In this new feature, Mintel’s Month in Retail, we highlight the breaking news stories that have made headlines in the European retail markets over the past four weeks, with exclusive analysis from Mintel’s expert retail team on potential implications. UK: Consumer confidence falls marginally post Brexit Mintel’s financial confidence trackers reveals that post referendum, there has been a dip in confidence, but by no means has collapsed. According to research collected post-referendum asking Brits about their financial situation over the next year, just over one quarter of consumers said that they were pretty confident they would be okay, down from a third who agreed with this in May 2016. “Mintel research reveals a dip in confidence as uncertainty about the future often hits demand. However, outside of consumer sentiment little has changed for retailers in the short term. Indeed, the ONS reported a slower month, citing a 1.1% rise in UK retail sales, excluding fuel during June 2016, following on from a 3.1% year-on-year increase in May 2016. Whilst the weather is often a get out of jail free card for retailers, bad June weather meant that the clothing and food sectors suffered. Next month we will get the first full set of results since the Euro referendum, and it will be interesting to see if it has had any major impact. Price changes due to the fall in the value of sterling will take time to work into the system, and it is up to retailers across the industry to reassure consumers that, at least for now, it is business as usual.” Nick Carroll – Senior Retail Analyst Poland: Tesco and Metro Group downsize Both Tesco and Metro Group are set to close stores following a review of the profitability of their business in Poland. This follows the decision by the Polish Government to introduce a new retail tax that will come into effect in September 2016. “The forthcoming new tax on retailers in Poland aims to help local retail firms compete against larger, mainly foreign-owned, retailers by exempting franchised and smaller chains from the levy. With margins already wafer thin, the tax could push some retailers into losses in the country, which may result in higher prices for consumers as businesses look to pass on increased costs. Some may look to change their approach, perhaps adopting a franchise model for future expansion. Others will look to increase profitability, by making existing stores more profitable rather than opening new ones, and closing less profitable ones. Natalie MacMillan – European Retail Analyst UK: Dyson opens first UK standalone store Electricals brand Dyson has opened its first physical retail store in the UK. Located on Oxford Street opposite Selfridges, the London flagship follows similar openings in Tokyo and Jakarta. Spread over two floors, the flagship offers the entire Dyson range – around 65 products – including vacuum cleaners, air purifiers and the recently-launched ‘Supersonic’ hairdryer. “Although online retail continues to take a growing share of the electricals market, stores remain integral to the buying process and, by opening a standalone shop, Dyson is able to have full control over the brand experience and specialist product knowledge offered to consumers. Showcasing the entire product range together in one space highlights the breadth of Dyson’s expertise, strengthening its brand image of being an innovator in technology that is worth paying more for. A physical store also appeals to today’s informed shoppers who are increasingly sceptical when it comes to brand claims, so placing emphasis on product demonstrations and testing should help alleviate their concerns.” Alice Goody – Retail Analyst Germany: Zalando increases margin guidance as sales soar Online fashion retailer Zalando has released preliminary figures for its second quarter of 2016. Group revenues increased 24-26% and, as a result, Zalando has reiterated its full year guidance of strong revenue growth at the upper end of the 20-25% growth corridor and increased full-year adjusted EBIT margin guidance to 4.0-5.5%. “Retailing is a very volume sensitive business. Having covered all fixed costs, profits then flow through at the gross margin. So with sales well above expectations, profits should also receive a bigger boost than expected. That is true for an online pure player as well. Of course, if volumes keep growing so strongly, then Zalando will need more warehousing capacity, but this season it is reaping the benefits of better capacity utilisation. It was arguments such as this that led to Ocado claiming that in the longer term it should be much more profitable than a store based food retailer. But it is the constant need for extra distribution capacity that means there must always be a limit to the profitability of an online pure player.” Richard Perks – Director of Retail Research UK: Sainsbury’s ends multi-buy promotions ahead of schedule In response to changing consumer shopping habits, Sainsbury made the decision to replace multi-buys with lower, regular pricing as customers increasingly shop more frequently, buying fewer items. The retailer has been gradually removing multi-buy offers from its stores during the last two years and completely stopped running the promotion in June 2016; two months ahead of schedule. “It is no surprise that consumers have reacted positively to Sainsbury’s move. This is the way the market has been moving for a number of year. Mintel’s Supermarkets UK 2015 report found that around three quarters of grocery shoppers said they would rather have lower prices than promotions; it is about adding convenience for the customer. Being tempted by multiple buy-one-get-one free deals as consumers shop makes it is harder to stick to a set shopping budget and also leads to unwanted wastage. This combined with range reductions by the leading multiples is designed to make shopping in superstores more convenient which is something the discounters have led on for a number of years.” Nick Carroll – Senior Retail Analyst UK and Germany: B&M continues to deliver strong growth Value retailer B&M has reported a 21.5% rise in sales to £554.8 million for the 13 weeks to 25 June 2016. Sales in the UK grew by 21.3% to £508.1 million, on the back of 12 new store openings in the quarter. In Germany, the Jawoll fascia saw sales grow from £37.8 million to £46.7 million. Five new German stores opened in the quarter. “Impressive numbers, but the growth is driven by new openings, and what underlying like-for-like growth there has been, has been offset by cannibalisation. That is the problem for all these fast-growing discounters at the moment. The most interesting figure for the future of B&M is the progress made by Jawoll in Germany. Again, most of the progress has been through new openings, but it looks as if there has been like-for-like growth as well, and this year’s growth comes on top of a near doubling of sales in the comparable quarter last year. If B&M can crack the German market, then it has a major new area for growth in the longer term.” Richard Perks – Director of Retail Research UK: Farewell Netto…Again Sainsbury’s has announced that its joint venture with Dansk Supermarked Group to roll out Netto stores to the UK will be ended with all stores being closed by the end of August 2016. Both parties said that sales were within expectations but that significant investment would be required in order to realise the full potential of the venture. “The abandonment of the Netto trial shows that Aldi and Lidl have reached a stage of development where competing head-on with them without a very high level of investment is futile. Instead, Sainsbury’s is shifting its focus towards the future of retail with less segmentation which is being driven by Amazon. Plus, the acquisition of Argos helps Sainsbury’s to effectively create a sort of ‘Amazon-with-stores’ format that prepares it for what it sees as the future of food retailing.” Thomas Slide – Retail Analyst You might also be interested in: Taking Stock: The Month in Retail (August) Taking Stock: The Month in Retail (September) BHS files for administration: What are the next steps for the brand? AmazonFresh: Just another online grocery service?