News & Insights

The ongoing high inflation environment has driven revenue increases but has hidden declining volumes for many retailers, a panel warned at World Retail Congress on the first day in Berlin.

Direct Group Chairman Bernie Brookes stressed that inflation had put volume in the spotlight.

“Top line growth can be driven by inflation while volumes are down. Growth from the core is more sustainable. If look at the decline of department stores has largely been about like-for-like growth,” he said. “Many parts of the retail flywheel that can be fixed without major capital investment.”

Looking to the department stores which have survived, they all provided experience and a day out, he explained, with larger roll outs and the rise of beauty stores separate from department stores leaving others to decline.

“You also need to be a higher end department store with service, or a discount department store with self-service, and I think many operators got caught in between,” he added.

Pepco CEO Stephan Borchert recalled that he joined the discount fashion chain when it had recorded six negative like-for-like quarters, with consumers increasingly sophisticated at price selectivity.

“For us one more visit, one more product is the goal and my view is that volume growth is the clearest signal that the strategy is working,” he said. “Volatility is punishing complexity. We like simplifying and executing excellently. Price and price trust is the leader to us, because if we can’t convince the customer we offer price value then we have a problem. So that means a strong scrutiny on store openings and looking at underperforming stores.”

Ahold Delhaize Member of the Supervisory Board Neela Montgomery added that volume led growth leaves “nowhere to hide”.

“Inflation has become a reality, and unless you understand the margin you can kid yourself you are performing well,” she warned. “In addition, the top 10% and the K-shaped consumer are real so you need to decide where you go for that growth.”

The session was moderated by Paul Martin, Global Retail Growth Leader, Partner & Managing Director, AlixPartners.