The opportunity at the older end of the market

Bhs has dominated the retail headlines in the last month. It’s been great for the media as two leading personalities in the saga – Sir Philip Green and Mike Ashley - have both appeared before a parliamentary committee.

But there’s much more to the story than the pension fund and whether the business should have been sold to Dominic Chappell and whether Mike Ashley should have been given the opportunity to buy it.

In particular, why did it fail and then, what does it say about the opportunities in the retail market going forward.

Why did it fail?

The saga is a sorry tale of missed opportunities. When Philip Green bought the business back in 2000 Primark was a small, almost insignificant player in the market. Yet that business had a vision and a new way of doing business, which have made it one of the most successful retailers in the last decade. But such vision appeared to be lacking at Bhs, and was not provided by Philip Green, even though his retail roots were in a discounter called Amber Day.

Opportunities at the older end of the market

Bhs was not a market leader, but it did have around 2% of the clothing market and 164 generally well-placed large stores. There has been plenty of interest in the chain, but no-one has been prepared to pay enough and the administrators have decided that closing it down will raise more money for creditors. So it now looks as if the stores will be sold off piecemeal.

This is sad – especially so for the staff – and disappointing for the retail market as well, because we think that there is a great opportunity at the older end of the market. That sector is poorly served at present, too few retailers really seem to understand what older people want and all too often one feels that the merchandise is selected by young people with a caricature granny in mind.

The challenge of the ageing population and its potential for retailers is discussed in many of Mintel’s Trends, such as “Retired for Hire” and “Extend my Brand” . We see that people are working longer. They are staying healthier for longer and they have money to spend. A more realistic view of what older people want and how they behave is developing.

Two markets

Less well understood is that the “Seniors” sector really splits into two. The split in the seniors market, in simple terms, is between those born before the war and those born after. The baby boom, in the sense of a huge spike in the number of births, was in 1946, though it continued at a lesser rate up to 1950. Those first baby boomers are 70 this year. They were 20 in 1966 and they were the main driver in the fundamental change in attitudes that took place in the late 1960s. There was the relaxation in moral attitudes (the summer of love) and with that came the most dramatic change in fashions that we have had in the last 100 years – at the beginning of the 1960s men in their late teens to 20s still tended to wear suits, but by the end of the decade fashions (and attitudes) had changed and they were wearing flares and flowery t-shirts.

Those born before the war are in their late 70s now; they did not espouse the new ideas in the same way. But for most of those who were young in the 1960s, there has been no going back.

Retailers have been slow to realise what has been going on in terms of this split among older shoppers – that is one of the main reasons why Austin Reed also failed recently.

Who serves the older market?

The balance of the seniors market has now tipped in favour of the baby boomers (in the sense of those born immediately post war) and retailers have to recognise that. But we think that few have. Selfridges engineered its recent growth by targeting younger consumers and, to an extent, so has John Lewis. The retailer with the oldest customer base is M&S, but its recent performance has been poor.

One telling insight into M&S comes from the “word cloud” from Social media. This is assembled by taking all the words associated with M&S from social media comments – green is positive and red negative. But it is the words themselves that are important.

Figure 1: Social media word cloud for M&S, May 2016
Base: all online communications including Twitter and blogs for 12 months to May 2016
[graphic: image 1]
Source: Infeg/Mintel

One can see the influence of the Christmas advertising campaign, but the key words are vouchers and competitions. The major thing lacking is any reference to fashion and fashionability. The implication is that M&S is succeeding by default – there is no-one else really challenging it to any significant degree in the senior market.

While there are no major players targeting seniors, there are smaller players – Fat Face, White Stuff and Crew Clothing spring to mind – that are doing exactly what we have described, and they are prospering. The great thing about these three is that they don’t look as if they are targeting the very old, but they are providing good quality clothing that is wearable. But there would appear to be a place for a major player in the market to try to adopt a similar strategy.

The opportunity

So that is where the opportunity lies. Older people want to be fashionable. They want fashionable clothing, but it needs to be engineered in a more forgiving way – older people cannot (or should not try to) wear skinny jeans, but they still want them to be fashionably cut.

Bhs and Austin Reed failed to rise to that challenge, but we need to see more people trying and there’s a big portfolio of stores available for someone willing to give it a go.

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