The recent collapse of Carpetright, a once well-known name in affordable flooring, underscores a troubling trend in the retail industry. This is not an isolated incident – as brands like Cath Kidston, Debenhams, and Arcadia Group have faced similar fates. These names, which once thrived in the middle market, now struggle to stay relevant in a rapidly evolving retail landscape.
In 2023, Carpetright saw its UK store count drop by over 60%, down from its peak of 700 stores in 2009. The rise in competition, impact of the cost of living crisis, the growth of online are all factors; we see again a middle-market player face its decline, Brands that fail to innovate and adapt to changing consumer preferences are finding it increasingly difficult to survive.
Today’s consumers are more discerning than ever. They no longer settle for the middle ground but gravitate towards extremes , value for some, high-end luxury for others; they favour recommerce and international D2C offerings like Shein and Temu continue to make headway.
Value operators like Primark succeed with an offering of fashionable items at unbeatable prices, catering to cost-conscious shoppers who prioritise affordability. Primark’s model has proven so effective that the brand has seen a 15% increase in revenue year-on-year, even in challenging economic climates.
Luxury brands such as Hermès continue to attract consumers willing to pay a premium for exclusivity and quality. Hermès reported a 23% increase in sales in 2023, indicating a robust demand for its high-end products. However, even within this luxe tier, brands such as Burberry have faced challenges, with its sales growth slowing to just 1% in the last quarter of 2023. Maintaining a luxury status requires constant innovation and a compelling brand narrative.
Caught between these two extremes, middle-market retailers find themselves in a precarious position. They are neither cheap enough to attract value shoppers nor exclusive enough to lure luxury seekers. This dilemma has led to a wave of closures and bankruptcies, with UK store closures reaching 47,000 in 2022, a 10% increase from the previous year.
Who is making it in the squeezed middle?
Fashion brands like Zara have found a sweet spot by combining style with perceived quality. Their rapid turnover of fashion trends keeps consumers coming back, always in search of the latest styles. Zara’s parent company, Inditex, reported that Spring/Summer collections continue to be very well received by customers. Store and online sales in constant currency between 1 May and 3 June 2024 increased 12% versus the same period in 2023. The group continues to see strong growth opportunities, highlighting the effectiveness of their model.
Meanwhile, Uniqlo has carved out a niche by focusing on durability and longevity. Their commitment to quality basics that endure beyond seasonal trends appeals to consumers looking for sustainable, long-lasting products. Uniqlo’s parent company, Fast Retailing, saw a 12% increase in revenue, driven largely by their focus on quality and wearability.
Innovation also plays a critical role in the success of some retailers. M&S Foods, for example, stands out for its unique, innovative offerings and commitment to quality. By continuously evolving the offer, they provide a compelling reason for consumers to choose them over competitors. M&S Foods reported volume growth in the food offer was plus 6.8% against the market down to nearly 1%, reflecting their successful strategy.
Similarly, NEXT has capitalised on the importance of speed and convenience. Their efficient service, both in-store and online, meets the demands of today’s time-pressed consumers. NEXT’s online sales saw profits rise 11 percent compared to retail’s 4 percent growth. The company’s operating profit, meanwhile, hit $1.2 billion, reflecting a 5.2 percent increase highlighting the importance of a seamless shopping experience.
Experience retail is certainly proving successful in the way consumers want to shop. Retailers who provide memorable in-store experiences, such as events, workshops, or integrated food offers, create destinations rather than mere stores. This approach fosters customer loyalty and encourages repeat visits, crucial for building a loyal customer base in a competitive market. A study by PwC found that 73% of consumers point to customer experience as an important factor in their purchasing decisions, yet only 49% say companies provide a good customer experience.
Luxury department stores such as Fortnum & Mason, Selfridges, and Harrods have shown that adaptability is key to survival. These iconic stores have managed to stay relevant by evolving with the times. Fortnum & Mason has embraced a blend of tradition and innovation, offering exclusive products and unique experiences such as in-store events and premium food halls. Selfridges has focused on creating an immersive shopping experience, with initiatives like pop-up shops, art installations, and an emphasis on sustainability. Harrods, celebrating 175 years, has invested heavily in digital transformation, ensuring that their luxury offerings are accessible online and providing personalised shopping services to cater to their discerning clientele.
The recent struggles and closures of mid-market retailers serve as a crucial lesson for the industry. Simply selling products is no longer sufficient. Today’s consumers seek value, quality, innovation, and unique experiences. Retailers who fail to meet these evolving expectations face a bleak future.
As the middle market continues to evolve, retailers must adapt or risk becoming another casualty. Those who can effectively balance value for money, fashion and durability, innovation and convenience, will thrive but it’s no-easy ask. The retail landscape is for those leaders who realise that simply ‘buying low and selling high” model is gone, and the philosophy that consumers should be sold ‘at’ is thankfully going too. It’s only those who can offer what the modern consumer truly wants will stand the test of time.
The demise of Carpetright and similar middle-market brands is more than just a cautionary tale; it is a call to action for retailers worldwide. The future belongs to those who can innovate, adapt, and meet the ever-changing demands of consumers. The retail industry is at a crossroads, and the choices made today will determine the winners and losers of tomorrow.
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