News Round Up: Retail Focus

The whirlwind of Christmas shopping followed by the flurry of Boxing Day and post-Christmas sales have got the entire team here in the Lightbulb office talking all things retail. While others have been braving packed shopping centres and high streets to grab a bargain in the sales, we’ve been following the latest stories from the retail world. Here’s what the Lightbulb team has been discussing this week:

Online promotions raise queries over retailer's profits

Financial Times

Within the peak Christmas shopping period, online orders in the US using promotional discounts and sales dramatically rose by 131 per cent in comparison to the previous year. The surge highlights that Christmas shoppers are increasingly keen to grab a bargain, but also that retailers are adding a greater number of promotions to their online offerings. Figures analysed by DynamicAction revealed that discounts and promotions, such as buy one get one free, featured in between 51 and 86 per cent of all transactions. While American retailers in general are more au fait with this form of heavy discounting (think Black Friday), aggressive competition has forced a number of retailers to up their promotions in order to retain their customer base. However, by adopting this approach can retailers maintain their profit margins?

Here in the Lightbulb offices we found this story incredibly interesting, as while online promotions can attract customers, aggressive discounting can severely damage a business’ profitability. The retail sector is increasingly competitive, both online and instore. With this in mind, in the New Year we’ll be interested to see whether more retailers will follow this discounting structure and how many will be able to maintain a profitable business model.

Luxury grocer aims to reduce tax bill by cutting basic pay

The Guardian

Fortnum & Mason, known as the Queen’s grocer, has found itself in a difficult position as it is faced with persuading a group of its staff to reduce their basic pay. Many have speculated that this is an effort to reduce Fortnum & Mason’s tax bill. While this is, of course, bad news for Fortnum & Mason’s employees, the retailer renowned as being the world’s ‘most luxurious’ department store is making moves to compensate staff in a share of tips. Currently, Fortnum & Mason does not distribute the 12.5 per cent service charge paid by drinkers at its bar in Heathrow and is subsequently in discussions with the bar’s 20 members of staff to come to an agreement. The reduction in basic pay would be as much as 11 per cent, taking many employees’ wages down to the national minimum hourly rate.

Fortnum & Mason communicated these changes to its employees via a letter and the plans have prompted protests outside the retailer’s flagship store in Piccadilly with trade union Unite commenting on the retailer’s “underhand practices” and “utter contempt” for its staff. This story caught our eye as it is all about communication and negotiation. Communicating bad news is always a challenge, but we can’t help but think that the retailer has missed the mark by not putting its plans forward in a better way to soften the blow. The retailer has also found itself in difficulty for not explaining the tip process clearly enough, with questions raised as to how much staff will receive from service charges voluntarily left by customers. In business, difficult decisions such as these have to be made, but it’s imperative that a company does not alienate its staff in the process.

Stay tuned to our blog and social media channels for our regular news updates covering a wide range of industries. If you have any questions or want to find out more about us, please don’t hesitate to get in touch with a member of the Lightbulb Leadership Solutions team today.

Fiona McKay