What can be learned from failing retailers

This is a particularly critical time for retailers all over Britain. Not a day passes without news of another retail brand failing and many big players have already gone into administration, downsized or closed down since recession officially began. It is indeed hard for retailers to make profits or even just break even when consumer confidence is low and shoppers spend less than they used to but it is also true that even in the current climate some brands are still thriving – so is there some lesson to be learned from failing retailers?

At Emotional Logic we have conducted research for major retail clients for several years and we keep our finger on the pulse of the only one who really matters – the consumer.

Looking at some of the failed retailers in the context of five years’ worth of consumer research, the first thing that struck us is how some of the brands that failed in 2011 are not on consumers’ radar when they go shopping. Respondents mention lots of brands unprompted during a typical focus group, they get enthusiastic about them and at times even recommend them to fellow respondents, and this tends to reflect their level of engagement with the brand itself, which ultimately drives sales.

Instead we found that all over the country brands like TJ Hughes and Habitat were not mentioned unprompted and as a result of not being top of the mind for consumers they seem to have been quickly forgotten. Focus groups show there was no attachment to these brands, no real affection or interest in them. This trend could be seen even before the start of the recession, which means these brands failed at keeping up with the public’s needs and tastes long ago, and did not respond quickly enough to changes affecting their target audience. It’s worth noting that it’s not stigma that kept consumers from visiting TJ Hughes more often: when it comes to value for money stores, the name on everybody’s lips is Primark, which is mentioned by virtually everyone as one of their favourite shops. Primark follows current trends and styles and makes them affordable for the masses, and this is what makes it successful even in an economic downturn.

When retail brands are tested in focus groups and consumers are asked whether they would like to see a particular store in a shopping centre, some of the brands tested will have a very broad appeal. For example, Zara is universally well liked across all the different consumer segments, and seems to be popular with most of them judging by the positive comments and reactions, but inevitably there are brands which don’t have the same type of universal appeal. This is the case of Jane Norman: when brought up during focus groups the retailer tends to split the audience, with mixed opinions and shoppers liking it and hating it in equal measure. The fact that this brand only appealed to some of the segments meant that when its already narrow audience cut down on their spending the retailer was left in big trouble.

The outlook for the retail sector doesn’t seem very positive for the future; however, high street fashion brands that have recently run into trouble because of the banking crisis, like All Saints and Karen Millen, managed to weather the storm because as our research shows they have a very strong relationship with shoppers and always elicit a passionate response in focus groups. It is ultimately down to the consumer whether they will buy a brand or not, and the retailers that are currently doing well are the ones that are moving with the times, listening to their customers, and adapting to their needs. Successful retailers will update their brand proposition with changing trends in order to stay fashionable and desirable, and will attract a cross section of different lifestyle segments to spread the risk, which is even more important in times of recession. To lose focus and forget this is a very costly mistake to make, as an array of empty Woolworths stores across the country testifies.