13th September 2019

Written by Juan Palenzuela (Researcher)

In this morning's briefing, Juan Palenzuela explores the changing nature of the retail industry and offers a dose of optimism for the future.

Good morning,

Over the past decade, a future for retail as we knew it, has evaporated before our eyes. The relentless growth of eCommerce including giants such as Amazon and eBay has changed the industry beyond recognition, and in many cases, beloved, well-known retailers just can’t keep up. 

The latest example of this came yesterday, as Arcadia published its annual results. Topshop, one of the group’s main holdings together with Miss Selfridge and Burton, reported a loss of nearly £500m and a drop in sales of 9%. In response, Arcadia is shutting 48 stores and cutting rents at other outlets. 

But rather than a long goodnight for the retail industry, this is perhaps just another inevitable readjustment. Over the past century, retail, in particular, has been shocked and shaped by the forces of creative destruction and has thus changed continually. The modern department store came about with the advent of big industrial cities and better logistics at the end of the 19th century. Then, improved manufacturing technologies allowed mass-produced goods to be sold in shopping centres, filled with speciality retailers that gained the upper-hand against the department stores. Later in the 20th century, the spread of discount retailers such as Walmart altered the order once again, offering the variety of a department store while reaping huge cost savings due to economies of scale. Soon after, “category killers” such as Home Depot and Petsmart shook the ground once again. 

Each stage of this chain didn’t kill the retail industry, but instead, they redefined it. They also changed the expectations of consumers and raised their standards accordingly. 

Arcadia’s poor results may indicate an emergency for Topshop in particular, but not necessarily for the whole industry. Stores no longer just serve a logistic function where consumers go and purchase products. As has happened in the past, their role is changing. Now stores are serving as an important point of contact where products are advertised and meaningful connections are made with consumers, and the purchase itself has become less important. Existing retailers need to move faster to assimilate this trend if they want to survive. 


As the opportunities for the Prime Minister to secure a Brexit deal diminish, the Democratic Unionist Party (DUP), has decided to accept some new compromises by agreeing for Northern Ireland to abide by some European Union rules, previously a red line. This effort was launched last night in a move that could help Boris secure a Brexit deal and prevent an Irish backstop. 

The leading candidates for the Democratic presidential nomination clashed in the same debate alongside each other in the race to take on Donald Trump in 2020. Former Vice President Joe Biden is still ahead of the curve with nearly 27% in the polls, with Sanders, Warren, and Harris Buttigieg and Yang clustered behind. 

A research group from Tesla published a paper yesterday on the Journal of the Electrochemical Society in which the group presents new findings regarding battery pouches that could last for decades and that could eventually be used in lorries and autonomous cars. The new type of battery, “beyond lithium-ion", could power cars more than a million miles and lose relatively little of its capacity. In ideal circumstances, the researchers suggest, the batteries could last for two decades. 

Business & Economy

The London Stock Exchange’s (LSE) board will meet later this week to decide on the Hong Kong Stock Exchange surprise $39 billion takeover proposal, according to Reuters. Many commentators warned of the prospects of a Stock Exchange influenced by China’s Communist Party in the future if the deal goes ahead.

The European Central Bank announced yesterday its biggest package of rate cuts and economic stimulus in three years as President Mario Draghi warned governments that they needed to act quickly to revive Europe’s meagre growth. As part of the package, the ECB cut interest rates even lower into negative territory and revived its contentious quantitative easing programme. Draghi also called for governments to reign in their fiscal spending. 

French customs officials rehearsed yesterday the event of a no-deal by stopping trucks carrying Airbus wing parts and baby equipment imported from the UK for special inspections on Thursday. French authorities believe that a no-deal Brexit on October 31 is now the most likely scenario, despite over two years of negotiations. It has also been helping manufacturers, truckers and logistics companies prepare to handle the nearly 5m truck movements a year between French ports and the UK. 


What happened yesterday?

The ECB’s package announcement yesterday reassured investors, who have grown worried of the state of the global economy. European stocks reacted positively, also buoyed by a Trump tweet saying that China would purchase large amounts of American agricultural products.

The pan-European Stoxx 600 index was 0.20% higher at 390.48 as the French CAC 40 added 0.44% to 5,642.86 and Germany's Dax rose by 0.41% to 12,410.25.

The excitement didn’t reach across the channel. London stocks underperformed relative to the rest of Europe: The FTSE 100 edged up 0.09% to 7,344.67. The pound also ended 0.13% higher against the US dollar at 1.23467 but off by 0.34% versus the euro at 1.1157.

Whats happening today?



Final Dividend Payment

Abdn.nw.dwn Ashtead Group Berkeley Group D4t4 Solutions Greene King London & Associated Properties Maven I&g 6  Moneysupermarket.Com Severfield  Walker Crisps


Panthera Res SVM UK Emerg

Trading Annoucements

Sthree Wetherspoon

Intl Economic Announcements

(10:00) Balance of Trade (EU) (13:30) Retail Sales (US) (13:30) Import and Export Price Indices (US) (15:00) Business Inventories (US) (15:00) U. of Michigan Confidence (Prelim) (US)

Columns of Note

On the Financial Times, Miranda Green looks at the hidden costs that are holding some students back and difficult social mobility. Although access to education has been widely democratised in Britain, hidden expenditure such as high school blazers and attending University open-days are being borne ultimately by the student, and in many instances, these are costs some families cannot afford, so the dream of going to University, for example, dies along the way. Solutions such as unbranded, generic uniforms and travel bursaries are crucial. By smoothing these “invisible” hurdles, students will be inclined to pursue higher education, Green argues, improving social mobility. 

Did you know?

With over 13 sextillion made as of 2018, the Metal-Oxide-Silicon Transistor is the most widely manufactured device of all time.

Parliamentary highlights


House of Commons

No business due to prorogation. Will next sit on Monday 14 October.

House of Lords

No business due to prorogation. Will next sit on Monday 14 October.

Scottish Parliament

No business scheduled.