Multi-channel wreaking havoc with property strategies

Strange things are happening in the world of retail property. On the one hand there is a strong argument from some retailers that large stores are best as they are more cost efficient. But on the other there is the counter view that smaller stores are more beneficial in an increasingly online-focused world.

More stores up for grabs.

Over recent weeks there has been a raft of media coverage and announcements by various retailers on how they are going to 'right-size' their store portfolios. This typically means they either focus on small stores or do the polar opposite and concentrate on their larger units and ditch the smaller footprint units.

Sir Philip Green, boss of Arcadia Group, has stated how he intends to offload hundreds of stores as the leases on as many as 500 of his high street units expire over the next three years.

The view is that there has been an unequal increase in the rentals on smaller outlets and that this is prompting him to close some outlets and consolidate his existing stores into larger sites.

Sir Philip Green (left) to offload unwanted property.

Also moving into ever-bigger store territory is Next. Apparently it has a plan to open stores with garden centres attached and coffee shops inside. This sounds (rather ominously) similar to the doomed strategy of opening ever-larger stores that Next founder George Davies initiated during his period of megalomania that ultiomately led to his ousting.

In the smaller stores camp are a host of retailers that are recognising that large units do not fit particularrly well into a world where an increasing percentage of retail sales are being transacted online. So why not, therefore, right-size the estate to have smaller stores with select ranges displayed and the bulk of the products made available online via in-store ordering at kiosks.

Best Buy is among the big names believed to be considering breaking out of its straightjacket of only operating big-box units and instead looking at opening smaller stores in the UK, which recognises the shift of consumers to buy electrical goods online.

Best Buy: maybe not just a big-box operator after all.

This schizophrenic view of the role that physical stores play in the retail model is not that surprising as the industry is in the midst of great uncertainty as it comes to terms with the reality that multi-channel is not just a buzz-word but is a business model and that all retailers must embrace it in some way or other if they are to survive and thrive.

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The sad demise of the City wine bars

This is a slight diversion from the normal fayre you'll find on Retailinsider.com but the news that the venerable Balls Brothers chain in the City of London is on the ropes highlights how successful retail/leisure organisations can suffer badly from rapidly changing tastes and cultures.

How long will the doors stay open?

I thought a close look at this situation would prove interesting. And it is a tale that is close to my heart as I spent eight years drinking in numerous pubs and bars during arguably the peak of the City wine bars during the late 1980s.


The story for me starts underneath London Bridge. Down a narrow staircase, past a smart, elderly doorman wearing a bowler hat was a candle-lit Davy's wine bar. Packed from midday with its mainly male banker clientele it was the venue for booze-heavy lunches that would stretch long into the afternoon.


This was the late 1980s and although the wine bar still operates from its basement location, its wooden sawdust-strewn flooring has been replaced with shiny tiles, the electric lights have been turned on, and doormen were long ago deemed unnecessary. The customers have also abandoned their leisurely two-bottle lunches and instead now rush down two-courses of food with one glass of wine or even a low-strength beer.

It might only be a 25-year timeframe but such have been the cultural changes in the City of London over this time that the FOB’s owner Davy’s believe the period has had the greatest impact on its business of any time in its long history. And it is the same story at the other venerable wine merchants and wine bar operators El Vino and Balls Brothers.

Far too much time was spent in this place.

Since this triumvirate have been selling wine in the City of London for over 400 years this suggests there have been some seismic changes in London’s financial district over recent years. What exactly has happened?

James Davy, executive chairman of Davy’s that was established in the 1870s and operates 35 wine bars, says: “The City began what I’d now call its merger with the West End for entertainments and this combined with a new generation of people coming through [to work there] and they wanted to do business [in bars] in the evenings.”

Wine bars had traditionally closed by 6pm prior to the 1980s and so they switched to opening until later to accommodate the incoming generation’s demands. This extension was out of financial necessity because the lunch trade had quickly dried up, literally. Davy says lunch had accounted for 70 per cent of sales before the 1990s but is now only 40 per cent.

A key prompt behind this new group of people entering the City was deregulation in 1986 with ‘Big Bang’, which opened up the markets to greater competition. Davy says: “There was a massive influx of people from around the world. It had previously been bowler hats, pin-stripe suits and homes in the Home Counties but this all changed.”

Bowler-hatted bankers: the apple of wine bars' eyes.

Big Bang and the 1980s boom led to what he calls the “birth of the barrow boy banker” that broadened the demographic of City workers. Richard Balls, chairman of troubled Balls Brothers that has been selling wine for 150 years, suggests there was a lot of financial product innovation that helped drive this change: “Financial disciplines were much more varied as more financial instruments were created and so we no longer just had stockbrokers and merchant bankers working in the City.”

Among the newcomers were traders of the products (often from the East End of London) who drank heavily in the evenings, which further fuelling the after-work trade in City wine bars. But it was not just male traders that appeared – the new City disciplines also attracted more women, with Balls suggesting the City of London now has 48 per cent female workers.

Not only did these people have different tastes and expectations but some of their employers – notably the US investment banks – had an institutional dislike of alcohol. When the 1992/3 recession hit, Anthony Mitchell, managing director of 131-year-old El Vino, says banks used it as an opportunity to cut company credit card spending on entertainments and demonise alcohol.

El Vino: surviving but not thriving.

“Some of the US banks put it in the contracts of their employees that they could not drink alcohol during the working day, which meant we were trying to survive on serving mineral water and orange juice at lunchtime,” he says.

The solution for the three companies was to develop the food side of their businesses so chefs were hired, kitchens built and dedicated dining rooms added at great expense. Davy says: “We started out with cold plates of food to support the wine but we’ve now got fully-blown kitchens and the wine now supports the food, which is chef-created items. We need our customers to eat as we can then sell them wine.”

At the El Vino bar on Fleet Street the kitchens now churn out a tapas selection including zucchini and pine nut bruschettas and chorizo e Fabadas, to cater for its well-travelled clientele. Although these dishes sit rather incongruously with old stalwarts like steak and kidney pudding, such change has been necessary but not wholly successful.

The extra overheads from adding a catering proposition that serves through the day and into the evening until 9pm caused headaches for El Vino and it was forced to close its three basement restaurants. Food is now only served at ground floor level: “They were very busy in the days of long lunches but we had to close them through lack of demand in Christmas 2008.”

This highlights the problem the established wine bars have had with historically operating out of basements. “They were cheap [to operate from] and became synonymous with wine bars but then the competition came along and opened wine bars, coffee bars and shops on the ground floor.”

With younger City workers demanding something different, and the incoming overseas bankers preferring a more Mediterranean-influenced environment, the basement inevitably lost its appeal. This coincided with a massive amount of City property development that included, for the first time, leisure units built into the ground floors of new office blocks.

Younger customers want light and airy venues.

Balls states that as a “general rule we’re not interested in opening any more basements” and new Balls Brothers bars opened during recent years have been located above ground, which has taken the non-basement split to 50 per cent of its portfolio. The brightening-up of the City FOB has been part of the attempt by Davy’s to make some of its bars less basement-like.

The most drastic move of any of the wine bar chains came from Balls Brothers that bought seven-site gastro bar group Lewis & Clarke in 2006 but it has been a big problem for the company and has undoubtedly contributed to its sad downfall.

Fancy a pint of cask ale down the supermarket

Pubs are arguably under more under pressure than retailers but at least they have a unique product to sell in the form of cask ale that cannot easily be bought in shops or over the internet.

Lots of choice but does any of it appeal?

As the industry has faced myriad problems - the smoking ban, increased red tape, the large pub companies operating a long-busted business model, and the supermarkets flogging cheap below-cost booze - the pub sector has thankfully had cask ale in its armoury to help it fight off the many threats to its survival.

Whereas the major grocers can flog all the bottles and cans of beer they like, it is simply not the same liquid as a pint of perfectly produced (and expertly dispensed) cask ale from the UK's many fine craft brewers.

As long as this has been in the pub industry's corner it has at least had something that it can use as a weapon to defend itself against the big nasty supermarkets.

But how long will this unique selling point survive because the specialist off-licenses are starting to play around with offering cask ales. Northern-based Rhythm & Booze has installed handpumps into a small number of its shops for take-away cask ale. And independent operator BrandInvest Group, based in Scotland, is rolling out cask ale pumps into 15 of its Winehouse outlets and a Cellar No 1 shop.

Can it really be too long before we find the supermarkets offering take-out cask ale? Certainly the first one to install pumps will be providing a clear point of differentiation to its rivals. It will be good news for cash-strapped cask ale drinkers on a budget but bad news for the pub industry and pub-goers.

Are we in a supermarket or pub?

It also leads to the question of whether this will potentially be another factor that contributes to the renaissance of in-home bars. This feature of all the best homes in the 1970s must surely be due for a return.

I'm certainly considering installing a bar in my daughter's dolls' house ahead of its delivery by Santa next month (yes, you can buy them on eBay).

Customer product reviews a waste of time

Shoppers rely heavily on customer product reviews when deciding a purchase, with recent research showing over three-quarters used ratings and reviews before buying.

But when so many of the entries are potentially fake and PR fluff do they bother?

It might be a review, but is there any insight?

The ongoing issue involving Trip Advisor is surely a warning. Ex-employees rubbishing their former employers in dire on-site reviews and their employers then retaliating with fake positive reviews highlights the serious weaknesses in such online feedback platforms.

There are examples of members of staff, journalists and marketing departments getting involved in posting reviews on many retailers' websites. One culprit among the many is Boots, which asked its staff to populate its site with positive reviews with a concentration on specific categories - supposedly to 'push' these goods.

Another potenially questionable scenario involves Figleaves.com that had 60+ reviews from one specific individual who had written extensive positive reports in perfect PR-like prose on a host of different products.

This could innocently be a lingerie-fixated crank with too much time on their hands. But cynically it is surely more likely to be somebody who has been paid to write these slick (or sickly) outpourings

Ed Lennox of online feedback forum Feefo (used by the likes of Fat Face, The White Company and Jack Wills) clearly has a product to flog but he is vociferous in his contempt for rival platforms that he reckons are effectively feeding the shopper duff information.

You don't see enough of this with product reviews

"The retailer is initially being hoodwinked by the product review vendors and so ultimately is the customer. They [the vendors] are effectively selling blogs written by anybody and moderated by the site owner," he argues.

Bad reviews are therefore vetoed or the negative element removed so they only read as positive spin. Lennox's argument is that only people who have made a legitimate purchase should be able to leave a review on a retail site. And only those reviews that are clearly contentious or are legally questionable should be removed.

If these were the rules by which all platforms played then maybe the product reviews we all read might be just a little more interesting - and more importantly, honest.

Home delivery - not just about Ocado and the supermarkets

Ocado and the big grocery chains naturally grab all the media attention and appear the only options for home delivered food. This is not the case.

There have been a number of organic food delivery companies that have cropped-up over recent years who supply nationwide and there is also the odd localised business.

One hyper-local operation is Hubbub that takes internet orders for the goods of eight stores centred on the Highbury-ish area of North London and then delivers them within a tight boundary.

Hubbub: Hyper-local food delivery

Marisa Leaf founded Hubbub in late-2008 when she ran a successful trial and has since been slowly building the business in this very specific part of the capital.

The numbers are undoubtedly small (she wouldn't reveal any financials whatsoever - apart from disclosing that the latest month-on-month sales for each of the shops was up between 30% and 40%).

The shops are carefully selected to offer a broad range of high quality goods - including fish from Fin & Flounder, meats from Frank Godfrey and vegetables and deli stuff from Barnsbury Grocer. Orders received by Hubbub are fed electronically to each store where the goods are packaged and then collected later that day. Each store's goods are collated with that of the others before same-day delivery to customers within one-hour time slots.

Frank Godfrey: Utilises Hubbub for home delivery

The hyper-local aspect is a key USP for the business and Leaf is keen to retain just a small number of shops, and for deliveries to stay within a tight area, until she has fully tested the boundaries of demand in the current Highbury area. She admits that the pressures to accept orders from slightly further afield (like Crouch End) and to add more stores has been very tempting.

She reckons she could have signed up at least 100 retailers so far. But this would stretch the economics of the business, which as a start-up has to keep things tight. The back-end IT infrastructure cost a chunky £250,000 but it provides a scaleable platform for operating a similar localised model, in different areas.

Leaf: keeping costs down by doing everything

The investors who stumped up for some of this outlay were earlier this year tapped for further funding and Leaf says she raised four-times the initial round (we don't know what that is). This is to be used to bump-up marketing activity and recruit further employees to the existing team of four.

This business is clearly in no way similar to Ocado nor to the food delivery set-ups of the major supermarkets. For that reason alone it is a very welcome alternative - especially for those people who really do value and support their local stores and don't just talk about it.

Older brands targeting younger market online

It might have been around since 1963, and been trading over the internet in the UK since way back in 1995, but clothing retailer Lands' End has only this month started selling goods to the younger end of the market on its British website.

It's taken since 1963, but Canvas has landed

It follows another long-established mail-order/online retailer N. Brown in recognising that its core customer is not getting any younger and that attracting a more youthful crowd has its benefits because they typically - have plenty of disposable income, a greater willingness to spend more money on fashion, and an increased propensity to shop online rather than over the phone.

For N. Brown the decision to target this new grouping came when it started playing around with younger brands like Simply Be and found this was a more than welcome addition to its core 50-plus year-old customer base.

At US-based Lands' End the prompt to go-young has been the appearance of Sheffield-born Nick Coe into the chief executive's seat at the company's HQ in the superbly-named Dodgeville in Wisconsin. He reckons he has brought a new perspective to the organisation.

The new range, Canvass, is aimed at an early-30s age group whereas the core Lands' End range is for 45 to 50-year-olds who Coe admits were nearer the age of 30 when they first become customers of the company many years ago.

The UK launch of Canvas follows its appearance in the US 12 months ago where Coe says it might only represent a small percentage of group sales at present but it is growing fast.

I'll have some of that - clothing

So much so in fact that he expects it to account for as much as 50% of total group sales within a five to 10-year timeframe. This will represent a truly meteoric change and suggests that if Coe's forecasts are correct then there is little wonder that Asos is placed on such a high valuation by the City.

This injection of growth from the younger demographic has also been seen at N. Brown where its financials show that the average age of its customer base is declining as growth in sales of its younger lines far outstrip those of its ranges aimed at its traditional older grouping.

At Lands' End it might have taken 47 years but under Coe's short stewardship the company seems to have sussed the obvious - that young people are the future.

Is quality beer still important to the supermarkets

Bottled beer was regarded as a super-premium category by the supermarkets a couple of years back and they seemed to like it. Tesco, Sainsbury's and Asda each held annual competitions to find the best new ales from UK brewers to help promote the category.

What happened to it?

As a beer drinker it is sad to see that they appear to have lost some interest in bottled beers as all three of the major grocers have gone very quiet on their competitions.

Maybe their attention is too firmly focused on pushing through cheap booze in packs of 24 bottles. We've all seen Stella, Carling and Budwieser knocked out at dangerously low prices.

This seems a surprise because in the US one of the few areas of very strong growth is in super premium beers and selected imported ales - the category has been growing at 15% this year. Contrast that with the falling or flat sales of the mega brands.

One person helping to keep bottled beers in supermarkets interesting is Steve Holt, managing director of Vertical Drinks, who made a name for himself importing the renowned US beer Sierra Nevada Pale Ale into the UK's bars, bars and major grocers.

He is also on a mission to do the same with the German Pilsner Veltins. It is currently in around 300 pubs throughout the UK including All Bar One and off licence Oddbins. The next step is to get it listed in the supermarkets as Holt reckons German beer has been under-represented in our big grocers.

Veltins: on a supermarket shelf near you soon

He suggests a beer like Veltins with its strong provenance should  hit the spot with UK drinkers - for afficionados (like Alan Giles at Fat Face) it is produced to the German purity laws of 1516 using spring water from alongside the brewery in the Sauerland region of the country.

It will almost certainly be in the supermarkets by next summer - with Waitrose possibly interested because of its premium positioning and Morrisons a contender if the price is right. The latter recently struck a deal to get Brewdog beers on its shelves.

This innovative Scotland-based brewery is also producing a beer for the Tesco Finest range called American Double IPA (aka Brewdog Hardcore IPA) at a chunky 9.2%.

This suggests the supermarkets are far from having lost interest in the bottled beer category but it would be good to see them re-introduce their competitions to really show that they are just as enthused by quality beer as before and are not just focused on doling out cheap tasteless fizz from the big global brewers.