Despite a damp and gloomy April impacting customer spend, there are plenty of reasons for UK retailers to be quietly cheerful about the months ahead. Here are some of the ways retailers can capitalise on continuing consumer caution.

In the UK we are obsessed with the weather, and rightly so: it impacts mood, movements and our spending habits. According to the Met Office, the UK experienced 55% more rainfall than average in April, making it the sixth wettest on record.

Perhaps no surprise then to see that retail sales declined 4% year on year last month, according to the BRC-KPMG Retail Sales Monitor. Even with Easter falling in March this year, that’s a disappointing drop. In the three months to April food sales were up just 4.4% and non-food sales down 2.8%. 

Barclays’ UK Consumer Spending Report also showed an overall slowdown in April as consumers made the effort to reduce discretionary spending ahead of the summer. Cold weather hampered in-store shopping and cutbacks were experienced in the food, drink and household categories.

Despite a gloomy April and a damp bank holiday weekend, there remains cause for cautious optimism.

(Say it quietly) The worst cost-of-living pressures are behind us…

A gradual uptick is visible in the GfK Consumer Confidence Barometer, which inched up two points in April. Consumers were feeling more positive about their personal finances for the next 12 months – even if that is taking a while to reflect in their spending habits.

Family spending power is growing, up 10.1% year on year in March, according to the Asda Income Tracker. Total household income averaged £933 per week, with an average weekly spending power of £233 per household. Falling inflation, the recent reduction in NI contribution rates and the National Living Wage are among the factors influencing this increase.

All of this suggests that the worst of the cost-of-living crisis is over. But after a prolonged downturn, it is taking consumers some time to shake off their reticence to spend.

More Waitrose, less Aldi?

The transition back to a healthier economy may be a gradual journey. A closer analysis of the Barclays data shows there was an 8.6% decline in spend at discount stores in April, representing an 11.3% reduction in transactions. Could this mean that customers are reining in spend altogether or might it indicate the beginning of some trading-up behaviour?

For my part, I have been more tempted to increase the number of items in my foodie top-up shop of late and recently bolstered my wardrobe with a few statement pieces. It’s not a radical change, more a gradual mindset shift.

These small and gradual shifts and tweaks add up. Retailers must focus on the detail of getting shoppers to add just one more item to their basket. With low prices and promotions now a hygiene factor, there is a need to stand out with creative messaging that resonates.

Holiday plans and a summer of sport

As stated in our Retail Horizon 2024 Consumer report, we remain cautiously optimistic for the second half of 2024 and that view still stands.

It is backed by the latest World Economic Outlook from the International Monetary Fund (IMF), which forecasts GDP growth of 0.5% for the UK in 2024 and 1.5% in 2025. A modest increase, but up from 0.3% last year. The IMF also warns that global recovery is set to be “slow and uneven”.

One watchout will be keeping an eye on the housing market and rental prices, which continue to squeeze many households. Despite these concerns, holiday bookings are up – Barclays reported a 7.1% rise in spend at travel agents last month as customers booked summer getaways.

This is no surprise given the miserable UK weather, but it also presents an opportunity for fashion retailers in the coming months. Shopping at my local B&M over the bank holiday weekend I noticed an unusually high number of people buying suitcases.

In addition to the holiday season, we can look ahead to a ‘summer of sport’ with the upcoming Paris Olympics and UEFA Euro 2024 in Germany. Another opportunity for retailers to capture spend.

Customer segmentation and the big picture

We know that consumer habits shift constantly and that the polarisation of wealth continues to deepen. For this reason, data will be more important than ever for retailers as they tap into recovery by segmenting and understanding customers in more detail, working to successfully balance the needs of those struggling with the desire for newness and innovation.

Kudos is due here to Tesco, which is strengthening its personalised customer communications through its partnership with Eagle Eye. Last week’s email entitled “Lisa, here’s your weekly round-up of things we think you’ll love” caught my eye among a crowded inbox and is exactly how retailers should be personalising communications to inspire customers.

There is plenty of opportunity out there to stand out and capture recovering spend in the second half of this year, particularly through differentiation, innovation, inspiration and great curation.

Recovery will be gradual, but it’s there for the taking

To my mind, Carrefour chief executive Alexandre Bompard best summarised how to win when he talked at the World Retail Congress about how retailers must keep pace with intense and rapid transformation and constant experimentation, but also be ready for new shocks. He told retailers to “continually adapt and navigate. This is what retail demands.”

As inflation falls further and the sun comes out, is your business ready to inspire?