UK: Brighter Times Ahead For Retailers?

Last Updated: 28 November 2012
Article by Vijay Thakrar

In my last blog, I looked at the prospects for the UK's automotive industry in the post-Olympic era which had left us with a glow of positivity.

Now, a couple of months down the track I'm thinking about the retail sector and again, will start with an Olympic reference.

As we entered 2012 there was much anticipation for what the London Games would deliver above and beyond pageantry and sporting success. Amongst the retail community there were high expectations that the Games would drive a boost in sales figures with Deloitte research revealing in January that 84% of retailers were expecting a positive upturn. The ONS retail sales figures released in September,however, indicated that the boost hadn't been as strong as anticipated. Indeed, a second piece of Deloitte research conducted during the Olympic Games found that only 59% of retailers experienced an increase in demand.

We're now in what is widely referred to as the 'Golden Quarter' – that is the all-important run up to Christmas when trading figures find themselves in 'make or break' territory. And yet we're faced on an almost daily basis with seemingly contradictory data and retail experience.

So what is the reality facing retailers here in the Midlands and beyond?

From my perspective it isn't all doom and gloom. Yes, certainly we are still seeing major retailers experiencing difficult trading conditions and even failure, yet at the same time certain retailers are enjoying growth and even profit. There is no democracy here – one retailer in a certain sector will flourish, whilst another in the same sector will flounder. Those who are doing well are demonstrating a commitment to customer service and presenting a distinctive offering that allows them to take business from less robust competitors and capture market share.

And there is still much to be positive about.

ONS figures released in mid-October showed that retail sales figures had grown in Q3, and at the fastest rate for two years. Deloitte figures released at around the same time showed that retail administrations were down 15% on the same period in 2011. Add to this that household spending has shown modest growth this year and new car sales have increased it becomes clear that there is some cautious consumer confidence returning.

Having worked through the VAT rise to 20%, lower inflation has reduced the squeeze on real incomes we saw at the beginning of the downturn and the UK's labour market is showing a certain resilience keeping unemployment below the peaks that previous recessions have experienced. Indeed, there are still retailers demonstrating there are good times to be enjoyed with news of rises in sales figures and record profits still being announced on a weekly basis.

We're not completely out of the woods yet – whilst we anticipate 2013 being brighter and consumers having more to spend, there are still challenges such as rises in fuel, utility and food bills, which mean retailers need to keep on their toes and plan a strategy that will see them through the Christmas trading period, and beyond.

At the heart of getting this strategy right are a number of factors. Importantly amongst these is getting the balance between store, online and mobile strategies right. It is an inescapable fact that mobile is growing in influence in the retail space and those who use this to their advantage should experience positive customer growth and market share. It is believed that almost half of smartphone users have used their device to research product information before or during a shopping trip – that is 6% of in-store sales being influenced by mobile use which in turn is equivalent to £15bn of sales in this year alone.

Add to that the phenomena of voucher-led discounts and flash sales. Gone are the days of just bi annual summer and Boxing Day sales. Now it is the norm for retailers to offer their customers (often via an online relationship) discounts for a limited time, or to stage flash sales aimed at driving footfall over a given timeframe. Whilst these undoubtedly work for many retailers, there is a need to employ such tactics in a strategic way to ensure you're neither too far ahead, or indeed behind, the competition and don't damage profit margins. These tactics need to have an overall beneficial impact after all.

Sadly I am not a fortune teller. I can't say who will and who won't survive. What is for sure, however, is that retailers need to seize the signs of better times ahead and recognise that in doing so, they may need to re-evaluate how they run their businesses and stay close to what their customers want.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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