Retailers are facing the “toughest trading environment ever” this Christmas according to research company Verdict, which is predicting the second lowest consumer spending growth in a fourth quarter for 20 years.
Verdict said today that UK consumers’ spending will only grow by 2 per cent in the last three months of the year, compared with growth of 3.1 per cent in 2007.
Verdict also said that much of the extra spend will be eaten up by high food prices this Christmas, with food inflation running at 6.3 per cent.
Annual retail expenditure growth will hit 2.4 per cent for 2008 according to Verdict research - a fall of 1.2 per cent from last year’s figure – and will spiral further in 2009, reaching only 1.7 per cent.
Verdict consulting director Neil Saunders said that a combination of internal and external factors were coming together to put unprecedented pressures on the retailer industry, which is facing a dismal 2009.
“Sales and margins will take a hit,” said Saunders. “For retailers the message is that you’ve got to step up to the plate. You’ve got to be more creative, and you’ve got to understand your customers more. In order to be successful retailers are going to have to work an awful lot harder than they have done.”
DIY and furniture and floors retailers will be hit the hardest this Christmas, said Saunders. Verdict is anticipating a 3.9 per cent drop in consumer expenditure growth in the DIY sector and a fall of 8.9 per cent in furniture and floors.