Blog: Leonie BarrieRetail freeze

Leonie Barrie | 19 May 2006

Retail certainly isn’t an exact science. Chatting with fellow delegates at a Global Sourcing Summit in London yesterday, we slipped into the stereotypical British conversation about the weather. This time last week it was absolutely sweltering over here; when I got into my car last Friday the thermometer registered 26º which is probably what we’d expect in an exceptional UK summer, not early May. The sun was shining and there was a sense of optimism in the air. But now it’s cold, wet and windy again. Crucially, this won’t be doing retail sales any good; despite all the forecasting tools at their disposal, something as simple as a change in the weather means stores are going to be struggling to shift the diaphanous shirts, micro-shorts and sandals that line their rails. As if to prove a point, yesterday the shops were deserted. 

In a similar vein, Global Refund suggests that rising oil prices – which tend to curb spending for most consumers – are also bringing some benefits by fuelling the spending power of consumers in oil-rich countries in the Middle East, Russia and Nigeria. Global Refund says tax-free shopping sales in 2005 rose by 6%, and predicts a 25-25% increase in tax free transactions from Middle East customers and 13-23% from the Russians in the UK this year.

Of course the effects of another unforeseen event, last year’s July bombings, caused a dip in tax free shopping, but the recovery was extremely fast amongst all visitors except the Japanese, who are still slow to return to the capital. Likewise, sales to US tourists are in decline. In contrast, tax free shopping from Chinese travellers in 2006 could grow by 40-50% as the ADS agreement (Approved Destination Status) signed between the UK and China kicks in. More fights to the UK from India, the world’s second fastest growing economy, are also likely to lead to more sales from this country. All of which should be good news for London’s retailers.


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