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The backdrop to my visit to Paul Cheema and his family at their Costcutter in Coventry last week was a deathly drumbeat from the supermarkets as weak trading conditions continued for another month.
“How are you finding things,” Paul asked me. I said that during January and February, retailers had been saying sales were very tough but that during March and April, independents had been more positive.
While the Cheema family is achieving sales growth he advised that the pattern was good week, good week, OK week, very bad week. What he is finding is that shoppers are running out of money, which is why week four is so quiet. While I was at his shop, trading was brisk.
What are the supermarkets saying? “I have been doing groceries for 28 years now…and this is the toughest it has ever been for consumers,” says Justin King, chief executive of Sainsbury’s. “If you look forward…we see this persisting for the rest of the year.” His like-for-like sales in the first quarter were down year-on-year. But better than Tesco.
Increased petrol prices, which are adding £5 a week for the average household, were a key factor. Sainsbury’s would respond by continuing to invest in convenience shops so consumers could shop locally. Its Basics range was growing fast, showing shoppers are trading down.
Over at Tesco, finance director Laurie McIlwee was providing the sound bites. Higher fuel prices were the the culprit as shoppers avoided discretionary items such as electricals, clothing or general merchandise. Food was holding up well.
The figures from Tesco and Sainsbury’s are averages. Some of their stores are doing very well. Others are struggling. The same is true for independent retailers. Analysis by the FT shows that some parts of the country like Reading and Aberdeen are doing fine and others such as Dundee and Liverpool are at risk.
The same rules apply to local shops. Be aware of the national trends but position your business for success. In part the supermarkets are talking their businesses down to take the pressure off their forward targets. They can see that the economy is recovering slowly and they are positioning their shareholders to expect lower returns, so that any surprises are on the up side.
Local shops need to ignore their propaganda and look beneath the rhetoric for opportunities. They are still very positive about local markets and fresh food. How will you respond? If you are in a symbol group, ask your wholesaler how they see the next six months. Do you have the cash to invest in promotions? What can you do to keep shoppers in store for longer? Are you a viable alternative to the supermarket shop?
What you need is a strategic approach, backing yourself to be successful.
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