Off-licences wait for the fallout

13 July, 2007

What a fortnight it has been. We have seen the smoking ban introduced into England, interest rates rise for the fifth time in under a year (with further rises expected), acts of terrorism in Glasgow and London, and parts of the country being hit with the worst floods in two decades.

Oh, and we have a new prime minister too, in case that had slipped through the net.

All of these things will impact retail.

Acts of terrorism make consumers think twice about going to places considered "likely targets" or retrench into

their homes and communities where

they feel most secure.

The smoking ban is likely to result in higher tobacco sales for the off-trade, either because smokers will stay in rather than go out, or

they will smoke as they walk between pubs, buying cigarettes in off-licences or convenience stores en route. Floods have brought uncertainty, disruption and financial hardship to many ,

and their lives could be altered for

many months.

Then there is the interest rate rise, introduced to curb our spending. Interest rates have been so low that we have been borrowing money cheaply to fund lifestyles or buy bigger and more expensive houses. All of this has pushed inflation up - hence the need to take some of the heat out of the economy.

Think positive

The Bank of England's deliberate policy of inflicting pain on the country is already taking effect. Profit warnings are up 60 per cent

and it's going to get worse before it gets better.

So what does this all mean for the off-licence industry?

Most of the factors discussed are entirely out of the control of the industry - so there is little point bemoaning

them - we just all need to get on with it.

It is fair to say that retail has had it reasonably easy over the last five years.

Now that the going is going to get tough (really tough), it will call on all of the industry's reserves to ride through the next 12 to 18 months.

But let's look at the positives. Alcohol consumption rarely goes down during an economic slow down. It's more the type of products, and place of consumption, which changes. More at-home entertaining?

Doesn't this play right into the hands of off-licences?

"Friday night specials" or "weekend treats" are simple messages which can be used to tempt shoppers and create some fun and theatre.

We have

the Rugby

World Cup just around the corner - who can truly capture the spectacle of a global sporting competition

within four walls of retail space?

Terrorism brings a greater focus on, and integration into, local and community issues

- again, isn't this great news for off-licences? How "local" is your off-licence?

Do you integrate into the community, actively seeking events or charities to support, building relationships with local communities, or do you simply sit in your off-licence waiting for shoppers to enter? Did you know that Tesco Express shoppers believe Tesco is more "community" than independent retailers.

How can an independent, with a great platform to be the local retailer of choice, lose a community positioning platform to a chain of 600 stores?

Price may become more important to consumers - but cheaper prices will never be the answer over poor availability, inappropriate ranges and terrible customer service.

We have been seeing an increase in other channels - particularly a return to the food specialists - farm shops, butchers, greengrocers etc.

Can off-licences set up concessions in these outlets, thus widening the range and improving the appeal for both parties?

Preparing for the future

The next 12 months are going to be quite rocky for retailers in all channels.

Retailers need to ask themselves four questions:


do we keep existing customers?


do we sell more to them?


do we get more customers?

Which suppliers

should we collaborate with to receive best practice category advice?

As always, there will be winners and losers in all retail channels. Winners are usually the ones who stay closest to their customers and go beyond the norm to deliver against their needs.

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