EPoS, E-commerce, Mobile, Websites, Graphic Design
If asked the the question, “What would you do if you had a time machine”, what would you say?
For the altruistic people amongst us, their answer is often something like, “I’d kill Hitler” or “I’d warn people about 911” – i.e. bad things that have already happened. But for the rest of us who are concerned with how we can shape the global future and our own personal fortunes, the time machine question often brings up the subject of lottery numbers or high performing companies that we should invest in.
So what if time machines did exist, but you could only travel in time by 5 years either way? What knowledge would you take back to 2010 that would have helped you personally and the rest of the world?
Would you take back an idea or invention that has hit the market in the past 18 months and effectively steal it as your own? Or would you invest in the ideas of others which you now know to be a success? Would you invest in technology, social media or even defence companies, whose share prices continue to rise in the wake of middle-east fighting.
Sparkstone Technology is a software provider to the retail sector, so the success or failure of retail companies is always on our radar, along with the potential mergers and sell-offs that could spur new growth. Just last week, a take-over bid was publicly announced involving ‘Poundland’ and its smaller competitor ‘99p Stores’. It was an announcement that saw Poundland’s share price close 15.4% up on the previous day. So what if you had that time machine, insider knowledge to invest in Poundland, five years or even one year ago… how would your investment have faired?
Well no too badly it seems, but you wouldn’t have made millions either…
If you’d invested in Poundland on March 12th, 2014 you would have paid 363.00 pence per share – today those same shares are selling at 413.60 pence. That’s not too shabby for an 11 month investment, but most of that growth has been in just the past month and helped dramatically by last week’s take over announcement. So the big question is, “Will Poundland’s shares maintain their value over the next 5 years?”.
With the value of hindsight, which retailers should you have invested in back in 2010?
As the global economy struggled with the deepest recession since the 1930s, 2008-2010 was a time period that saw many UK retailers going bust. ‘Well loved’ brands like Woolworths, discovered they just weren’t loved enough to save their ailing high street stores (the Woolworth’s name was bought by Shop Direct, who now trade online with Woolworths.co.uk along with their other brands, Very.co.uk and Littlewoods.com)
Since 2010, there certainly isn’t a clear winner when it comes to retail verticals, with fortunes varying greatly between companies who on the surface offer very similar products. Take for example, builders merchants Wolseley and Travis Perkins. Both offer building, plumbing and electrical supplies to the trade and general public (in Wolseley’s case it’s via a number of different brands). And both companies have recorded high share performance in recent years…
But at the same time, the UK’s market leader Kingfisher Group, which owns DIY giant B&Q, has seen share prices struggle to sustain a steady and reliable growth pattern.
Perhaps the difference between B&Q and Travis Perkins (TP) lies with the type of customers they are targeting. B&Q is focussed predominantly on the home DIY market whilst TP’s main customers are builders and other tradesmen. Many of these small businesses service the house building industry which has bounced back spectacularly from recession over the past 3 years as housing shortages increased demand.
So should retailers adjust their offering to suit market trends or are there ways to make money with your core products even when demand falls? The traditional way to survive when consumer demands change, is to reduce your overheads and expenditure. But for many large retailers like B&Q, this can be a lengthy process involving redundancy consultations with staff, off-loading assets and streamlining business processes. Other companies like Tesco, have also struggled to cope as demand for their mid-range products has fallen, with consumers either opting for high-end premium products or the value for money alternatives available at Aldi and Lidl.
So as a potential time machine investor in retail companies, who else should be on your watch list for the next few years?
If we take previous share performance as an indicator of how capable the management team is in any given company, you might want to look at companies like Wal-mart, NEXT and WH Smith.
All three of these companies have shown strong (and more importantly for investors… steady) growth over the past few years. This indicates that the people they have in charge, really understand their market and understand the pulse of their target shoppers.
But this ‘chartism’ approach to share predictions can be dangerous as it takes no account of global influences that can’t be foreseen, or their effects cannot be estimated accurately. Terrorism, natural disasters and changes in government policy, can all have an effect on the way businesses are run and the way consumers spend their money.
There can never be a ‘sure thing’ when it comes to business, and retail is particularly susceptible to the whims, trends and finances of consumers. So instead of a time machine, Sparkstone offers software that helps retailers to analyse their sales performance and profit margins, making it possible to implement Business Intelligence strategies that can have a real impact on your bottom line. Using our CRM in combination with real-time sales data, you can learn to order and allocate stock more efficiently and with almost fortune teller like accuracy.
You could reduce warehousing overheads, reduce wastage and increase sales, all by having the right stock, in the right place and at the right price!
…Are you planning to invest in retail over the next few years? Perhaps you’re a retailer yourself and you want to invest in your future by upgrading your systems and working practices? Sparkstone has the experience you need and we’re always happy to take your call to see if we can help.
Call now: 01489 795000