UK high street mainstay Arcadia – owner of Topshop, Miss Selfridge, Dorothy Perkins and other major brands – entered administration on Monday.
Arcadia was the biggest concession operator in Debenhams, which is currently in administration. Shortly after the announcement of the firm’s collapse, JD Sports – the last remaining bidder for Debenhams – pulled out of talks despite having been close to securing a deal as recently as the end of last week.
Debenhams will now be wound down. It currently operates 124 UK stores and has cut 6,5000 jobs since May; the remaining 12,000 jobs are now at risk.
Both retailers have been hit hard by the COVID-19 pandemic and a loss in customer footfall in city centres.
Arcadia’s collapse had been expected after the chain failed to secure a rescue loan of £30 million. It operates 444 stores in the UK and 22 internationally, and currently has 9,294 employees on furlough. The company’s collapse puts a total of 13,000 jobs at risk.
Arcadia has hired administrators from Deloitte and announced that its stores will continue to trade as options are considered. All orders that were made over the Black Friday weekend will also be honoured.
“We will be rapidly seeking expressions of interest and expect to identify one or more buyers to ensure the future success of the businesses,” said Deloitte joint administrator Matt Smith.
FRP Advisory’s Geoff Rowley, a joint administrator to Debenhams, said that administrators “deeply regret” the decision to close the company, which was forced by current business circumstances.
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“All reasonable steps were taken to complete a transaction that would secure the future of Debenhams,” he said. “However, the economic landscape is extremely challenging and, coupled with the uncertainty facing the UK retail industry, a viable deal could not be reached.”
Debenhams will continue to trade to clear current and contracted stock, then close.
Arcadia, the UK-based retail group owned by billionaire Sir Philip Green, is set to enter administration imminently, according to the BBC.
Questions over the future of the retail empire were raised on Friday as it emerged that Arcadia had failed to secure a £30 million loan from potential lenders. A spokesperson said at the time that senior leadership were “working on a number of contingency options to secure the future of the group’s brands”.
Rival retail company Frasers Group, owned by billionaire Mike Ashley, said that it had offered Arcadia a £50 million loan to save it from collapsing and was “awaiting a substantive response”. Sources among Arcadia’s senior staff told the BBC they do not expect a last-minute rescue deal.
Arcadia owns several major high street retailers and brands including Topshop, Miss Selfridge, Dorothy Perkins, Wallis and Evans. It has struggled in recent years with a shift in consumer activity from city-centre businesses to online retail, and has acknowledged that the COVID-19 pandemic in 2020 had “a material impact on trading” across its brands.
The retail group operates over 500 stores across the UK and employs around 14,500 people, whose jobs will be at risk should the company enter administration.
Shares in some of Arcadia’s rivals rose on Monday in response to news of the company’s probable insolvency. Next gained 2.8% on forecasts of weakened competition on the high street, and JD Sports rose 6.5% on predictions that it may choose to drop its proposed purchase of Debenhans.
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Online fashion retailer Boohoo, which may be interested in buying Arcadia-owned brands such as Topshop, gained 5.5%.
Frasers Group on Monday also said it “would be interested in participating in any sale process” of Arcadia’s brands should they be sold off.
Several large high street stores have decided not to participate in Black Friday sales, even as spending is set to soar in the UK this year.
Next, a late adopter of Black Friday sales, saw great success in previous years with high demand for its discounted clothes, furniture and homeware, but this year has decided to avoid levying similar discounts. The move comes after the retailer reported that its in-store sales had been badly affected by the COVID-19 pandemic and loss in customer footfall, down to half of volumes seen in 2019.
Marks & Spencer also confirmed that it would not be offering any “specific Black Friday deals”, in keeping with a pattern that it has set in previous years. Instead, it will “focus on offering great value and deals throughout the whole festive season” – a line echoed by homeware chain Wilko, which said it intends to offer “great value products at great prices every day” rather than implementing Black Friday discounts.
Discount chain B&M linked its decision not to offer Black Friday sales to the dangers of the COVID-19 pandemic. A spokesperson said that their strategy of season-long sales “avoids excessive crowds on any one day”.
Black Friday is often seen as a key trading day in the lead-up to the Christmas period, with many traditional and online retailers treating it as the unofficial beginning of end-of-year holiday sales.
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Lloyds Bank expects Black Friday spending in-store to hit $750 million this year, up from £718 last year, though 2020’s longer sales period and greater overall retailer participation make it difficultl to draw comparisons with previous years.
More than two-thirds of shoppers have delayed a purchase in anticipation of finding a bargain during the sale, according to Lloyds.
During the five-and-a-half-hour “Big Tech” hearing on 29 July, in which the House antitrust committee grilled CEOs of America’s four largest tech companies on their alleged anticompetitive and anti-consumer practices, Representative Jamie Raskin made a particular quip: “In the 19th century, we had the Robber Barons. In the 21st century, we’ve got the ‘Cyber Barons,’” he said.
Subcommittee chair David Cicilline was more succinct. “These companies as they exist today have monopoly power,” he said. “Some need to be broken up, all need to be properly regulated and held accountable.” He expressed concern that antitrust laws first penned more than a century ago might not hold in a digital age.
Cicilline was correct. US antitrust laws rely on the premise that consumers are being charged too much due to a company holding an almost monopolistic interest. A key difference between tech giants and the monopolies of old, however, is in their ability to turn a profit without overpricing. Much of Amazon’s dominance is owed to underselling its competitors; Google and Facebook provide their services for free. It is this accessibility that has allowed these relatively young companies to become ubiquitous.
With the addition of Microsoft, the companies that came under scrutiny in the hearing – Apple, Amazon, Facebook and Google parent Alphabet – represent the largest companies in the world by market capitalisation. The ‘Big Five’ hold a combined market cap of more than $4.9 trillion, greater than that of any single nation on Earth save for Japan, China and the United States. While not always overt, the influence of Silicon Valley has come to dominate almost every aspect of modern life.
The ‘Big Five’ hold a combined market cap of more than $4.9 trillion, greater than that of any single nation on Earth save for Japan, China and the United States.
The largest of the Big Five, Apple produces and sells the most popular smartphone in the US and Europe. By extension, it operates the most popular mobile app store. In a time when every member of the populace is all but required to own a smartphone, whether as a working adult or a social adolescent, Apple uses the App Store to touch the lives of billions; its apps are the middlemen when we share documents, chat with friends, sign in for work, browse the internet, track our fitness, play games and order food. The platform’s market dominance has enabled Apple to take a 30% commission from transactions made through the apps it hosts – a revenue stream worth hundreds of billions – which most app developers simply accept as the price of tapping into Apple’s world-spanning market.
The second-largest mobile app platform, the Google Play store, also scoops 30% of sales revenue from its hosted apps, but that is far from Alphabet Inc.’s primary source of income. The greater part of its influence is in the Google search engine, which commands a staggering 92% market share.
It is now well-documented that Google has built a global empire on the harvesting of data from its search engine users and the sale of that data to advertisers. This simple business model netted Alphabet $113.26 billion from ad sales in 2019 alone, and continues to shape the content that is presented to us when we use Google’s service – which is so omnipresent that it became a part of our language more than a decade ago.
Data-based dominance is also enjoyed by Facebook, which holds access to the personal lives of more than a third of the world population on an even more intimate level than Google. The social media giant’s reach is enhanced by its ownership of WhatsApp and Instagram, each boasting over a billion active monthly users continually sharing data with the parent company. As mundane as the concept of selling ad space might seem, Facebook’s grip on the global consciousness has magnified the power of targeted ads enormously; motivated actors can even affect national elections using its reach.
As mundane as the concept of selling ad space might seem, Facebook’s grip on the global consciousness has magnified the power of targeted ads enormously; motivated actors can even affect national elections using its reach.
Amazon is no stranger to the data trade; in fact, it earns more than its retail division. Its ownership of a 44% market share in US eCommerce, a staggering level of control over the world’s fastest-growing sales medium, fuels an even more profitable data collection vehicle and the growing digital presence of Amazon Web Services. While high street stores fade into obsolescence, those who take their business online are hard-pressed to compete with a titan that can one-up them on price and delivery speed – and which already knows exactly how to target their customer base.
Even in the face of a global pandemic that has brought multiple industries to their knees, the tech giants’ expansion has only accelerated. The western world now relies on the devices built by Apple and Microsoft to do their jobs, on Facebook’s social platforms to connect with absent family and the wider world, and on Amazon’s next-day delivery service to replace shuttered retailers. With restrictions placed on public transport and entertainment options, rising giants like Uber and Netflix have grown to fill the void. Profit margins for tech players have been stabilised or strengthened while the rest of the world has struggled to account for losses.
The changed state of society has given the monopolies a greater boon than a simple profit boost, however. The new reliance on access to technology has changed public attitudes towards their influence and notably curtailed enthusiasm for breaking up the tech monopolies. People enjoy the services that the likes of Amazon and Netflix provide when the COVID-19 pandemic has restricted their options for entertainment. The recently released FutureBrand Index showed Apple topping the list on internal and external perception. Even in the aftermath of the 29 July hearing, almost half of 18-to-34-year-olds who witnessed its coverage came away with a better opinion of the Big Tech companies being questioned; 63% reported using their products and services more often. Only 40% of those questioned believed that any of the companies should be broken up by the government, with 29% opposed to the idea and 30% unsure.
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In this tech-dominated climate, where the largest companies enjoy both market dominance and widespread customer approval, we are unlikely to see the Big Five fall to antitrust suits like Standard Oil. Given tech’s natural bent towards innovation, they are also not likely to be outpaced by smaller competitors like US Steel – they are more likely to add them to their portfolio, as Facebook added emerging rival Instagram.
We have yet to see what action Congress may take to stem the expansion of America’s tech monopolies. What is certain, however, is that in the meantime their influence in modern life will continue to grow ever more pervasive and ever more profitable.
US retail sales saw a smaller increase than expected during July, and may slow further in the months ahead due to spiralling COVID-19 cases and a reduction in unemployment benefits, the US Commerce Department announced on Friday.
Overall retail sales increased by 1.2% in July, falling behind the 8.2% increase seen in June – which was itself a sharp decrease from an 18.2% increase in May. However, May’s surge, the largest on record, followed two months of equally historical declines owing to the outbreak of the COVID-19 pandemic throughout the US.
July’s sales increase did not meet the 19.9% target that economists polled by Reuters had forecasted for the month.
While retail growth slowed significantly, the overall increase in sales demonstrated that prior months’ figures were not a fluke, and that retail had begun to bounce back.
Michelle Meyer, chief US economist at Bank of America, said that the figures showed “a willingness and a desire to spend” from the American public. “There is no doubt the recovery in consumer spending has been robust,” she said.
However, the recovery in retail sales was aided by a $600 weekly jobless benefits supplement, which around 30 million US citizens have been receiving, and which expired at the end of June. This benefit accounted for 20% of the personal income of those affected, and assisted recipients in buying food and paying bills.
While the supplement has been extended via an executive order by President Trump, the weekly payout has been reduced to $400. The effect that this will have on retail sales in August and beyond remains to be seen.
Tuesday morning trading saw shares in airlines and retailers increasing across the UK and EU, apparently symptomatic of growing hopes that international travel restrictions will ease as summer comes about.
London’s FTSE 100 surged by 1.9%, and the more UK-centric FTSE 250 by 3%. Pubs, cinema groups and retailers also saw share price growth.
The gains followed a Monday evening announcement from Prime Minister Boris Johnson that car showrooms and outdoor markets will be allowed to reopen from next week, with high street shops, department stores, shopping centres and other non-essential retail premises being able to resume business from 15 June.
The greatest earners in Tuesday trading were air travel and hotel companies, with airline conglomerate and British Airways owner International Airlines Group (IAG) seeing a 15% surge while Intercontinental Hotels Group (IHG) jumped by 14%.
Meanwhile, European shares leaped to an 11-week high, with investor sentiment likely boosted by the German government’s recent €9 billion bailout of Lufthansa.
Markets.com chief market analyst, Neil Wilson, commented on the stock price surges: “Strength in this sector underscores confidence among investors that economies are reopening, and consumers are keen to travel.”
“There is a lot more hope that travel restrictions across Europe will be eased in time for the summer holidays. If the summer holiday season can be saved it would be a big plus after most of us wrote it off.”
The COVID-19 virus is a global pandemic. With countries worldwide reporting cases, it is no wonder that it has greatly affected economies on a huge scale and reach. With more and more people confined in their homes, investors are now scrambling to come up with contingency plans to make sure their assets remain safe from it all. Of all the industries, the real estate sector seems to be the most affected. Hotels, restaurants, and retail stores are now empty.
Effect on Commercial Real Estate
In Asia, particularly in the hardest-hit areas, retailers are closing up shop. Retailers are being forced to send their workers home and stop operations. Restaurants, in the absence of customers, are left with no choice but to offer door-to-door deliveries or close as well. With travel bans in place, the usual busy areas of tourist spots are now deserted. With no sales, companies are forced to hold their wages and figure out how they will cover their monthly rent payments.
Rent Relief
Many businesses are now asking their real estate brokers like the Jeff Tabor group to negotiate rent relief and other forms of support to keep their businesses afloat. In Singapore, their restaurant association already requested shopping mall landlords to cut rents by at least 50% for the next three months. Some retailers have already granted relief measures including marketing assistance programs, flexible rental payments, and a rental rebate.
Effect on Residential Real Estate
Many think that the impact of the coronavirus should not extend to residential real estate. However, the effects are now felt within the residential sector as a number of home buyers are skeptical over fears of uncertainty - which is an expected outcome whenever something unusual happens in the markets. Fears about the virus caused the stock market to drop by over 1,000 points.
Real estate agents, however, believe that this is a good time to list their properties on the market. Uncertainty can sometimes equate to opportunity. Those who already have existing mortgages can negotiate to get the best deals possible. Based on the data provided by Black Knight, as many as 11 million homeowners can move to save more money through refinancing.
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Preparing for the Worst
Some of the malls in Singapore are slowly opening up shops despite the few numbers of buyers trickling in. Many believe that they have better chances of recouping what they have lost by continuing to operate. Nevertheless, they are still wary and are constantly finding ways just to break even and still provide goods and services. Restaurants are now offering food deliveries to doctors and nurses. Some of them are opening only when healthcare workers need to go out, take a break, and eat out. Right now, it is a give-and-take scenario.
The Bottom Line
Uncertainties can happen in the market. As we are experiencing, one crucial factor can affect the economy on a grand scale. In this case, the coronavirus or the COVID-19. With no known cure yet, real estate investors, home buyers and sellers have nothing to do but wait and see what comes of the virus and the real estate industry. For now, people should expect the worst and pray that their assets don’t turn into liabilities. COVID-19 could very well be the next Great Recession that we should brace for.
Below Christine Bailey, Chief Marketing Officer at international payment solutions company Valitor, explains for Finance Monthly the complexities of valuation and exactly how retailers can determine the value of their stores.
One look around our high streets or news website and you are met with empty stores and articles proclaiming the death of the high street. However, things are starting to change. So it’s time to reevaluate high street stores and put a new price on them.
Price wars with eCommerce
The reality that has existed for some time is that with higher overheads and a smaller inventory, bricks and mortar stores are at too big a disadvantage to compete with eCommerce on price and choice. Smartphones in hand, consumers are quickly comparing online and in-store prices and buying whatever is cheapest and most convenient. Things only get worse with large scale events such as Black Friday. In fact, nine in ten Heads of Commerce believe these sale events have devalued products in the minds of consumers, to the extent that they’re less likely to shop during non-discounted periods.
In order for brands and retailers to effectively revalue their stores, we need to understand what physical stores can offer and online cannot. Firstly, bricks and mortar have a clear lead with personalising the customer experience. By blending their online and offline setups together, omni-channel retailers can dramatically improve the customer experience
By blending their online and offline setups together, omni-channel retailers can dramatically improve the customer experience.
Offering more than quick sales
For instance, physical stores can benefit an omnichannel retailer via its unique strengths, including in-person support, simple returns, and the ease of payments. In fact, recent research found that almost one in five (19%) retail executives think the top hidden strength of the high street is its people. Assets like in-person support then should not be overlooked. Together, these strengths contribute to a robust in-store customer experience, which may not translate into a sale being made at the store itself, but can support online sales, or reinforce the brand.
Taking this further, there are other elements that omni-channel retailers also need to take advantage of. Embracing an experiential approach and putting customers at the centre of a physical brand experience is key to revaluing physical stores. Through shifting their focus from selling products to the people purchasing them, brands can connect with consumers on another level and start building long term relationships.
One great example and leader in this area is Nespresso. By focusing on consumer needs, Nespresso’s stores showcase its products in an immersive way, creating a multisensory experience. Staff add to this with expert knowledge and can take customers from the physical point of sale all the way to a personalised subscription plan which is then facilitated via its app. So although purchases are made via the app, the physical store has a major driver in securing the sale in the first place and providing an experience centre to push new products and flavours.
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Nespresso’s customers now no longer see its stores as just a place to make purchases. Instead, they have become destinations that they want to go, all of which helps build a positive connection with the brand and support the development of a long term relationship. This type of store usage can be replicated quickly and easily by other brands too. What is crucial is having a physical presence that aligned to customer needs.
In the future we may see innovative technologies such as VR and AR also being used, shifting shoppers’ experiences from simply browsing, to immersing themselves in a brand’s offering. But, retailers need to understand it before they invest in it. Crucially, brands also need to identify whether their customers are actually interested in it and see benefit in using it, prioritising their wants and needs.
In this high-pressure era of retail, stores should not be valued purely on revenue anymore. Instead, they should be viewed as a way to complete true end-to-end experiences from first engagement through to the next purchase. Ultimately, this will increase customer retention and the value of each transaction too. While revenue is an ever-important consideration, the ways customers make purchases has changed. This does not mean the value of stores has disappeared. Instead, brands and retailers need to look at how a physical stores advantage can be used to improve the omni-channel experience.
This has especially rung true for the British high street in recent years, with retail centre footfall having fallen almost exclusively between January 2017 and March 2019.
Whilst the future prospects for high street retail may initially seem bleak, there is nonetheless good reason to believe that there is light at the end of the tunnel. In this article, Jason Wood, Head of Commercial Property and Rashid Ali, Partner at UK law firm Smith Partnership, take a closer look at the role of commercial property in the age of high street decline.
Is High Street Retail Really Nearing Death?
Headlines announcing 'the death of high street retail' have become commonplace in the public arena, and there is definitely significant evidence to suggest that the high street is at least feeling the pressure.
The number of people purchasing goods and services online is expected to increase from 1.66 billion in 2016 to around 2.14 billion in 2021. Overall, ecommerce sales already accounted for more than 14% of global retail sales in 2019, and forecasts are tipping it to grow further towards 22% in the next four years alone.
Although these figures do not necessarily mean that digital consumers are shifting their focus entirely towards the online sphere, the trend undoubtedly represents a threat to traditional retail businesses. That observation is backed by the numbers, with the closure of UK chain stores having led to a decline of 6537 stores in 2018.
It's not all bad news, however. Amidst this general downturn, takeaways, sports clubs, pet shops and specialist clothing stores are just some of the retailers that have posted a net gain in store numbers during the first half of 2019.
Retailers' Response
As online sales continue to grow, retail businesses have begun to adapt and diversify their approach. Aside from making their own move into the online market, retailers have found many new ways of safeguarding their commercial longevity. These could range from practical steps such as selling assets and large-scale reorganisations to focusing on the delivery of a more immersive brand experience.
Although the former approach may be seen as a necessary consequence of the changing retail environment, the latter steps may well be the ones that help reimagine high street retail in the 21st century. The presence of physical stores will always be the main distinction between online and offline shopping, and retailers are faced with the challenge of playing to those unique strengths in a future-oriented way.
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What About the Commercial Property Sector?
Retailers aren't the only ones having to adapt to this brave new world – the commercial property sector has its own role to play in shaping the direction of the UK high street.
Store closures affecting both small businesses and high-profile retailers have made it harder for property investors to make the most out of their brick and mortar assets. Instead, many of them are faced with vacant space and reduced rental yields.
Unsurprisingly, commercial landlords whose portfolio is heavily focused around retail space are being hit hardest by the struggling retail sector. Rental cuts and company voluntary arrangements (CVAs) are at the order of the day, forcing landlords to rethink their strategy.
Commercial landlords whose portfolio is heavily focused around retail space are being hit hardest by the struggling retail sector.
Much like retailers themselves, diversification is often at the centre of that new approach. In some cases, this calls for nothing more than the repurposing of one retail space into another – as more and more shopping goes digital, retail warehouses continue to retain their importance.
In other cases, commercial property investors are moving into an entirely new direction. Opportunities in residential property, build to rent, flexible office space and other areas mean that landlords still enjoy many avenues through which to pursue commercial success. If the decline of the high street has taught us anything, it's that adaptability is central to achieving that goal.
In order to ensure longevity, developments can no longer be based solely on office or residential use. A greater focus on multi-use, the environment and more flexible lease structures can go a long way in shaping spaces that occupiers wish to remain in, helping landlords guarantee income in the long term.
The commercial property sector is also responding to these changes through moving away from retail-led and transactional high streets. There is now a greater focus on experience and the blending of retail, leisure and culture into a single space. The future of city centres lies with being more than just a place to shop; they are set to become community hubs where visitors can shop, eat, visit and explore to their heart's content.
In the face of such developments, landlords themselves are also having to alter their approach. Commenting on the changing role of the commercial landlord, Smith Partnership's Wood and Ali said:
"Landlords focused on providing long leases at high rents are likely to struggle for survival in the long-term. In their place, landlords who take a more active role in the management and performance of their tenants are likely to become the new norm. As such, commercial landlords are steadily settling into a new role as the curators of the high street, considering which businesses will thrive in their space and supporting them in doing just that."
A New Horizon
With changing consumer behaviours continuing to have a significant impact on the UK high street, the time has never been better to carve out a new way forward.
Although retailers and commercial landlords will undoubtedly face further challenges in the years to come, there is also a wealth of new opportunity on the horizon. Those who are able to capitalise on it successfully are set to play an instrumental role in shaping the path ahead.
AA research suggests that after three years, a car will have depreciated by 60% from its original showroom price tag, and that is if the car is averaging 10,000 miles per year. The biggest losses come in the first year however, with a deduction of around 40% being made by the end of the first 365 days. Obviously, there are different ways of putting the brakes on depreciation. Keeping the car clean, regular servicing in accordance with manufacturer’s guidelines, and one eye on the mileage gauge, will all go a long way in reducing potential losses. But is there another option to consider?
However, when the hypothetical family from number 28 parade the street in their new Mercedes A Class, doing somewhat of a victory lap, Google is just seconds away as we scout our next big purchase.
Funding the initial payment
In reality not everyone has tens of thousands of pounds kicking about in their spare bedroom. With PCP, the payment is broken down into three major chunks.
Firstly, you’ve got the initial deposit which is usually 10% of the car’s showroom value. Secondly, the monthly payments which will include enough to cover the depreciation costs incurred throughout the contract. Finally — and this is where things change once the final payment of the contract has been made, you get the option to either return the car or take a new one on a new contract. Or, you can pay a balloon payment and then the car is yours.
Another option is taking out a PCP lease - the monthly repayments are significantly lower than they would be with a finance deal. The option then presents itself is to drive a car that you would initially have deemed to be significantly out of your price range. Therefore, if you don’t have a big deposit and want lower monthly repayments, then this might be exactly what you’re after.
Personal Contract Purchase
A personal contract purchase (PCP) is proving itself to be a popular option amongst those who pick finance, with 78% of those choosing the agreement. Admittedly, it goes against everything our parents have told us to do, in regard to owning our own car, but if you can battle those initial demons, then we’re here to show you why this might be for you.
The beauty of PCP, particularly if you don’t use your car for your daily commute, is you can effectively buy a weekend car. When purchasing a new car outright, you are restricted by the constant reminder that you will have this car for the foreseeable future. With PCP, you can buy the car that caters exactly to the needs of your evenings and weekends. For example, an SUV if you go camping with the kids most weekends throughout the summer, or a two-door roadster, if your Sundays are filled by coastal runs. And, if your circumstances do change, you can simply exchange the car.
Not only has PCP offered motorists a car they would never have been able to otherwise afford, it has in some sense saved the British car market. For the past three years, the number of new car sales in the UK has stayed above 2.5million units per year, in comparison to 2011 when it was only 1.9million.
Premium brands such as Audi, Mercedes, BMW and Jaguar Land Rover have all performed outstandingly through the system. This is due to the fact these cars hold their value better, and therefore depreciation is less, ultimately benefiting both dealer and driver. Mercedes reported a 100% upturn in UK sales since 2010.
Mileage
Congestion charges, heavy traffic, and the cherry on the top of the cake — parking. Three reasons many drivers in the UK have steered away from the daily commute in the car and opted for public transport. A decade ago, our decision when purchasing a car will have depended hugely on our day-to-day usage — but when that isn’t the same, why should the choice be?
The average annual mileage of a car in the UK is 7,900. One drawback of renting your car through PCP is that is that when initially taking out the contract, you are given a mileage restriction and if you exceed this, you will be penalised. If, however, you would consider yourself to be one of those average UK drivers, then PCP offers no qualms. The opportunity to purchase a new contract once your current one is up means you aren’t going to have spent your days driving around in an old car with high mileage.
In summary, with more and more dealerships offering customers the opportunity to own a new car for £99 a month, when their total gym membership and mobile phone contract equates to more — well, it’s a no brainer.
Sources:
https://www.ft.com/content/0e651206-0ee1-11e7-a88c-50ba212dce4d
https://www.thinkmoney.co.uk/news-advice/what-is-the-average-miles-driven-per-year-in-the-uk-0-8581-0.htm
https://www.lookers.co.uk/finance/pcp/
http://www.theaa.com/car-buying/depreciation
https://www.autoexpress.co.uk/car-news/90794/pcp-personal-contract-purchase-car-deals-explained
https://www.telegraph.co.uk/money/consumer-affairs/should-rent-next-car/
Here Finance Monthly hears from Hannah Conway, Consultant at Brandpie, on exactly why shifts in consumer trust are what drive and alter the financial landscape.
The financial crisis of 2008 had far-reaching consequences, some of which can still be felt. Public trust in traditional banking institutions has eroded and brands in the sector are dealing with the reputational damages endured. One needn’t look further than Chase Bank capitalising on the trend of being relatable on social media only to face public wrath for bailouts that occurred ten years earlier.
Consumers have clearly not forgotten the crisis. In fact, the 2018 Edelman Trust Barometer ranked financial services as the least trusted industry worldwide. In the same report, technology ranked as the most trusted. Silicon Valley flourished in the decade following the financial crisis, with organisations small and large introducing technologies that would come to revolutionise consumer finance.
In this landscape, tech conglomerates, have been able to make serious in-roads into different aspects of consumer finance, a process that shows no signs of waning.
Amazon was among the trailblazers innovating in this space, introducing one-click ordering as early as 2000. With an ecosystem boasting 310 million active customer accounts, over 100 million Prime subscribers and over 5 million sellers across 12 marketplaces, Amazon is no rookie. The retail giant is building an array of financial services to increase further participation in the Amazon ecosystem, ranging from payments infrastructure to Amazon Pay – which already has 33 million customers worldwide.
Amazon Cash, which launched in 2017, enables customers to deposit cash to their Amazon.com balance by showing a barcode at participating retailers. The cash is applied to their Amazon account immediately, giving “cash customers”, such as anyone who doesn’t have a bank account or debit and credit cards, the ability to shop on the e-tail giant.
The technological advancements in voice will ultimately enable Amazon to make further encroachments into consumer finance. Virtual assistant Alexa is set to dominate voice shopping, currently having the largest market share of smart speakers, more than twice that of its competitors, Google and Microsoft. Purchases processed through voice are expected to skyrocket to $40 billion by 2022. As consumers were already using the platform, the introduction of new customer-friendly payment experiences serve to further boost Amazon’s position.
The technological advancements in voice will ultimately enable Amazon to make further encroachments into consumer finance. Virtual assistant Alexa is set to dominate voice shopping, currently having the largest market share of smart speakers, more than twice that of its competitors, Google and Microsoft.
Apple has similarly made great strides in the space. ApplePay is already available in 33 countries, with over 250 million users worldwide.
CEO Tim Cook recently announced Apple Card, a new credit card, which is expected to be released in the US this summer before potentially being rolled out globally. Purchases from Apple’s physical stores, website, App Store or iTunes will come with a 3% cash back, with all other purchases at 1%, all in the form of Daily Cash, which will then be added in Apple’s Wallet app.
Apple is building an ecosystem which will see consumers use Apple products to pay, with the cash back options leading to more purchasing. In addition to the seamless customer experience across its portfolio, the giant is pushing privacy as its main differentiator, with its latest “Privacy Matters” commercial prime example. Apple wants to assure customers that all their private information on their phone is safe, with its new credit card offering similarly touting security and ease of use.
Facebook introduced peer-to-peer payment in its messenger app back in 2015, but it is the company’s subsidiary Instagram that is making significant in-roads to consumer finance.
Facebook usage might be steadily dwindling, but Instagram is on the rise. As Instagram is a highly visual medium and users have the feed to interact with their favourite brands, it was a logical next step that the network would introduce purchasing and payment mechanisms sooner rather than later. This became a reality earlier in the year with Instagram enabling in-app checkout for its shoppable posts. In April 2019, the offering was extended from brands to influencers, significantly boosting Instagram’s reach. Deutsche Bank analysts have already predicted Instagram’s move into social shopping could be worth $10 billion by as soon as 2021.
But while the West is fast encroaching this space, no one has managed to catch up to WeChat’s fast ascension into the sphere of digital payments. With over 1 billion active users, and thanks to its own in-app shopping and payment system, the Chinese social media network is a force to be reckoned with. It provides a seamless mobile lifestyle through which consumers can order food, send and receive money, pay utility bills, shop and more.
With over 1 billion active users, and thanks to its own in-app shopping and payment system, the Chinese social media network (WeChat) is a force to be reckoned with. It provides a seamless mobile lifestyle through which consumers can order food, send and receive money, pay utility bills, shop and more.
Social payments are the norm. Consumers can buy a friend a cup of coffee and send it through WeChat Pay. Busking musicians no longer expect coins or notes, they have signs with their WeChat Pay QR codes on them. WeChat Pay leads the way with over 600 million users, outranking most of its competitors. Tencent, the company that owns WeChat recently joined forces with JD.com, China’s leading e-commerce platform to cover both online and offline markets.
Thanks to the innovative way they use technology to communicate integrity, security and trust, as well as creating a better customer experience, tech organisations have seen younger generations and seasoned consumers alike gravitate towards digital-first offerings.
But while challengers were ahead of the curve in evaluating how consumers want to interact with banks, traditional players need not despair. From designing apps that introduce a more mobile-first offering to embracing cutting-edge tech, such as AI and IoT, to enable predictive and hyper-personalised interactions, there is plenty traditional banks can do to create captivating customer journeys to meet customers’ ever-evolving expectations.
But if you have to spend £20 every year on a replacement pair, then over three years that’s £60 spent. It makes more sense to spend that £60 at the start on a pair of shoes that will last three years or more, especially if they are more comfortable and a higher quality.
Your shopping habits have a huge effect on the environment too, and it is certainly suffering for these so-called ‘fast-fashion’ trends. While scooping up a dress for £5 might seem like an exciting bargain, let’s be honest, the price might be more the motivator in the purchase than the style, quality, or comfort. More and more of these clothes just end up being worn once or twice before heading to the bin. In fact, in a survey by Method Home, of 2,000 British shoppers, nearly a fifth admitted to throwing clothes in the bin.
What impact can fast fashion have?
With fashion trends changing faster than ever before, there’s an increasing pressure on consumers to change up their wardrobes faster. But, with our money only stretching so far, many of us are turning to cheaper outlets for our clothing.
Cut-cost fashion must also find somewhere to make savings along the production line. You can’t sell a £5 dress without using cheaper materials and such. This often leads to garments made quickly with non-organic fabrics. Plus, as the Independent reported, the process of dying these clothes is the second largest contributor to water pollution.
While the short-term purchase may be cheaper, the cost to keep replacing the item over the years will add up. If a more expensive version will last a number of years, it could end up being comparatively cheaper.
By its very nature, it is expected that the garment you have purchased will not be kept long, nor will it be expected to last for years. On the flip side, fashion with an emphasis on quality and durability will see you through. This manifests particularly in the threads lost during washing. Cheap clothes tend to shed tiny microfibres when washed, which end up polluting our oceans.
The cost of quality
As Life Hacker rightly states, a high price doesn’t always mean high quality. Here’s some top tips for spotting good quality shoes and clothing:
- Spares for repairs — this is like a calling card from the designer. If the item comes with spare buttons, then the item is expected to last enough for it to require a button mend at some point!
- Check the pattern matches at the seams — it’s the little things that are the biggest giveaway!
- Look for gaps in the stitching — an item that will last will have no gaps between stitches on the seam, and also have more stitches per inch. Take a good look at those stitches!
- Don’t look at the price tag — as mentioned before, this isn’t always an indicator or quality. People can, and will, charge good money for a poor product. Take a look at the item itself.
- For clothes, scrunch them up a bit — take some of the material in your hand and ball it up for a few seconds, then let go. A good quality material will survive and the wrinkles will fall out. Cheap material will stay wrinkled and creased.
Leather ankle boots for example are versatile and can be used for range of occasions, so make sure to buy a quality pair to withstand all those wears! Divide its cost by the amount of times you think you’ll wear it and that will give you the cost per wear. If it’s something you’ll wear every day, definitely check the quality of the item! Remember, the ‘bargain’ comes in how many times you think you’ll wear the item. It’s always recommended to invest a little in timeless staples that can be mixed and matched for a variety of outfits.
Sources:
https://theecologist.org/2018/oct/30/fast-fashion-method-madness
https://lifehacker.com/cheap-clothes-are-too-expensive-buy-quality-instead-1751019637
https://fashionunited.uk/news/fashion/method-soap-brand-wants-to-clean-waste-in-fashion/2018101239428
http://www.wrap.org.uk/content/love-your-clothes-waste-prevention
https://www.independent.co.uk/life-style/fashion/environment-costs-fast-fashion-pollution-waste-sustainability-a8139386.html
https://www.itv.com/news/2018-10-31/britains-love-of-fast-fashion-is-harming-marine-life/
https://www.cbc.ca/news/canada/london/like-uber-for-clothes-stmnt-startup-fight-fast-fashion-closet-rentals-1.4902265
https://www.buzzfeed.com/alisoncaporimo/clothing-quality-clues?utm_term=.dewknndvZ#.jdqgLLJQ3
https://www.liveabout.com/how-to-spot-quality-clothing-1387970
