x
By using this website, you agree to our use of cookies to enhance your experience.
We have 1 guests online 
Sign up

Retailers face another year of gloom

Monday 9th January 2012

The New Year will fail to bring a rosier outlook for the UK’s struggling retailers, according to the KPMG/Synovate Retail Think Tank.

Even the London Olympics, the Queen’s Diamond Jubilee celebrations and a falling inflation rate are unlikely to provide much respite for those hardest hit.

When considering the prospects for 2012, the RTT members believe that consumer confidence will remain depressed with economic forecasts pointing to slow growth at best.

KPMG UK Head of Retail Helen Dickinson said: "2012 will be about future proofing the business to ensure survival in a market that will not change any time soon. The squeeze on personal incomes will continue despite the expected decline in the rate of headline inflation."

Vicky Redwood of Capital Economics said: "The biggest uncertainty hanging over the UK is what happens in Europe. But so far, it does not look like euro zone leaders are getting to grips with their debt crisis.

"This could contribute to a second credit crunch at the same time as consumers have to deal with further rises in UK unemployment."

Overall, RTT members expect sales volumes will continue to fall. Competition will remain fierce as retailers compete to maintain their share of a smaller pie.  Non-food sectors will be hit harder than food.  There will however, be some businesses that escape the worst effects in 2012.

Professor John Dawson of Edinburgh and Stirling Universities said: "High-end retailing whether fashion or food, on-line sales, pop-up shops, or retailers with an offer emphasising convenience are more likely to be among those successfully negotiating 2012, but traditional operations targeting middle markets with large numbers of high street stores may find 2012 even more difficult than 2011."

The feel-good factor from the London Olympics and the Queen’s Diamond Jubilee celebrations should provide retailers with a sales boost, but Nick Bubb warned that "the great British weather may not look as kindly upon these events as it did in April 2011 for the Royal Wedding".

There are also concerns that outside of the South East, the Games may become a reason to stay at home rather than visit the shops. Its positive effects could also be limited by the seismic shift in consumer attitude towards impulse buying.

Tim Denison of Synovate Retail said: "Emergent behavioural patterns that have spawned since the downturn will become mainstream and engrained.

"For shoppers, 'value for money' will remain lodged top-of-mind, eager to ensure that their lower level of discretionary income is spent wisely. The retailer’s response will continue to focus heavily on promotional activity and on helping shoppers establish justification to buy."

The continued rise of online shopping and the prevalence of sites offering customer reviews has accelerated this process, with customers now able to easily source the best quality products at the best value.

Changing, and challenging, consumer behaviour has meant that retailers have been forced to alter the way they run their business, streamlining their operations and adjusting strategy to allow for greater flexibility.

Richard Lowe, Head of Retail & Wholesale at Barclays Corporate said: "Retailers have spent a considerable amount of time sorting out their capital structures and fewer remain highly-financially geared, putting the sector in a stronger position to manage the toughening economic climate."

In 2012, it will be the operators that best manage all these changes who will turn a difficult market environment to their advantage. The RTT does, however, expect there to be a number of high-profile administrations in the early part of the year.

Conlumino’s Neil Saunders said: "The process of change will create casualties but, longer term, it will create winners too. Those that adapt will survive and could even come out of the process stronger as a result. Some retailers have already started on this journey which is why, among the gloomy trading updates, there are occasionally chinks of light."

Tough economic conditions, coupled with the continued growth of online shopping, raises the ominous prospect of some High Streets being littered with vacant properties during 2012. The RTT members acknowledged that this could be a concern in some areas but was unlikely to affect prime retail sites, where demand for outlets is still high.

CBRE’s Mark Teale said there was a chronic shortage of available space for flagship units where premiums (£5-£10million being paid on Regent Street) are back with a vengeance, while chain retail and catering and leisure branch numbers continue to grow.

He said: "The area that has seen a sharp decline in branch numbers is services. Non-food chain retailers are continuing their long-run retrenchment into larger, higher productivity markets, leaving a trail of vacant property in their wake. The internet-led decline in services activities has exacerbated the problem. Some High Streets can be bolstered by re-anchoring. Others, without long-run public subsidy in one form or another, are a lost cause.”

Have your say on this story using the comment section below

Mike Jones





blog comments powered by Disqus
Feedback:
If you have any questions or suggestions about this article or our news section, please don't hesitate to contact us.

Editorial Contact Details - Conor Shilling
conor.shilling@angelsmedia.co.uk
0845 672 6000
Related News Stories
Most Read News Stories