Stiff Competition

In Brexit Britain, at Least Death Is Getting Cheaper

Dignity and Carpetright can't escape the power of the internet.
Michael Nicholson/Corbis via Getty Images
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What do carpets and coffins have in common?

They are both suffering as the internet makes prices more transparent and consumers shop around. That's the message on Friday from both Carpetright Plc, which has been floored by a slump in demand, and funeral director Dignity Plc, whose earnings will be six feet under this year.

Analysts' expectations for Dignity's 2018 earnings are now half their previous estimate, and the shift at Carpetright is even more severe. The shares of both fell about 50 percent before recovering -- slightly.

While it's easy to see how e-commerce might eat into sales of skirts or even sausages, you would have thought a large purchase such as a funeral, that needs to be handled sensitively, would be immune from online disruption.

Serious Drop

Shares in Dignity fell as much as 54 percent after a severe profit warning

Source: Bloomberg

Not so. It turns out that even grief-stricken Brits are prepared to shop around for the cheapest funeral director. Consequently, Dignity has been forced to slash its prices. 

As for Carpetright, it is under pressure not just from online rivals, but from Tapi, the new chain started by the family that originally founded Carpetright, although it played down the impact from its arch rival.

Shopping Elsewhere

Two profit warnings in two months have taken their toll on Carpetright

Source: Bloomberg

Britons' propensity to search for a bargain -- or forgo purchases altogether -- has been heightened by the squeeze from inflation running ahead of wage growth. The march toward Brexit and the prospect of higher interest rates are making consumers even more nervous. Big purchases such as home furnishings and electronic items are typically the first to suffer when sentiment deteriorates.

The usual response to online competition is to slash costs, and retailers across the board are reining in expenses. But that's risky. Just look at how Tesco Plc's customers were turned off five years ago by intense cost-cutting by previous Chief Executive Officer, Philip Clarke.

This strategy is even more perilous in the funeral business, where care and compassion are crucial. Dignity will look for efficiencies, but will remain obsessed by customer service.

It needs to: it's bad enough when your Tesco online order doesn't arrive on time. The consequences of a loved one's funeral being ruined are far more serious.

The warnings from Dignity and Carpetright, as well as lackluster sales at discounter Bonmarche Holdings Plc, underline the fragility of British spending. The volume of U.K. retail sales dropped 1.5 percent in December from November, according to the Office for National Statistics, in the worst performance for the month in seven years. Sales of household goods sank 5.3 percent.

Where Did All The Shoppers Go?

Retail sales in December were worse than expected

Source: U.K. Office For National Statistics

And while its hard to see what would provoke a turnaround in the performance of either Carpetright or Dignity any time soon, there is one reason to be cheerful. While the slump in the pound following the Brexit referendum is pushing up prices for many items, at least the cost of a funeral is getting cheaper.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

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    Andrea Felsted in London at

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