Why Next could be Next! Another Retail Casualty?
The past few years have been tough for retailers. Since the recession hit back in 2009 we’ve seen established retailers drop like flies. Credit has been hard to come by for any business that seems to have a slightly suspect business model or whose brand has not kept with the times and progressed its business into the youth driven spending age!
One company that has defied my expectations and so far weathered the retail storm is NEXT!
Although it seems to be defying the odds I still havn’t changed my view that NEXT could well be one of the next (Pardon the Pun) retailers to be dragged into the fray! Why do I feel NEXT is so exposed to the financial storm? For me it’s NEXT’s target markets that present the problem. They are the ones who are currently seeing the biggest drop in their disposable income due to the recession.
When I look at next I see two main target markets, middle class families and young spenders.
Middle Class Families
The gap between rich and poor hasn’t been so large for generations. While the rich get richer the poor are being pushed even further into poverty. What about the middle class? How are they faring?
The truth is the disposable income of the middle class is being hit really hard. Employers have frozen or cut wages while inflation has soared. Changes to tax credits have financially affected middle class families more than any other social class. When you look at the price of the products sold in NEXT, be it clothing or home ware, they are clearly tailored to the middle class. The price range is slightly out of reach for poorer families who have also been hit by the recession, but is not costly enough for the richer in society who want to show their wealth by sporting designer brands! Poorer shoppers will not change where they buy their clothes because they can’t, supermarkets and stores like Primark still remain the cheapest places for the less well off to buy their clothes and that is unlikely to change! While the upper class can generally still afford to buy the designer brands that they are accustomed to but may have to sacrifice the new Bentley this year!
Middle class families may well have to swallow their pride and start to switch some of their shopping to stores like Primark if they are going to maintain their standard of living in other areas and continue to pay their mortgages!
The other demographic the NEXT brand is clearly aimed at is young spenders with plenty of disposable income. The problem is that this target market is fast disappearing! Youth unemployment has risen dramatically, tuition fees have also risen and as a result the disposable income of young spenders has decreased drastically. I know tuition fees will not have an immediate affect on disposable income but it will certainly cause young spenders to become more financially aware.
The other worrying factor for stores like NEXT is that for young spenders stores like Primark seem to have made it onto the cool list. It is no longer considered uncool to be shopping at Primark, in fact quite the opposite! I constantly hear people proudly boasting that their top which their friends are admiring only cost £8 at Primark!
All this does not bode well for a store like NEXT where you’d be lucky to get change from a £20 note if you wanted to buy a similar item!
NEXT may be surviving for now but I feel this is more down to a reluctance of people to admit their current financial position than a sustainable business model. As people begin to come to terms with the fact that a change in spending habits is necessary, I think NEXT could soon be the next retail name to run into trouble!