Every time the ONS or BRC issues sales figures that are not as bad as expected, the retail industry is accused of crying wolf.
Every time the ONS or BRC issues sales figures that are not as bad as expected, the retail industry is accused of crying wolf. Yet the reason retail sales haven’t fallen off a cliff is good retailing. Retailers have come up with compelling offers and aggressive promotions. It’s not been easy. But it is clear that things are going to get harder before they get easier.
Asda’s insightful monthly income tracker this week spelt out the scale of the squeeze on consumers’ disposable income. It found shoppers were 8.4% worse off overall this September than last, and that in certain regions the picture was even worse.
Consumers clearly aren’t feeling confident and are concentrating on getting their finances into shape for the tough times they see ahead. Official figures this week showed people are saving more, suggesting that they’re concentrating on getting their credit cards paid off and saving money for special occasions.
That should provide retailers with reassurance for Christmas. Shoppers will still want to treat their kids and are likely to be squirrelling money away for the rest of the year to ensure their Christmas is good.
But looking at the broader picture, all that lies ahead for the UK consumer is more increases in the cost of living. The really frightening prospect is the rises in domestic fuel that kick in from January, and will coincide with the coldest time of year. This is set to hit families on lower incomes really hard.
At a meeting of senior retailers last week, we asked what were the bright spots on the horizon. The answer from many was that they lay beyond these shores. Because in the UK, a long hard winter lies ahead for retailers.
The lands of opportunity
The gloomy UK market only increases the pressure on British retailers to come up with plans for international expansion. Even the quintessentially British Argos is now ditching its long-held resistance to moving overseas by going into a joint venture in China.
But as the number of UK retailers that have come unstuck in international markets has shown, it’s not as simple as going to the country with the greatest population. As the example of Kingfisher in Turkey shows, provided the local partner is the right one, sometimes it’s the less obvious locations that can produce the best results.