You know we’re in trouble when retailers start blaming the weather. Which is exactly what Sir Stuart Rose, chief executive of that bellwether of the high street Marks & Spencer, did when sounding off about April being a rotten trading month.
Tempered gloom was the tenor of his message, as he disclosed that behind the shiny façade of the £1bn pre-tax profits achieved during the last financial year lay a more disquieting reality of deteriorating like-for-like sales in both food and clothing, the M&S staples. But he made this rather epigrammatic observation about M&S’ future: where, a few years ago, M&S “was a weak business in a strong market, now it is a strong business in a weak market.”
Just how weak is this market, you might ask, and how is it going to affect the rest of us? The first thing to note is that M&S’ trading experience, though general, is by no means universal. True, we’ve had some pretty lacklustre results from the likes of Kingfisher, DSGI, Woolworths, Debenhams and Next. But we cannot, by the same token, ignore the more upbeat performance of Morrisons, Sainsbury, WH Smith and (latterly) Tesco. Unfortunately, to this mixed trading pattern we must add the palpable fact of a stagnating housing market and the unusually Stentorian note in the governor of the Bank of England’s voice.
Mervyn King, perhaps emboldened by the growing weakness of the Brown administration and the fact of having secured a second term, has decided to tell us how he really sees it. And frankly his is not an opinion, however unpalatable, we can easily ignore.
Instead of a little turbulence in the money markets followed by some temporary consumer fall-out, we are now being encouraged to think of an altogether more epic change in the economic cycle, as the nice decade gives way to the nasty. If King is to be believed, the comfortable sweet spot of effortless UK growth – essentially engendered by China’s entry into the global trading community during the early Nineties and the benefits flowing from it, such as cheap labour, low factory prices, dwindling inflation – is now rapidly curdling. There will be no going back, so we’d better pull our socks up and become more productive.
If the King thesis is correct then marketing faces a sea-change over the next few years. The “new optimistic millennial feeling” which Mark Lund, chairman of the Advertising Association, identifies with the early years of the 21st century will likely yield to something altogether harsher and more pragmatic. Difficult decisions will have to be made, marginal buying options eliminated as unaffordable, the new car and the new kitchen put off. Banks and financial services will need to adopt a more sober, austere approach in the wake of the meretricious excesses of Northern Rock (if they are to regain consumer confidence, that is). And what of the softer everyday choices: fairtrade over conventional, ethical over price-competitive, added-value brands over own-label? Here, too, we may see a change in the consumer commitment of the past few years. Though to what extent, and for how long, remains to be seen.