Times are getting hard and the weak are about to get weaker

From The Times November 28, 2007
Major retailers lose sparkle as figures slump ahead of year’s biggest spree
Steve Hawkes and Miles Costello

Fears over the fallout of the global credit crunch grew yesterday as Signet, the jewellery retailer, and Pendragon, Britain’s biggest car dealer, blamed growing economic uncertainty for stark profit warnings.

John Stevenson, an analyst at Shore Capital, said it was now clear that there would be a marked divergence between winners and losers on the high street over Christmas.
He added that a spate of price cuts and Christmas sales by Debenhams, WH Smith, Gap, Burtons and Dorothy Perkins reflected the fact that stores were already having to use incentives to attract customers. “No doubt Christmas will be late and, with the next weekend representing the ‘payday’ watershed, retailers will be looking for signs of improvement as we move into December,” Mr Stevenson said.

Here we go again – it is the same brutal message of comparative Competitive Strength.
Times are getting hard and the weak are about to get weaker. So what’s new about that?

If we apply a Competitive Strength perspective then we can deduce something different. The key question is not who is or is not cutting prices and bringing forward Sales but whether the stores named were “having to use incentives” or whether they are choosing to do so.

Businesses that enjoy the high Competitive Strength level, better than Excellent, we call Free. For a retailer this means they can choose to discount where and how they want, using this as a tool to create greater competitive advantage. An obvious example of this is Tesco who are regularly and skilfully use the price cut weapon to make life difficult for their competitors.

Companies that are in the low Competitive Strength condition we call Constrained cannot "choose" to discount. They feel compelled to do so in order to chase the sales volumes they cannot otherwise generate, because this is all they can do. A business leadership in a Constrained retailer who states they have “chosen” to have an early sale is attempting either to disguise their weaknesses or, if they believe it, fooling themselves. Hoping it will be "all right in the morning" is not a strategy – it is Denial.

We say, please look at the Competitive Strength web site. Please see the frightening difference in both financial strength and business resilience there is between the Constrained and the Excellent. Please see just how deeply temporary and precarious is the position of the Constrained business.

The Competitive Strength Report is the only independent measure that will enable a business leadership to rapidly and objectively assess how they compare with the Free. Within days they can establish what their business’ position is – and more importantly, decide what to do about it.