In recent weeks, our newspapers have been awash with positive indicators suggesting the difficult economic climate is starting to improve.
In recent weeks, our newspapers have been awash with positive indicators suggesting the difficult economic climate is starting to improve. We have seen a rise in housing activity, and manufacturing and car registration figures. Perhaps, most importantly for the sector, stronger retail sales have come about as a result of the fine weather which has added to the ‘feel-good’ factor and boosted sales of seasonal goods.
In addition, UK business is growing in confidence. Deloitte’s latest CFO survey for Q2 2013 shows that CFOs’ expectations for hiring, investment and discretionary spending have returned to levels last seen in early 2011. This comes at a time when lending remains relatively subdued.
However, whilst these are undoubtedly encouraging signs, we must take into account the continued cautious mood of the consumer. Our Consumer Tracker shows confidence about disposable income is at its least negative since the Tracker began in 2011, yet it does still remain negative. Incomes remain squeezed and will continue to act as a dampener on consumer spending growth. UK business is starting to find its feet, but it will take some time before consumers find more pennies in their pockets.
So what does all this mean for retailers? It is likely that certain sub sectors will experience an upturn. Increased activity across the housing market bodes well for home retailers, whilst rising car registration figures suggest big ticket items, including electricals, are back on the agenda for some consumers. Clearly, those selling summer clothes and outdoor goods are also set to do well, given the prolonged sunshine. However, mid-market players will remain under pressure until wage growth picks up. People have worked hard to redress their balance sheets and are not as easily tempted to indulge as they might have been prior to the recession. Ultimately, price and value remain consumers’ key focus.
Nevertheless, regardless of sector, those with a well-executed multichannel capability are likely to see strong results. Certainly, the importance of the mobile channel to retailers is rapidly rising as the device emerges as the shopper’s favourite sales assistant. Our latest mobile research revealed that not only have half of UK consumers used a smartphone to buy goods, 57% have also used it to check product availability. They are a key tool in converting store sales, influencing the consumer at various points in their shopping journey. Multichannel will play a pivotal role in deciding retailers’ success this Christmas. Conditions are looking favourable for the all-important ‘golden quarter’ but it is only by embracing each channel’s full potential with the right strategy that a consumer-facing business can thrive in a multichannel world.
Retailers should take confidence from the improving financial landscape. There are undoubtedly more hurdles to overcome, but the sector is slowly gaining momentum. Are we there yet? Not yet. But perhaps we are beginning to make our way.
- Ian Geddes is head of retail at Deloitte