David Taylor, CEO of James Caan’s business advisory firm Hamilton Bradshaw Venture Partners, urges SME’s in the retail sector to stay positive for the festive period.
Much of the press around consumer spending for this period is focused on the negative aspects of a slowdown in retail expenditure like-for-like from this period last year, and stating that the Q3 figures were used overly optimistically when supporting the statement that it was the end of the recession. However, I think that an overall positive message can still be supported, based on tentative growth forecasts for Q4, even if the Christmas period may not be as fruitful for retail as it has been previously.
The British Retail Consortium has stated that October’s UK retail sales were 0.1% lower on a like-for-like basis than a year ago, ending the modest revival seen in September. The BRC Director General Stephen Robertson added “The disappointing figures are a reminder of the difficult economic realities many are still facing. Falling consumer confidence means people are limiting spending to essential items and are cautious about committing to big-ticket and discretionary buying.” .
This is obviously problematic for the retail sector, especially after the collapse of tech-giant Comet. The BRC said online sales in the last three months now included the two weakest growth rates of the four years the figures have been collected, as disposable incomes are squeezed and people hold off making major purchases.
Until the market recovers further, it is obviously difficult to imagine people spending a lot on their Christmas presents. However, we can hope that the growth in America, up to a predicted 3 per cent for the third quarter in a row, will impact positively on the European economy. This is also coupled with the fact that UK exports to developing nations, especially the BRIC block, are now in double figure growth.
Clothing and footwear sales saw double-digit like-for-like growth in the first week of the month as customers bought autumn and winter collections, but then died down. David McCorquodale, head of retail at KPMG, said October sales figures had been like a “disappointing firework – full of promise, but eventually fizzing out with a whimper” and said winning a share of the Christmas wallet over the next two months would be just as competitive as last year.
The food and drink sector was more resilient between August and October with the three month weighted average like-for-like sales increasing 0.7%. Mr McCorquodale added: “The recession may be officially over, but it will take a little longer for consumers to feel they can spend freely again. Retailers are holding less stock than a year ago and may choose to be cautious with pre-Christmas sales in order to protect margins.”
However, the future may still be bright for online retailers, who always expect to do well in this period. As footfall decreases on the high street, it is usually reflected in an upswing for online traffic. The top ten most popular days for online retailers are:
1. Monday, November 26 (Cyber Monday)
2. Monday, December 3
3. Monday, December 10 (Green Monday – two Mondays before Christmas)
4. Tuesday, November 27
5. Tuesday, December 4
6. Monday, December 17 (Last day with guaranteed free shipping before Christmas)
7. Tuesday, December 11
8. Friday, November 30
9. Thursday, December 6
10. Thursday, December 13
If online shops can capitalise on these key dates, they may still find that they end on a lighter note than previously expected. With modest growth figures for 2013 and 2014, the best in the Eurozone, a cautiously optimistic note can still be sounded for this Christmas period.
The retail market in which we operate has changed completely over these last few years, with the emergence of a more modest and value-focused consumer as a result. Consumers now have much less disposable income available to them and are constantly looking for ways to control their spending.
SME’s in this sector must realise this and change the way in which they run their businesses in order to stay current with this ever evolving market.
My key piece of advice is to embrace the internet as a sales tool whilst constantly streamlining business operations, in-line with consumers streamlined spending.
