UK: Analysts expect tough retail environment to continue in 2013
This year is set to be another tough year for retailers as austerity measures and uncertainty hit UK consumer confidence, according to the KPMG/Ipsos Retail Think Tank (RTT).
Members of the RTT believe that another year of low growth will mean consumers will remain reluctant to spend, and retailers will have to develop innovative strategies to drive sales.
"Austerity Britain is here to stay and 2013 will feel remarkably like 2012. The lack of economic growth and shaky consumer confidence will result in yet another year of deferred discretionary spend, especially for retailers selling big ticket items," said KPMG head of retail David McCorquodale.
The impact of the economy on trading conditions and consumer disposal income levels are set to remain the key challenge facing the sector in 2013.
It also warned that an undersupply of large format prime retail space on the market could potentially curb retailers' expansion plans in 2013.
"Speculative development activity is at a record low. Instead developers are undertaking small extensions to established schemes which have proved themselves to be successful," said Mark Teal, head of retail research at commercial real estate firm CBRE.
"With little new space coming on stream, primary shortages are becoming more and more acute. The dearth of speculative development has left large store expansion plans in tatters."
Yet, despite the gloomy trading conditions, the RTT believes there are opportunities for growth.
"I expect retailers to find their feet and spawn new initiatives this year. Their success will be dependent largely on what they make of it themselves," said Tim Denison, director of retail intelligence at Ipsos.
"Perhaps most exciting of all will be to see how retailers connect bricks, click and taps to create a truly omni-channel world. Well-founded investment could breathe new life into down-trodden retail phrases such as ‘customer service' and ‘the shopping experience'."
Other areas of growth include smartphones and tablets also opportunities for growth as does international expansion, particularly through e-commerce.
Barclays head of retail and wholesale Richard Lowe said: "The borderless retail landscape created by e-commerce means that it is easier than ever before for retailers of all shapes and sizes to tap into new markets. By adopting online strategies, retailers can test local appetite for brands and products without having the associated overheads of opening physical stores."
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