Confused? Can’t understand the world around you? Don’t worry – you’re not alone. UK retail is a deeply confusing place right now and this week’s news does little to help clarify the picture.
How do you reconcile the modest 1 per cent like-for-like decline for August revealed by the BRC and the month’s strong footfall with many experts’ view that we’re in the worst conditions since the early 1980s? Kesa’s dramatic like-for-like fall and Next’s well-flagged but still poor interims back up the atrocious anecdotes we’re all hearing.
Two things that we can be sure of is that the performance of the food retailers is propping up the stats with the help of inflation, and that in non-food the difficult environment was compounded by the miserable summer weather.
But the economy is not that bad – yet. Crucial barometers of its health – particularly unemployment – are nowhere near the levels that have characterised past recessions.
That’s not necessarily good news. If unemployment does become significant, things will worsen rapidly. And if sales fall back now, retailers won’t be able to bank on making the same gains they have made in recent years from sourcing or the strength of the pound to prop up their profits.
The real problems right now are consumer confidence and the housing market collapse. People might still have jobs and be able to pay the mortgage, but everything they read and hear tells them this might change by Christmas. And because people aren’t moving, they’re not buying white goods or sofas.
Neither of these factors are going to change soon. But maybe there is one positive from the BRC numbers: that it’s hard, but retailers in general might just be doing a good job of responding to customers’ changing circumstances.
Lay off M&S
As journalists, we’d never want to discourage moles from leaking information. We find plain brown envelopes and made-up hotmail addresses work especially well.
But the opprobrium directed at Marks & Spencer by the unions for sacking the employee who leaked its new redundancy policy to the press is not on. He was careless, got caught and then refused not to leak further information in future. In the circumstances, the company had no option.
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