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Why mid-market retailers are feeling the squeeze.

Why mid-market retailers are feeling the squeeze

If you are searching for evidence that shoppers are spending less in the recession, look no further than your local high street. More shops than ever have been boarded up or taken over by charities or pound shops.

Within the space of a few short weeks last summer, chocolate chain Thorntons announced plans to close up to 180 poorly performing stores with the loss of up to 700 jobs, women's fashion chain Jane Norman, which called in administrators, broke the news that 33 stores would shut and 400 employees be made redundant, and floor-covering business Carpetright said it would cut 75 outlets, placing up to 200 jobs at risk.

At a time when many retailers are struggling to make ends meet, 99p Stores - which also trades as Family Bargains - reported a pre-tax profit of £6.3 million on a turnover of more than £300 million. The group, which opened its first shop in north London in 2001, recently bought 68 former Woolworths stores. Sales are up 18% year-on-year since April 2011.

In Volume: 34 Issue: 28 of Marketing Week Lou Cooper attempts to make sense of the changes. She reports on research which reveals that luxury brands like Burberry and Hermes, and budget outlets such as Primark and New Look, are squeezing mid-price brands out of the market. Shoppers are buying more budget brands while also treating themselves to the occasional premium purchase.

Marks and Spencer has been quick to adapt to the new realities. Cooper points out that, through its 'dine in for two for £10' promotion, it is adjusting its premium positioning in the eyes of consumers and reaching out to new customers. It is 'offering them the convenience of an entire meal, rather than just slashing prices on multiple food times'.

It is a model that other mid-range retailers could usefully copy, in order to avoid being dragged into a battle on price with the budget outlets.

Cooper focuses in particular on the market for alcoholic beverages. Around 25 pubs a week closed in Britain in 2010 as more and more people opted to buy cheap alcohol from supermarkets and drink it at home.

Pubs can never hope, of course, to sell alcohol as cheaply as the supermarkets. That means they have to work harder at emphasising the value of the experience gained by drinking in a pub.

Cheap alcohol is a theme taken up by Tim Ambler in Volume: 46 Issue: 7 of Admap He explores how beverages giant Diageo launched a new, low-cost brand of vodka, Popov, which itself made no money but did serve to strengthen the position of its stable-mate product, Smirnoff.

Ambler concludes that, in a recession, every large firm should take the opportunity to revise its brand and portfolio positioning statements to 'ensure that equities are maximized'.

While most businesses would be tempted to slim their product portfolios in a recession, Ambler argues the case for expanding them to take on competitor brands.

It may not feel like the right thing to do - but there is plenty of evidence to suggest that the strategy actually works.