The event, hosted by our Chief Executive Chris Harte, provided an audience with Colin Temple, Chief Executive of schuh, Scotland's home-grown branded footwear retailer and now part of US Genesco Inc., as well as David McCorquodale, Head of Retail UK and Partner KPMG. Colin and David were interviewed by Jeremy Peat OBE, Visiting Professor at the University of Strathclyde International Public Policy Institute. The event rounded off with an opportunity to network over some drinks and canapés.
schuh steps forward
Colin Temple focused on the changes in the retail industry that schuh has experienced over the years. The business was started in 1981 with a store on North Bridge, Edinburgh and at that time they happily took 25 year leases with a couple of months offered rent free and the landlord paying for fit outs. The changing market led to businesses having to pay to take property, which Colin described as “the making of the company,” as it forced them to become more efficient. The business now takes on 10 year leases with a break at year five, to provide flexibility as the quality of locations constantly changes.
Colin explained that of the main driver of recent growth for the chain included: being bought out by Genesco; expanding store numbers from 56, at the time of buyout, to 128 stores currently; and making the move into opening standalone schuh "Kids" stores. Colin sees more potential to thrive in terms of multi-channel retailing. 18% of schuh’s business is now online and 62% of that is mobile. The introduction of ‘click & collect’ style booths and shops with no cash desks - where shoppers can use a tablet to instantly see whether a shoe is available in the stockroom in their size – will make the process much smoother for customers. The removal of cash desks also creates more space on the shop floor, whereas daily van deliveries to stores means that less stock is required in store so more space can be dedicated to retail areas.
Retail industry evolution
David McCorquodale of KPMG believes that there will be a disaggregation of pricing and other retailers should follow John Lewis’ lead on charging for services such as ‘click & collect’, as retailers are incurring costs when it comes to customer fulfilment of products. This is akin to airlines like Ryanair and Easyjet, who offer low-cost fares but consumers pay for extra leg room or queue jumping.
David reiterated the importance of continuing to evolve through experience and the importance of consumer power. Although he does not think the internet is the death of the store, he has predicted that the High Street will continue to shrink and that there will be more varied uses of former shop units, such as residential, which could actually feed the growth of convenience retail in town centres. David stated that rising local authority rates puts shop proprietors at a disadvantage, but it is unlikely the Government will want any reduction in this source of revenue with Brexit looming.
Referring to the National Living Wage, David referred to the BRC’s prediction that there will be 950,000 less jobs in retail by 2025. The squeeze on margins will affect small operations who only have one or two employees - newsagents and the like who can’t reduce headcount.
David pointed out that the average annual retail spend has not changed since the Brexit referendum result, but that currency devaluation is the big issue going forward. He explained that some companies are protected temporarily from the devaluation by hedging but others, like Sports Direct, that didn't hedge ended up issuing a profits warning straight away. He predicts that inflation will hit significantly after Christmas when hedging unwinds. He has noted that on the whole retailers have so far managed not to pass on the cost to consumers but it will be hard for them not to, at least in part.
As the question and answer session got under way, interest soon turned to Black Friday, with it falling just a day after our seminar. Colin noted that schuh doesn’t reap many benefits from the day and that it is Amazon that is impacted most, as it deals with logistical difficulties for order fulfilment. It was suggested that Black Friday has not created its own market and that instead consumers have delayed buying from October and November while taking some retail spend from the Christmas period. David accepted it was something that was likely here to stay!