Happy New Year! What a year we are expecting it to be, with everything from a Royal baby to further Brexit negotiations. Nevertheless, eyes are also on retail as we continue to see how a backdrop of inflation and low wage growth will influence household spend. It is fair to say that the retail sales during 2017 were disappointing but there may be some hope to come.
Here are a few predictions from the Retail and Wholesale team at Wilkins Kennedy:
1 Big pressure for big ticket
With Brexit around the corner, all eyes will be on trade in 2018 and beyond. Tariffs and trade deals that once streamlined goods processes in and out of Europe may change, so costs associated with manufacturing may increase. Material costs may also go up as currency valuations fluctuate – all of these costs could be passed on to the consumer.
The last recession taught us that big ticket items, particularly electronics, become postponed purchases as consumers tighten their purse strings. If inflation continues to outstrip wage growth, then costs in 2018 will increase and disposable income will be squeezed. Big ticket-ers will need to make sure they are ready to weather a potential storm in 2018, but it could mean a quick recovery in subsequent year once those postponed purchases come in.
2 Footfall, not falling
There has been a big push to online and retailers should be considering how the digital age could dramatically improve business. However, there is still room for a physical store and it should not be discounted. Linking in to the above point about big ticket items, these products actually help drive footfall. Out of town retail parks particularly benefitted from high levels of footfall during the recession, even whilst high street stores were suffering.
According to a recent survey, 40% of consumers will still visit a physical store at some point during their purchasing journey. Retailers are quickly adapting to this by making stores into “destinations”, where consumers can try products before they buy them, provide quick returns and click and collect depots, with the aim of improving the overall shopping experience.
3 Young people will spend more
In a recent survey, young people were the only group that expected to spend more over Christmas 2017, with 30% of under 25s saying they are more likely to spend more, vs 25% who said they will spend less. In the same survey, 53% of under 25s said they expected to do better in 2018 – and in contrast to their older counterparts of 45-54 year olds, where 35% said they are likely to be worse off.
This does not necessarily mean more frivolous spending, however, as one in three people in the under 25s and 25-34 categories said they would save more next year. When young people do spend, the patterns appear different to their parents’ generation. Under 25s are more likely to spend on clothing, technology and health and beauty products compared to 45-54 year olds.
4 Always on the go
E-commerce has undoubtedly changed the face of the retail landscape in recent years. Not only has this changed the shopping experience, but consumer expectation has also changed considerably – and retailers need to make sure they stay one-step ahead.
We mentioned above about the younger generation having different spend priorities than their elders and linked to this is a further point about service expectation. Young people have been brought up with smart technology that instantly connects them with the rest of the world. They expect to be able to shop online from their mobile devices and receive deliveries as quickly as possible. Retailers’ responses were “want it now” drone technology and same-day delivery.
The growth of mobile will allow retailers to become closer to their customers and offer a much better service. It will become easier to match consumer needs through purchase monitoring and providing offers that will get customers back through the doors, be it physical or on-line.
We trust that your 2018 goes off with a bang, but, if you are a retailer in need of some business advice, contact the Retail and Wholesale team at Wilkins Kennedy who would be happy to help.