UK? Just the small matters of reforming local government finance and the planning system. Piece of cake!

Add to this our success in securing a meeting with Queen Mary (to whom we are extremey grateful) which will require some thought, and our annual conference and exhibition moving to September (it's going to be a belter, if you haven't booked why not!?) then my team's summer looks pretty busy. 

I'd better make that cuppa a double espresso. 

Some forecasts indicate China will be the second-largest consumer market in the world by 2015, not far behind America.  According to The Economist, the Chinese already buy more cars than people in any other country with 13.5m purchased last year, well ahead of the Americans' 11.6m.  China is well on the way to becoming world's biggest luxury-goods market.  

Last year, $82bn (£50.4bn) worth of retail sales in China were from online transactions.  

That's about a tenth of the country's total retail sales, and a 95% increase on the value of internet transactions on the previous year.  Korea is the most developed online shopping market in Asia, followed by Japan but China is catching up.

The biggest e-commerce website in China is Taobao, which has a port called Taobao Mall that now hosts around 30,000 online stores.  Some 53,000 items are sold on Taobao every minute of the day.  An astonishing statistic.  But an even fundamental underlying question comes to mind; is this the beginning of online shopping centres taking a foothold in modern Chinese retail?  

So why so much online penetration in China?  Ultimately, retailers cannot keep up with the pace of urbanization.  As cities such as Shanghai sprawl further outwards in every direction, many people especially younger families, find they can only afford to live in what could be termed 'dormitory suburbs'.  Here, new housing is cheaper to buy but the major retailers have not yet set up shop.  If consumers have the ease of buying online and have the goods delivered to their door, they do not need to make the long journey downtown.  Makes perfect sense. 

Secondly, many of the local salespeople do not particularly understand the products they are selling, so savvy shoppers know they need to do their research online before they purchase.  The online world is allowing shoppers to read reviews and gain advice before they buy.  Access to better knowledge - another plus for online purchasing. 

Without the expensive overheads of a physical store, virtual stores can undercut the high street substantially.  Consumers also believe websites are more reliable, as given the heavy brand consumption in physical formats this has led to considerable numbers of fake products being sold.  This is somewhat different to the attitude observed in European countries or the US where some people worry that they are more likely to be sold fakes online than in real shops.

The appetite seems to be there for online transactional growth.  But I wonder, at what point, if it is possible, will physical formats become secondary?  Is this a likely future?  In an emerging economy which is observing a growing middle class, and according to The Financial Times, where women are becoming big buyers of Maseratis and expensive whisky, one would think that physical shop presence is most needed in the luxury market.  I am less confident of the other spectrum of the market.