Currently in our Economics and Business Studies course we are studying key factors which affect demand and supply and macro-economics. As we are falling into a double dip recession at present, I find it highly beneficial to understand what is going on in our economy; why there is a recession and how we can survive it successfully. The course helps to apply our knowledge to everyday life to help explain market changes such as in the case of high street retailers. Due to the recession customers have cut back on spending, as there has been increased unemployment and because of inflation, consumers want to keep onto their pennies because they have less disposable income. As a result, demand for high street retailers products have fallen significantly; some more than others.
For example Thorntons which employs 4,375 in 591 stores, including 227 run by franchisees, issued a profit warning in December, predicting that they would only break even in the current financial year. As a result, they intend to close up to 180 shops over the next three years. In order to increase sales, they are reorganising a strategy to become less of a niche market and more mass marketed by selling more off its website and through supermarkets. Another example includes HMV which has been mainly affected by the increased purchasing of music and DVDs via the internet; this lead to a 6 month pre-tax loss of £45.7 million. Following on from the loss, they have closed numerous stores and sold its Waterstone’s book stores. They are now refocusing their attempts to boost sales using new technology. As can be seen from these examples, steps need to be taken to protect their business as sales are just not reaching their optimum, since fewer customers are willing to buy luxury products and are saving their money when times are rough.
Sonia Rajput L6O