Auto enrolment pension affects on retail salesThe government wants us to save for the future. It makes sense. We’re living long lives and we need to plan for our financial futures if we are going to be able to live more comfortably when we retire. Pensions can be complicated and difficult to understand and, up until a few years ago, people were often asked to actively opt-in to a pension scheme and as such it had a low level of take up.

Things changed with the 2008 Pensions Act, when ‘auto enrolment’ was regarded as the best way to counter apathy and persuade people to get saving. Larger companies started the process back in 2012. Small and micro businesses, employing from one to 50 people, had to have everybody enrolled by February 2018 at the latest. The levels started small with minimum auto-enrolment contributions of 2% (split equally between employee and employer). In April, this year, it rose to 8% (5% employee and 3% employer).

It is estimated auto enrolment has lead up to 10 million people to start saving for their retirement for the first time. This is great news for individuals and society, long term, but for retailers, already seeing sales fall, it is less money in people’s pockets and reduced spending power. 

This has all been a long time coming. But, it’s still not enough. People will need to save an even higher percentage of their income. In 2017, the Pensions minister, Richard Harrington, set a target for savers to achieve a £250,000 pension pot by the time they retire. To reach this target, an individual whose salary builds up to £27,000 over their career and saves for 40 years with no breaks would need combined employee and employer contribution levels of 25% says research for Citywire's New Model Adviser® by pensions provider Aviva.

The statutory contributions rate looks like it will rise further, no firm plans have been set just yet, but are we starting to see the affects this new level of saving is having on retail sales?

September 2019 saw the worst retail sales figures since British Retail Consortium (BRC) records began in 1995. Sales decreased by 1.3% in September. Sales decreased by 1.7% on a Like-for-like basis from September 2018, when they had decreased 0.2% from the preceding year. The BRC said the “spectre” of a potential no-deal Brexit is weighing on consumers’ purchasing decisions, but surely higher levels of minimum pension contributions are resulting in lower retail sales?

Pension provider Royal London produced research looking into what would happen if someone who has only contributed the minimum to their pensions under government 'auto-enrolment' rules, decides to draw a state pension as soon as they can and immediately cuts down to part-time work. Royal London defines a ‘gold standard’ retirement - income at retirement is two-thirds of pre-retirement levels - or a ‘silver standard’ retirement - income is half of pre-retirement levels. Someone pursuing a flexible retirement would have to work until they are 79 to achieve the ‘gold standard’. The age comes down to 74 for a worker who defers taking a state pension and maintains full-time hours until they stop working. A worker targeting ‘silver standard’ retirement but who retires gradually would have to work on until they were 69 – or 68 if they defer their state pension and continue in full-time work. The report encourages workers to contribute more than the legal minimum of 8% (combined employee and employer contribution) to a workplace pension. It said a 10% rate allows an individual to retire around three years earlier, while a contribution rate of 12% allows an individual to retire around six years earlier than if they contributed just the minimum

The older you are when you start to save, the higher the contributions will have to be. So someone starting aged 32 should contribute 16% of their salary for the rest of their working life. While 16% may seem a huge commitment, this figure includes your employer's contribution. All employers must 'auto-enrol' their qualifying employees in a workplace pension. Qualifying employees are those that are aged between 22 and State Pension age, earn more than £10,000 a year and work in the UK.

According to a report by Scottish Widows, the average income that people state they will require for comfortable retirement is £23,000 a year and it recommends that 12% of income should be channelled into a pension throughout your working life.

Almost 50 per cent of workers are still not putting away enough to meet those expectations. In 2015, one in five weren’t contributing anything to any pension at all and out of 6,000 workplace schemes more than 5,000 were in deficit. Figures from the Pension Protection Fund in May 2016 showed that the shortfall was a colossal £300 billion.

“In future contribution rates are going to rise. There’s a consensus in the industry that even when we get to 8% that’s still not enough. That can’t be the end and we must not rest on our laurels.” says Emma Douglas, Head of Defined Contribution at Legal and General, told ‘Smart Pension’, a company founded by experienced finance & technology professionals and designed specifically to support UK businesses faced with the challenges of auto enrolment.

“We will need to raise awareness about the importance of saving enough to provide a really comfortable retirement. There may be some pain to come, but I think that once people see their pension pot growing there will be acceptance and engagement. We need to make sure pension statements are transparent and easy to understand.” she says. “Overall, I think auto enrolment has been very positive.”

Tom Selby, senior analyst at AJ Bell told Moneywise: “To put it into perspective, someone earning around £27,000 and paying in the auto-enrolment minimum will see their personal contribution rise from about £500 this year to more than £850 in 2019/20.”

£850 for somebody on a £27,000 income is a chunk of money. It could be a month’s rent. Looking at Millennials and Generation Z already spending significant amounts of their incomes on renting and paying pack student loans, it will put more of a squeeze on their already reduced disposable incomes.

“While for most people this is still not enough to enjoy a comfortable retirement, we are now getting to the stage where some reluctant savers could start to feel the pinch. Rising average pay should help ease the pain, but anyone missing out on a salary hike could well be tempted to prioritise spending today over saving for tomorrow.” he says.

People can choose to opt out at any time. “Anyone thinking of quitting their workplace pension needs to understand that they will be losing out on both tax relief and their employer contribution, which put together double the value of the money they put in. Put another way, opting out of your pension is a bit like taking a voluntary pay cut – so nobody should do it lightly!” he says.

According to Jenny Condron, the ACA's (Association of Consulting Actuaries) chairwoman, this phased increase in contributions is needed to ensure that many more people save sufficient amounts, for both an adequate retirement income and one where they have real choices to spend some of their accumulated savings, as they approach or reach retirement.

She said: “Actions are needed to draw more of those on lower incomes and the self-employed into auto-enrolment levels of contributions, beginning with the gig economy’s quasi-employers.

“Then, from 2025, with due notice having been given, there is the need to gradually phase in rises in total contributions until they reach 12-14% of earnings.”

Minimum contributions were increased overall from 2 to 5 per cent in April 2018, which for 85 per cent of employers didn’t have an adverse impact on scheme participation, the ACA said.

It’s obvious that those on lower incomes have always saved less for their retirement. They are also more sensitive to the increased contributions. Putting 12%-14% of earnings into a pension pot will be difficult for many and sacrifices will have to be made if they decide to stay in the scheme. It could see increasing numbers of people opting out or a marked decrease in disposable incomes. People on lower incomes will have to make a difficult choice. This is very large group of people who weren’t saving before.

More stats show how retail is seeing sales fall. IMRG Capgemini Online Retail Index showed a drop of -22.5% in menswear digital sales year-on-year for September, with overall clothing sales seeing its first negative growth in over two years. Womenswear, footwear and accessories also declined with year-on-year growth rates of -13.3%, -9.8% and -9.0% respectively.

Auto enrolment is a fantastic idea for people’s long-term financial futures. Contemporary retail is in a perfect storm and auto enrolment pensions encouraging an estimated 10 million people to save at least 5% (& rising) of their income for the first time will only increase the squeeze and could be an extra of contributing factor to the current retail malaise. Will the British go from spenders to savers? Retailers will hope not.

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Tuesday, 22 October 2019 16:18

First Look Giambattista Valli X H&M Menswear

H&M Giambattista Valli collaboration menswear Product menswearWe’ve had a few years off from the hysteria of the H&M fashion collaborations. There was a time when we had 6 month’s build up to the launch and you knew the date regardless of whether you liked the designer in question or wanted anything in particular. Now, all that is over and H&M’s parent brand isn’t quite as successful as it once was, we can take our time and judge it simply on the clothes. From the preview pictures (below), it looks pretty good.

Left - Coat - £179

This year’s collab. is with the Italian designer, Giambattista Valli, who, as far as I’m aware, hasn’t done menswear before. Known for his pleated, tiered evening wear, and haute couture, his ‘Valli Girls’ are finally getting their ‘Valli Boys’.

The press release says, “Valli explored the idea of free-spirited men taking pieces, patterns and fabrics from the women’s wardrobe; sampling and mixing freely, like DJs. The choice of flesh pink as the base colour – the simplest tee in the collection is pink, not white – which says it all.”

The leopard long coat (£199) and the embroidered black riding coat (£299) sum up Valli’s approach to menswear: they started life in Valli’s women’s collections and are now adapted to a man’s wardrobe. The embroidered tailcoat is an homage to the jacket worn by French intellectuals and artists when they join the Académie Française.

I like the punky, rockabilly feel to the menswear. The leopard coat is fun and the pearl necklace is a good entry piece. The prices are quite pricey, so if you're buying the outerwear you'll want to see the finish and quality before you decide to buy/keep it.

Launches Nov. 7th

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H&M Giambattista Valli collaboration menswear Product menswear

H&M Giambattista Valli collaboration menswear Product menswear

H&M Giambattista Valli collaboration menswear Product menswear

Banksy clutch brick bag Croydon Gross Domestic Product menswearThe biggest thing to hit Croydon since the tram, Banksy’s pop-up, Gross Domestic Product, the homewares brand from Banksy, opened a shop showcasing his latest and greatest hits collection of social commentary. The affordable, well, in the context that one of his paintings recently went for £10 million, pieces are available through a ballot system. You’ll be notified if you’re lucky to win anything and then you have the option to buy it. You only get one pick!

Here’s my choice: “This fashion-forward accessory is made from a genuine real life house brick and is perfect for the kind of person who doesn’t carry much but might need to whack someone in the face. Probably no less practical than the output of most haute couture fashion houses. Made from random bits of old handbag so yours may differ from the one pictured. Signed.” says the website.

Not that Banksy seems to know that clutches don’t usually have handles, but who am I to tell him anything…

You have until October 28th 2019 to register your interest.

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Extinction Rebellion Fast FashionIf things weren’t getting hard enough for ‘fast-fashion’ retailers along comes ‘Extinction Rebellion’ (XR). Protests the world over are warning of impending doom and trying to ram home and ostracise those who continue to shop at brands and retailers vilified for producing clothing that is deemed to be disposable.

While the traditional high-street has struggled, both here and in the US, Forever 21 filing for Chapter 11 bankruptcy protection, for example, the winners of the fashion internet, such as ASOS and Zalando, appear to be slowing. Recent profit warnings and falling share prices have put a wobble in this bright spark of retail. 

Left - An impromptu anti-fashion show in London's Oxford Circus

While ASOS is expected to show an uplift in revenues this week, could this be the peak for these types of retailers? Is the much publicised message of Extinction Rebellion cutting through to the buying public and will this prove to be a tipping point for ‘Fast-Fashion’?

Morgan Stanley recently said the volume of clothes shoppers buy has plateaued, "we suspect it's primarily because consumers are now buying clothing in such large quantities that they get very little marginal 'utility' from any additional items.” they said.

Retailers such as Primark, H&M and Boohoo rely on large volumes with small profit margins. Is this slowing more a result of saturation rather than the start of a boycott of ‘fast-fashion’ brands for environmental concerns?

“There is some very muddled thinking around the debate on how to make the 21st-century world more environmentally-friendly.” says Eric Musgrave, fashion industry commentator and former editor of Drapers. “I am sure the fashion industry is wasteful, but I’d like to know which large-scale industries are not. Who, for example, ever talks about mass-produced furniture, or pots and pans? I am not an apologist for the fashion business, but it is seen largely as a frivolous unnecessary luxury, not a necessity, hence it is an “easy” (or some would argue “legitimate”) target.” he says.

“I see no desire from the mass of the British public to change their buying habits. It would be wrong to confuse problems that may have risen at individual companies like Quiz and ASOS with overall trends.

“Too often overlooked in all this analysis is that the UK is a very troubled economy, with little sign of it improving any time soon. We have had 11 years of austerity and many people do not have much money. Asking them to forgo the pleasures they derive from cheap fast fashion is the epitome of wishful thinking.” he says. “Fast fashion is here to stay for decades to come – within the sector there will always be winners and losers.

And ask yourself, seriously, what lasting impact on fast fashion did the grim Rana Plaza disaster in Dhaka in 2013 have?”

“The fast fashion firms will not adjust their model. If some disappear, others will appear to take their place.” he says. “Finally, I await the explanation from Extinction Rebellion and the like about what all the many millions of people who earn a living in the fashion supply chain will do if it were to shut down tomorrow.”

Fast-fashion retailer Quiz, a fast growing newcomer to the market, recently announced lower sales in the first half of the year in the face of a “very challenging” high street. The retailer said its stores and concessions had suffered weaker-than-expected sales over the six months to September after a slump in footfall. Quiz reported that total group revenues slipped 5% to £63.3 million during the period, as online growth (7%) failed to offset its high street decline.

The entire fashion industry seems quite content to push all the heat onto these ‘fast-fashion’ retailers. Now public enemy No.1, ‘fast-fashion’ has become a scapegoat for the fashion industry in general. Arguably, all fashion is fast and in its nature it is disposable. People are being forced to question their purchases and asking themselves if they really need it, but is it significantly changing behaviour?

As part of Extinction Rebellion’s #XR52 weeks of direct action, they are urging people to #BOYCOTTFASHION for a whole year, in order to disrupt business-as-usual and send a message to government, industry and public alike that enough is enough.

Olly Rzysko CMO + Retail Advisor, says, “It will take something big for there to be a significant shift, eg the ‘blue planet’ plastic straw moment.”

Kathryn Bishop, Deputy editor - LS:N Global, says, “On Question Time last week, an audience member said David Attenborough spoke to her more than XR activity did. Sadly…”

It appears people are still buying clothes in volume, but we reached a peak a few years back. Kantar data suggests consumers in the UK are buying 50 items of clothing a year, up from 20 items in the 1990s but down from 52 three years ago. In the US the figure is estimated to be as high as 65 items a year, compared with between 40 and 50 in the 1990s and almost 70 in 2005.

"Put simply, consumers would rather spend their marginal dollar on, say, going out for a meal, than on buying a 60th item of clothing in a year,” Morgan Stanley analysts Geoff Ruddell, Kimberly Greenberger and Maki Shinozaki said in their report.

"It is our contention, therefore, that the apparel markets in many developed countries may now be entering a lengthy period of structural decline.” they said. The main catalyst for increased consumption was falling prices. "If clothing volumes are plateauing in developed countries, the only way the apparel markets there can grow is if clothing prices go up," the report said. "But (potential US tariff impacts aside) we think it more likely that they will continue to fall ... as production continues to shift from China to lower-cost countries in the region (such as Vietnam and Bangladesh)," it said.

US clothing prices have fallen by 0.8 per cent a year since 2001, while UK prices fell for 13 consecutive years until 2010. Volumes in the UK have more than doubled since 1998 and US volumes have grown almost 50 per cent since 2001, driving 28 per cent market growth. "Expecting consumers to buy clothing in ever-larger volumes, in response to ever-lower prices, was never likely to be sustained in the very long term," the Morgan Stanley report said. The allure of buying has also gone with consumers already own so many clothes that each new item they purchase doesn't spark happiness the report also said.

Personal stylist Elsa Boutaric with a focus on sustainable fashion and helping people build a sustainable wardrobe, and spend less, says with regards to the #ExtinctionRebellion movement, “I think it is definitely raising awareness of the issues surrounding fast-fashion, and putting it into the minds of the consumer. Publishing reports, stats and figures of the actual effect that the message is having has the potential to be more valuable in driving change.” she says

Extinction Rebellion Fast FashionIs this the tipping point for fast-fashion?

“Consumer behaviour patterns are changing and though we still live in a generation of convenience, consumers are looking for more sustainable and ethical options than a cheap pair of jeans and shoes.” says Boutaric. “People shop on ASOS because it is a viable option compared to other online shops, so when their customer base moves away to look for sustainable alternatives, they don’t have anything to fall back on. 

“ASOS is middle market, combined with high street and doesn’t really have a place in the future of fashion unless it learns to adapt, and this is what it is going to have to prove it can to do both its customers and its investors in order to secure its future.” she says. 

“The disadvantage they (fast-fashion retailers) have is that they deliver huge volumes on low margins, so would need to change their business model drastically. This isn’t easy to do when you have developed a position in a market place and it would mean working with new designers and increase their prices. This not only has the potential to reflect badly on their own brand, but also the designers that they work with." she says. 

Right - Are you ready to boycott fashion for a year? #ExtinctionRebellion

“They would need to introduce charitable angles or work with ethical designers without damaging their reputation or losing their market. Also, they would need to manage their stock and not have so much go to waste sitting in warehouses waiting to be sold. This could mean a change in manufacturers and distributors which could prove costly and time consuming. There are several factors that businesses would need to consider, and not all of them will survive.” she says.

 “There has certainly been a shift, and it is being driven by consumers and some brands are struggling to keep up, but others are adapting and thriving.” says Boutaric. “I don’t think it’s a case of reducing their consumption, it’s more consumers buying more ethical options. More people are only buying what they need, or shopping charity shops, or attending clothes swaps. Buying new seems to be a new slur, unless it’s from ethical brands and designers.” she says.

We are constantly told that young people are the most engaged in these types of environmental movements and it’s their future we are ruining, but they are also fast-fashion’s target demographic and consumers. There’s a big disconnect here. 

There could be a perfect storm brewing for fast-fashion with XR. If it connects with young people’s behaviour it could be significant. A swing away from this type of consumption could be detrimental to these giants of fashion. 

Fast-fashion retailers are starting to make green noises with second hand stores - Read more here - popping up and others like H&M and Next moving into selling other brands to off-set the malaise in their own - Read more here - but investors think long term and will need to feel confident that these retailers will continue to grow and be profitable. One thing is certain, brands and retailers will want to distance themselves from the term 'fast-fashion' and its negative connotations. There needs to be a groundswell from the people passionately protesting at Extinction Rebellion to the average British consumer.

'Fast-Fashion' is the OxyContin of the fashion industry. Going cold turkey could have some serious side effects.

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Sunday, 13 October 2019 18:58

The New Cult T-Shirt? Wagyu Beef

Wagatha Christie Ozzy Shah logo t shirt Colleen Rooney Rebekah VardyFashion gets even faster. Move over DHL and that crappy ironed-on Gucci logo T-shirt, there’s a new cult tee in town. Thanks to the wagyu beef that exploded into the public between Mmes. Rooney and Vardy, it’s all about the 'Wagatha Christie' T-shirt. Today's chip paper is tomorrow's logo tee.

Left - Wagatha Christie Tee - £11.99

Fashion stylist, Ozzy Shah, decided to print a few tees to celebrate the feud. (There’s hasn’t been this much tea split since Boston in 1776).

“I’ve sold 6300 now!” says Shah. (That's over £75,000's worth!) “But I’ve had to stop taking orders now because the supplier doesn’t have enough T-shirts left! 

“The T-shirts are ready made and they just need printing so the supplier can churn them out fast. Luckily the delivery time was put as 3-4 working days so that gives us time to get everything ready then we can deliver next day!” he says.

Expect an explosion of wearers tagging themselves on social media just as Vardy gets forensic with hers... 

“I didn’t realise it was actually going to be a success, I just made the logo on Canva myself and had my brother’s graphic designer perfect it, which he did in a matter of 30 mins, then I sent the AI file to the supplier who supplies Boohoo etc and has ready made tees, so it was a matter of printing. I didn’t buy any stock, it was just on demand.” says Shah.

“Luckily, the supplier is a close friend of mine and he thought it was a funny idea, so he printed 300 tees in 20 mins to show me what it would look like. Deliveries will be coming straight from the factory.”

What’s been the split between males and females buying into this new Wagatha Christie cult?

“It was 50/50 to be honest, a lot of men bought it too." says Shah.

This could be a rare case of making more money selling the T-shirts than those stories!


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