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Fashion, luxury and lifestyle aggregator - May 2023

Posted: 30/05/2023

A ‘Mega May’?

This year, an additional bank holiday was granted on 8 May to celebrate the coronation of His Majesty King Charles III, which was predicted to have a mixed impact upon the retail sector. Despite retailers rejoicing in the historic occasion with coronation ranges, decorations, offers and events, online spending was expected to decrease by 26.6% compared to the year before with consumers across the UK instead celebrating at street parties, taking holidays and catching up with friends and family – costing online retailers an estimated £128 million. The forecast would represent the largest year-on-year drop since the Queen’s Platinum Jubilee in 2022, during which online spending decreased by 34% compared to the same three days in 2021.

However, in the lead up to and during the coronation weekend, footfall was anticipated to increase by 4% across all UK retail destinations. Pubs were also hoping for a sales boost, with the government’s extension of licensing hours from 11pm to 1am on Friday, Saturday and Sunday. Supermarket chains similarly benefited, with several food retailers reporting considerable surges in sales in the run up to the weekend as consumers stocked up for picnics and street parties. Sainsbury’s sold 143.3 miles of bunting, Lidl reported a 60% increase in sales of its £14 Carpentier Champagne Brut as well as a 33% rise in quiche sales, as customers took inspiration from the signature coronation dish. Aldi in fact predicted it would sell 30 quiches and 170 scones a minute.

Despite all the excitement, recent data has shown that overall footfall was actually 20.6% lower than the preceding weekend (29 April) which marked the early May bank holiday, notwithstanding that central London had its largest increase in visitors on coronation day (6 May). That said, it seems retailers in the capital experienced mixed trading – many popular destinations within the immediate vicinity of the procession, including Saville Row and Piccadilly, were hindered by road closures and the coronation itself, while other retailers capitalised on the increase in tourists and overall boost in consumer morale.

The jury is still out on the final figures of the coronation weekend, as well as the impact of ‘Mega May’ (referencing this month’s three bank holiday Mondays) more generally, and whether the anticipated lift in sales after a slow start to spring/summer shopping will live up to expectations.

In any case, the celebrations didn’t finish after the royal occasion, with the arrival of Eurovision the following weekend. Host city Liverpool certainly reaped the rewards (despite the UK song entry not being as successful, coming second to last). Retail complex Liverpool One reported an extra 680,000 visits during the song contest and nearly £20 million in extra revenue, with businesses likening the event to Christmas. The results represent the shopping mall’s best week to date this year, exceeding post-pandemic record figures outside the holiday season.

Battle of the brands

Earlier this month, M&S announced the injection of further funding into Nobody's Child. The eco-conscious affordable womenswear brand has been described as ‘an important part of the M&S family’ with the retail giant already owning a 27% stake in it and the fashion label being the first third party clothing brand to go live on M& in September 2020.

The investment, thought to be in the single-digit millions, is part of M&S’s overall ‘Brands at M&S’ strategy, which marks a move closer to the traditional department store model where high street brand partners ‘complement and complete’ M&S’s own range.

Nishi Mahajan, who previously ran Amazon's fashion business, has been the driving force behind the move that is intended to rival the likes of Next and John Lewis. It’s anticipated that M&S’s third-party sales may eventually be as high as £1 billion – almost a tenth of total revenues – and represent a £400 million opportunity within clothing and homeware.

The announcement is representative of a growing trend within the sector. Next, for instance, has boosted its number of third-party brands from 500 to 1,000 in the last three years and in 2022, British brand Reiss took on a new head of buying to oversee the addition of more high-end third party brands to its offering. More recently, Sainsbury's announced the addition of two new clothing brands, Everbelle and For All the Love, which comes just a few months after the supermarket chain similarly signed deals to stock fashion retailers Little Mistress and Sosander.

Clearly competition amongst large retailers is increasing (Little Mistress claims to now be available through all ‘big 7 retailers’: John Lewis, M&S, Next, JD Williams, Matalan, Asos and Sainsbury's). However, M&S have suggested that its strategy is more quality, rather than quantity of brands, stating ‘curated choice is key – not a plethora of brands that are hard for our customers to navigate’.

In any case, brand diversity is certainly on the rise both in store and online, but commentators are calling for retailers to tread carefully – partnerships could risk detracting from, rather than enhancing, a retailer’s own ranges. Further, with the number of labels in different retailers ever increasing, too much diversification rather ironically risks standardising the customer experience, so that different stores begin to look the same. But for now, there are no signs of stopping and retailers appear to be getting it right. M&S for instance, which in fact stocks exclusive offerings from Nobody’s Child, more than doubled its third party sales to over £70 million in the six months to October 2022.

Return of the high street?

The UK high street appears to be making a comeback. JD Sports are on track to reach £1 billion in profits this year, with its sales rising 18% in the year to January. The company has recently expanded in the US and Europe in anticipation of a continued demand for leisurewear and trainers, which chief executive Régis Schultz describes as an ‘affordable luxury treat’ for young consumers. The high street retailer has further plans to reach new markets in Europe and Latin America and expand into different areas including gaming and music. Schultz attributes JD’s recent success partly due to having a physical presence alongside its online sales, allowing the brand to capitalise on shoppers returning to the high street and protecting it from a decline in sales seen by online retailers. 

LK Bennett has also seen a 40% rise in profits this year, marking its most successful year for more than a decade, attributed to increased demand for occasionwear post-pandemic. It comes as the womenswear retailer continues to expand its store presence in the UK, and shall return to the US via wholesale later this year. Revenues at luxury brand Burberry similarly rose 10% over the year to 1 April, boosted by a rebound in China, its largest market. Store sales in fact increased across all of Burberry’s markets, as 60 new stores were opened during the same period, alongside a reorganisation of operations.

Meanwhile, online-only retailers face greater challenges. Boohoo’s annual sales have fallen by 11%, making a pre-tax loss of £90.7 million. Online retailers have been squeezed by the rising cost of deliveries as a result of surging energy and labour costs, as well as consumers returning to the high street, and reduced overall spending amid ongoing cost of living concerns. However, Boohoo, who are still committed to investing in future growth including automation, remains positive about future performance, with planned cost-cutting and expected deflation. Asos also recently posted heavy losses, as its UK revenue dropped 10% this year and shares in the company fell by 20.7% – the lowest level since 2010. The online giant suffered from larger levels of returns and has struggled to contend with shoppers returning to physical stores. However, with ongoing restructuring and cost saving initiatives having also impacted short-term growth, it too appears optimistic about the second half of the year.

The rise in online-only retailers was once seen as a death-knell for an already struggling high street, but recent trends suggest that consumers are keen to return to brick-and-mortar stores. It may be too early to tell whether the high street can thrive once again. 

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