Kurt Salmon: Consumer sentiment slightly up in 2015

28 April 2015 Consultancy.uk

Despite the near stagnant wage growth, consumer sentiment is generally more positive than in 2014, research by consulting firm Kurt Salmon show. This slight rise in confidence is, however, not mirrored in increased consumer spending. This, according to the research, follows from the stagnant disposable income, something some retailers themselves are implicitly perpetuating.

In a recently released report by from Retail Week in association with Kurt Salmon, the UK retail market is mapped*. The report, titled ‘Retail 2015’, surveys 25 UK retail executives for their current market sentiment as well as their best projection for where their business is going in the coming years. The news from both retailers and consumers about the coming years is a mixed bag.

Kurt Salmon - Shopping

The retail executives, according to the report, remain unconvinced that the current positive UK economic indicators mean that their businesses will benefit greatly, with 75% projecting modest growth for the 2015 period. This results from a continued concern about the disposable income of consumers. “We have more people in employment but they haven’t had any salary increases that they would have traditionally been used to,” says the Managing Director of a grocery retailer. “I think the general picture for retail will be very, very tough,” the Chief Executive of a discount chain adds, with low growth in wages cited as a critical factor affecting consumer spending.

Consumer and executive sentiment
In a survey of 1,000 consumers, their financial position was found to be up on balance, with more consumers (29%) feeling more confident about their financial position than a year before, compared to 25% indicating being less secure. Their confidence in the economy is also generally positive, with 31% saying they are slightly or significantly more confident, 48% saying they feel the same and 21% feeling slightly or much less confident. The slight positive sentiment is reflected by the executives, who gouged the general sentiment among consumers to be positive – with  63% believing that the mood was slightly more positive, 25% the same and 12% worse.

What is the mood among your consumers compared with last year?

The slightly improved financial status, and the general agreement among executives of consumer sentiment being positive, correlates with a slightly positive projection for retail sales by the executives, with 16% forecasting flat sales figures (versus 60% in 2014), and some 72% expecting sales to be slightly better (up from 36% last year); in total this means that executives expecting to see a slight or much better sales figure has jumped to 84% from 40% last year.

Forecast for retail sales over the next year compared with 2014

Stagnant disposable income
One of the chief concerns for the future of growth in the retail sector is tied to the disposable income of consumers. According to the report, the longstanding gap between earning growth and inflation is only now starting to correct itself, thus consumer confidence is not yet showing in material pounds. In what the report highlights as a “perceptive” remark about the reason for a depressed level of disposable income, one executive reveals, “We are certainly guilty, and I expect many of our peers are guilty, of keeping pay very low. You cannot forever expect people to work harder and do more and still expect not to pay any more. That is a challenge that all of us retailers need to have in our sights next year.”

* Consultancy.uk also highlighted the development of an omni-channel strategy by retailers, showing that only 5% is ‘omni-channel proof’.

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Lack of high street openings sees UK retail in precarious state

11 March 2019 Consultancy.uk

Changes in consumer behaviour, particularly in favour of online shopping, are starting to take their toll on shop-fronts in the UK, while stagnant wages are hitting peoples’ willingness to go out for food and drink. As a result, the rate of closures is more than four times that for the same period in 2017, although largely reflecting of a lack of new openings.

The retail market has fallen under a cloud of uncertainty in the UK; consumer confidence has dipped, while wages have continued to malinger in negative territory. Retailers are also under pressure from disruptive technology, as consumer sentiment shifts to more online shopping and at-home leisure. While retailers have been able to weather the storm for the past years, transformations, low consumer spending and technology have begun to take their toll.

New analysis from PwC explores the current market conditions in the UK for retail shops, focused on net openings and closings. The market changes in the UK have seen the net closures to date hit 1,123 in H1 2018 across the UK’s top 500 high-streets. The rate of closures was considerably above openings for the first half of 2018, at 1,569 openings and 2,692 closures. Compared to H1 2017, more than four times as many shops closed than opened.

Openings and closures for retail industry

The study considered the most prominent areas to see a reduction in openings and net closures across the retail landscape. Overall, fashion stores were the hardest hit in absolute terms, with a total of 104 closures for H1 2018, followed by public houses and inns, which saw 99 closures in the same period. Electrical goods stores saw a net -44 decline, with a total of 8 openings for the period. Meanwhile charity shops were in a state of relative flux, with 80 openings to 117 closures. The firm notes that service sector shops, including estate agent, banks, recruitment agencies and travel agents, among others, too have begun the process of moving online.

Not all areas of retail saw closures, with coffee and ice cream shops seeing a small net increase in openings over all. Book stores – predictions of their total obliteration appear to have waned – saw a net 18 openings, while supermarkets drew the highest overall growth relative to closures, at 18 opened and 6 closed.

Regional figures for the UK

Not all areas have seen the same level of closures, with the Greater London area and the South East the hardest hit by the current wave of closures, at -268 and -197 net change, respectively, compared to -23 and -25 closures for the same period in 2017. The middle of England too saw considerable closures, with the West Midlands clocking a net -89, and Yorkshire and the Humber down -117 stores overall.

Commenting on the figures, Lisa Hooker, consumer markets leader at PwC, said, “Openings simply aren’t replacing closures at a fast-enough rate. Specifically, the openings across ‘experiential’ chains, such as ice cream parlours, beauty salons and vape shops, haven’t been enough to offset closures in the more traditional categories. Looking ahead, the turmoil facing the sector is unlikely to abate. Store closures already announced in the second half of the year due to administrations and CVAs already will further intensify the situation.”

Related: Artificial Intelligence offers $340 billion opportunity to retail sector.