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03 May 2012

News - Health of UK Retail worsens

By Ben Turner @ 13:29 :: 1685 Views :: 4 Comments :: Article Rating
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Following its quarterly meeting in April 2012, the KPMG / Ipsos Retail Think Tank (RTT) – a panel of retail industry commentators that provides authoritative and independent views on issues affecting the sector – is reporting an even bleaker outlook for UK retailers, with the health of the industry expected to worsen to record levels before any signs of recovery.

The RTT Retail Health Index is expected to fall to an all time low of 77 by the end of quarter two of 2012. This compares with 79 at the end of the first quarter and is five points lower than the level recorded during the depths of the original banking crisis and recession, in quarters two and three of 2009. 

Although high profile events such as The Queen’s Diamond Jubilee celebrations and 2012 Games will inject a ‘feel good’ factor for some, underlying economic trends will have an increasingly detrimental impact on consumer confidence and spending, according to the RTT.

Helen Dickinson, Partner and Head of Retail, KPMG UK, said: “For several reasons, the first quarter of 2012 was not quite as dire as the RTT had originally forecast in December; demand for goods and services was slightly better than we had predicted and margins weren’t hit as badly. However, there will be a latent effect going into quarter two as the stark reality of the economy begins to take its toll on consumers in the coming months.”

The RTT noted that John Lewis is only one of a handful of UK retailers riding against the tide; many others are struggling to compete for business, resorting to heavy promotions, voucher schemes and discounting.

Dr Tim Denison, Director of Retail Intelligence at Ipsos Retail Performance, said: “Following unprecedented levels of promotions and discounts in quarter four of 2011 which had a severely detrimental impact on retailer margins, many businesses now recognise that this is not a sustainable strategy.”

Casting a positive light across an otherwise bleak picture for UK retailers, Richard Lowe, Head of Retail & Wholesale Barclays Corporate, said: “A lot of retailers do still believe there are costs savings to be made, especially if they are able to adapt their business models. The world of online shopping has created international outlets for UK retailers, with several performing very well in overseas markets.”

Summarising the RTT’s April discussion, Helen Dickinson of KPMG, said: “What we expected to happen to the health of the UK retail sector in the first quarter looks to have been delayed until the second.

The underlying economic and financial trends are pointing in the wrong direction for retailers, many of whom are struggling to generate sales, protect their margins and control their costs. The retail sector is undergoing structural change as our desire to consume ever increasing volumes of goods diminishes and technological advances continue to change the way we shop.

Future increases in selling prices are not an option for retailers to use to help them respond to these changes and maintain sales growth. Maintaining and improving profitability is a goal which is becoming harder and harder for retailers to achieve and hence the state of health will continue on a downward trajectory for the foreseeable future.”

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comment By mike33 @ 15 August 2012 22:48
The retail is definitely so bad and i do not see any upside at all. I see this happening for more years in the future. The economy is definitely struggling to come back. Wedding centerpieces

comment By fredj @ 23 August 2012 00:31
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