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Sunday, 7 December 2014

The ‘retail misery-o-meter’ in The Netherlands continues with more defaulting retail chains and 'the worst has yet to come' in my humble opinion.

Last week, the Dutch Central Bureau of Statistics wrote about the situation in the Dutch retail industry:

In 2014Q3, the sales within almost all non-food segments of the retail industry improved, in comparison with the same period last year. Even the lifestyle and interior shops recorded a sales increase for the first time in six years. However, the results of footwear and clothes boutiques have deteriorated during the last two quarters.

This year the footwear and clothes boutiques started positive, with higher sales numbers and a larger sales volume; the first growth since early 2012. Since Q2, however, the growth already diminished and sales dropped. This downward trend continued in Q3. On top of that, the prices have dropped with an increasing pace, since 2013, towards  a level of -2% y-o-y in 2014Q3.

In Q3, all distinguished segments in the clothing and footwear industry showed negative growth. During the first half of 2014, only customers of women’s clothing boutiques spent less money. Q3 was a two-faced period for the footwear and clothing boutiques. August was very successful with the largest sales growth since February 2013, while the relatively dry and sunny September month on the other hand showed the largest decline in over one-and-a-half year.

In Q3, the sales of the overall retail industry was slightly lower, year on year, after a 2nd quarter with slight positive growth.

For the retail industry, the current crisis is like the proverbial three-headed dragon: at the time we think that we have beaten the first two heads, the third head returns in order to start the fight all over again. Where there is definitely a ground for some very cautious optimism about the labour market and the general economy in The Netherlands, the Dutch consumers yet keep their hands firmly in their pockets.

People in The Netherlands should not be misled by the annually returning stories in the media about the massive sales and the record numbers of electronic transactions during Sinterklaas (Dutch forefather of Santa Claus) and X-Mas sales periods (both in December). These data might (or might not) be right, but the whole trend in the retail industry is hardly pointed upward, in spite of the greenshoots in the aforementioned CBS report.

About two months ago, I wrote an article about the dire situation in the retail industry in The Netherlands and in particular about the situation of the large retail store chains Halfords (bikes and automobile parts; 100+ stores) and D-Reizen (traveling agencies).

At that time, Halfords had already bankrupted, but it was nevertheless hoping for a second beginning, and D-Reizen was at the brink of abandoning 150 of its 500 subsidiaries. Here are a few snippets of this story:

Although there is still optimism among the executive management and they see ample opportunities to continue the store chain, which allegedly has ’12.5 million visitors per year’, I personally consider the chances of Halfords surviving this shakeout quite dim.

The stores are (in)famous for their cheap, Chinese bikes and further they are not specialized bike stores, not specialized car-part and car detailing stores and not specialized… in anything. It is a little bit of this and a little bit of that, but nothing special at all. To put it bluntly: the store sells nothing that numerous other store (chain)s don’t sell at the same or better prices.

Besides that, the formula has probably suffered from exhaustion, like many other store chains: simply too many stores at too many poor(?) locations.

The second store chain in dire straits is the aforementioned D-Reizen.

Of course, the internet has been a particularly massive factor in the traveling industry and in many more parts of the retail industry. Why would you f.i. visit a traveling agency, when you can order almost any trip from the comfort of your own chair. […]since the Mrs. started to live together with me, I totally stopped visiting travel agencies. My wife books our travels online and she always manages to get the best trip for the best price. She never failed at that yet.

Last week, I saw my opinion – about the very dim chances for Halfords for a successful second beginning– unfortunately being confirmed by reality: there will indeed not be a second beginning for Halfords. The bankruptcy of this company is irrevocable now.

On top of that, Halfords was not the only retail chain that bankrupted during the last few weeks. The large brand store chain of clothes label ‘Mexx’ – with over 300 stores – has bankrupted, including its overseas retail chains and its design department, and so has the store chain in writing tools and office stationery Winter. And there are several other store chains that seem to be in a bloody struggle for survival or – as you also may call it – they are firmly on their way to a certain death.

On my personal ‘hitlist’ of shops, which seem  on the road towards their demise, there are the eyewear and optics chains Pearle, Eyewish Groeneveld and Specsavers. These three chains are involved in a ‘Kamikaze’ battle to show to the world, who can give most free pairs of spectacles and/or single glasses away to their customers. Pearle wins on points with two free pairs of spectacles for every sold pair of spectacles, but Specsavers is trailing closely.

Other store chains under jeopardy are the store chains, which sell computers, household appliances, modern lighting systems and consumer electronics, like MediaMarkt, BCC, Scheer & Foppen and Dixons. Also these store chains are fighting eachother ‘till death does them part’ with crazy discounts, free gifts and lowest-price-guarantees.

And personally, I would not give a dime about the chances for survival of many of the numerous ‘telephone brand shops’ in The Netherlands – representing KPN, T-Mobile or Vodafone – as most people, who need a smartphone already have one and there are simply too much of these same shops already.

The same is true for lifestyle and interior magazines without a real face and purpose, like f.i. Jysk, and for the Dutch department stores and specialists in small and non-electric household appliances, like HEMA and Blokker.

The main reason for this are the excess numbers of shops, that store chains like Blokker, C&A and HEMA  and all the aforementioned other chains maintain in all the languishing, excess shopping areas all over the country. This turns most shopping centres and malls into monuments of monotonous boredom, without any kind of surprise and special attraction for consumers. The few independent specialty stores, with a fully different assortment and a surprising look-and-feel, cannot be the cork that keep such shopping malls afloat.

Although it is very bad for the franchise-holders – mostly very hardworking and enthusiastic people, who live their dream to own their own shop – it would be best when the Dutch retail landscape would go through a merciless shakeout.

Excess shopping space should be abandoned in The Netherlands and turned into something different, while the various shopping malls and shopping streets should maintain a radical and strict policy, with respect to the percentage of shops coming from ‘the usual suspects in the retail industry’. There is simply no need for yet another HEMA, Blokker, Primark,  H&M, Kruidvat, GAMMA, JYSK, C&A or for any other chain store, as a matter of fact.

Unsuccessful shopping space should be abandoned, while relatively successful shopping centres should focus even more on the stores that really make a difference, when it comes to diversity and elements of surprise. Unfortunately, I am afraid that many municipalities or exploration companies of shopping space, like Unibail/Rodamco, Corio and Wereldhave, dont dare to be so radical in their discrimination between shops and store chains, although especially Unibail/Rodamco has actually a reputation for very strict and discriminative shopping space management, as a key to their success.

I am certain that my ‘retail misery-o-meter’ will continue to show deep red figures in the coming years, when especially municipalities and aldermen continue to go for the quick bucks and golden promises of yet another shopping mall or feel pressured ‘to do something’ for project developers and building companies in dire straits. 

There is not a single problem in The Netherlands that will be solved by yet another shopping mall and such shopping malls will definitely not solve the ubiquitous consumer strike, which has The Netherlands still firmly in its grasp.

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