In the news this week

16 Jan 2015|Added Value

It was announced this week that Chief Executive of Wm Morrisons, Dalton Philips, is to step down after the retailer experienced a slump in Christmas sales. Morrison’s board believed a new leader was needed to make the transformations required to turn its fortunes around. Facing tough competition and a uphill battle for growth Morrisons thanked Mr Philips for his contribution over the past five years but looks for someone to bring a fresh dynamic to the leadership.

“Morrisons has a bigger mountain to climb than Tesco. It was very late into loyalty (only launching a programme at the point it seemed the loyalty schemes were falling out of favour), convenience and online, so it is still trying to build a conventionally modern supermarket retail business at a time when the likes of Tesco and Sainsbury’s have the opportunity to consolidate or even retrench. And whilst the brand has some fantastic stories to tell about the vertical integration of its food supply for example, the reality is the geographic footprint of their stores leaves them more exposed to the white heat of competition from the likes of Lidl and Aldi than the other big 4 supermarkets, and so an ultimately unwinnable price war is almost impossible to resist. In that context, Morrisons needs to think differently, and changes at the top may be seen as the catalyst required to do that.”

Matt Woodhams, Brand Director, Added Value UK

 

Meanwhile Burberry was reporting success with a record 15% rise in the Christmas quarter, hitting £604m revenue, a 8% like-for-like rise. However its Asia-Pacific market didn’t deliver quite so pleasing figures with a low single-digit percentage growth and a slight comparable sales fall, which was reflective of the challenging environment and ‘disruption’ in Hong Kong.

“Burberry have blamed falling sales in Asia-Pacific on ‘disruption’ in Hong Kong – a thinly veiled reference to the protests, yet there is little compelling evidence to support the notion that the Occupy Central movement impacted the luxury retail market in Hong Kong. There are two likely causes of falling Burberry sales, the first being the anti-corruption drive impacting on lower corporate gifting among Mainland Chinese who are key to the Hong Kong market.  This drive pre-dates the protests. Secondly, there is a changing profile of Mainland visitors to Hong Kong. Visitor numbers are up, but the visitors are among the less wealthy Chinese who aren’t as likely to seek luxury brands. The wealthier Mainland visitors are increasingly likely to go to Europe instead in search of better deals, products which are not available locally and a superior retail experience. If, Burberry want to drive sales in Asia Pacific they should focus on improving the Asia retail experience for Mainland Chinese shoppers and the growing band of other wealthy Asians wherever they may be.  Asia exclusive products, Asian designers and pricing which compares favourably with Europe would all be good places to start.”

Matthew Carr, Managing Director, Added Value Hong Kong

 

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