Comet and the Argosnauts

Over the last week the press has been full of the demise of Comet – the biggest retail failure since the death of Woolworths in the words of some papers – and (as can be seen in our Media Commentary section) we have said a few things about it.

One of the points that I have been trying (and probably failing) to express is that we must disentangle the impacts of the (make mine a triple) recession from the structural change going on. What we are seeing for many retailers is a “perfect storm” of cost rises, competitors outperforming and customers deserting. Comet joins a long line of retailers in recent years where the recession has exposed some basic unpalatable and unprofitable facts.

Consumers are now shopping in different ways for different things and if they go places, in different places. As I type this this morning we can compare the latest results of Primark (according to the Associated British Foods’ group data, sales up 17%) with Marks and Spencer (sales up 0.9% with only food being positive). Comet was caught in the recession, but was also caught out in the structural change going on in British retailing, with consumers shopping on the internet and via mobile, being more demanding and value conscious and expecting better from the stores and service than many retailers seem to give them.

The overlay in Comet is the presence and role of private equity. Bought by private equity for a song a while back, the motivations and desires of the company, as well as the imperatives as problems mounted, will have been changed. Hence the refusal at the weekend to honour gift vouchers – these are not real money to the owners, as compared with cash or the stock (well the bits they own). Why accept them if you can get out of it?

Comet have been struggling for some time, and the 6,600 people who are likely to lose their jobs are those left after previous slimming down exercises.  And in a further reflection of the changing times, the Royal Mail, or is it the Post Office, announced they are adding 1000 jobs to cope with the volume of small parcels and packets from online shopping and especially Amazon.

And then there is Argos. Many of you may know that I have one of the few, if not the only, collection of Argos catalogues in private hands. Built up and infilled from an initial private donation, the changing consumers tastes can be tracked through the catalogues since 1973. They offer a window on a consumer and retail world that we have forgotten and that is un-recorded at that level of detail.

But this week Argos announced that they were to fully embrace digital and online and that the catalogue would be given a lesser status in their customer support. Argos already has one of the most visited web sites in the UK, mobile sales are booming, and click and collect is about 40% of the business. So in one sense it was bowing to the inevitable. But again one can feel the winds of change and not just in the embracing of technology, but again in the initial closure of 75 stores.

For consumers that don’t like or can not use the internet or the smartphone, local choices are getting reduced at quite a rate. Perhaps the only silver lining in this is the potential for really local solutions to develop to fill what is a fast growing void in many places?

About Leigh Sparks

I am Professor of Retail Studies at the Institute for Retail Studies, University of Stirling, where I research and teach aspects of retailing and retail supply chains, alongside various colleagues.
This entry was posted in Catalogues, Closure, Comet, Competition, Consumer Change, Internet shopping, Online Retailing, Private Equity and tagged , , , , . Bookmark the permalink.

2 Responses to Comet and the Argosnauts

  1. David Wicker says:

    There is a third factor. As a Retail FD with ten years of experience, I too have studied the dynamics of this sector. What gave me fresh insight was doing some consultancy for a Global retailer. Just comparing UK stores with our nearest neighbour in Europe was edifying. In the UK we’ve become so used to the extremely high business rates imposed on the sector that we’re immune from thinking dispassionately about them. Compared to Europe we are absolutely strangling UK retailers with what they call “social charges”. If business rates were raised equitably to UK retailers as their European counterparts, profitability would soar.
    Now when we talk about social taxes on labour …………….

  2. Leigh Sparks says:

    David

    Thanks for the comment. Is one of the things about Comet etc though their differential performance against the sector? Others are profitable despite the costs? Your point I assume is a sector wide one but how does the valuations in and out of town play in to this (leaving aside Scotland’s recent “Tesco tax”).

    If they had a choice, in your experience where would retailers prefer their costs to fall – property or labour?

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