The recession will fundamentally change retail for good, according to a report from Verdict Research.
The report said the retail sector is in the mid-point of a lengthy reform. It said last year will be remembered as the beginning of a substantial contraction of the sector that had become bloated with over capacity and buoyed by rocketing house prices and cheap credit.
Verdict predicts just 8.1 per cent growth in the UK over the five years to 2013, a massive drop from the increase of 14.1 per cent in the same period to 2008.
2009 will be the year when the market is at its weakest, with the first negative growth since Verdict records began in 1984. Total UK retail will decline 0.6 per cent and non-food spend will decline 3 per cent.
Verdict Research senior retail analyst Malcolm Pinkerton said: “Unemployment will not peak until late in 2010, as cutbacks continue to spread outwards from the financial sector, in which the credit crisis began, to affect all areas of the UK workforce. Both actual unemployment and the looming threat of it act as the ultimate dampeners to consumer spending, so the worst is truly yet to come.”
Verdict said the recession is the catalyst for long-term transformation in retail. Verdict retail analyst Matthew Piner said: “By the end of this downturn, shopper psychology will be irreversibly changed from that of the heady days seen in the late 1990s and early part of this decade.
“Spending will rise after the recession and consumer confidence will gain some traction again, but shoppers from the lower socio-economic groups in particular will have formed a more price conscious outlook and an intolerance of taking on debt to fund retail expenditure.”
The report said retailers will have to change their strategies and adapt to the new trends. Merchandising will also need to become more efficient, both in a logistical sense and in terms of driving sales.