Foreign visitors and sports lovers have begun converging on the capital ahead of the London 2012 Olympic Games following years of preparation from businesses across the nation.
As the economy continues to struggle, with the Office For National Statistics reporting earlier this week that GDP has fallen 0.7 per cent over the second quarter, the retail sector in particular is hoping for a boost to sales and footfall during the much-anticipated sporting event.
But are these high expectations realistic following disappointing figures post-Jubilee?
Jon Copestake, retail analyst at the Economist Intelligence Unit, told Retail Gazette that he believes predicting the economic impact of the London 2012 Olympic Games will be difficult in net terms.
“There will certainly be an influx of spending from tourism and a feel-good factor to boost consumers,” Copestake added.
“The spending on Olympic preparations has also helped employment and injected money into the economy. However, I can’t see a significant lasting impact.
“The £10 billion spent on the Olympics is a large number and the influx of Olympic visitors will certainly have deterred other tourists or business travellers from visiting.
“Some observers are also wary of the disruption the Olympics could cause and the economic cost of that.”
Similarly, suggestions that the high street will be reinvigorated by an influx of visitors may be wide of the mark considering the London-centric aspect of the event.
“The “high street” is unlikely to be a strong beneficiary although retail as a whole will certainly see an uptick,” explained Copestake.
“The Centre for Retail Research is forecasting additional sales of just over £1 billion resulting from the Olympics and Jubilee. However, this is only around a third of a per cent of total retail sales forecast for 2012.
“Additionally, the economic effects will be localised and centred on London, which has outperformed the UK economy as a whole anyway, so in terms of provincial high streets where the money is most needed the impact will be muted.
“There are additional pitfalls too. The Olympics may crowd London with tourists, but may prove a distraction from shopping hubs like Oxford Street.
“The rigorous brand entitlements enforced by LOCOG have also proved unpopular among some retailers and could limit the bulk of the benefits to approved partners.”
While there is no doubt that official partners to the Games including Adidas, Westfield and John Lewis, which last week saw an 11.2 per cent boost to sales in the build up to the Games, will benefit from such brand exposure, companies across the retail industry have also worked hard to prepare for the rush.
Distribution & logistics specialist DHL, which is not an official sponsor, has worked closely with Transport for London (TfL) to ensure minimal disruption to its network as 5.3 million visitors flood into the UK over the 100 day period.
“DHL is prepared and planned to keep London’s logistics running, despite the challenges caused by Games: increased congestion, the need for night-time deliveries on some routes, and security challenges,” Hugh Basham, Transport Strategy & Policy Director at DHL told Retail Gazette.
“Given that we handle the logistics for about 80 per cent of Oxford Street’s retailers, we have been planning very carefully for any potential disruption.
“Our senior team members have been seconded to TfL to ensure that the logistics industry has been represented in all discussions about Olympics transport and travel, as it’s a key driver in keeping the Games, and the country, running.”
Basham also noted that retailers on high streets have different logistical requirements to those within shopping centres depending on whether or not they operate using centralised or consolidated distribution centres and explained that DHL has been running customer workshops with retailers for the past two years
“Wherever they are based, retailers need to prepare for busy periods by assessing how they can mitigate the challenges but make the most of the opportunities,” he said.
“One of the challenges logistics companies are facing is actually delivering goods to people’s homes, particularly those in lock-down zones where security is understandably paramount.
“To cope with these challenges, we have employed extra drivers to ensure security, which is particularly important when undertaking night-time deliveries.
“DHL has approached this summer like a three-month Christmas: and while Christmas brings challenges, it also brings great opportunities for retailers large and small.”
Small and independent retailers have seen a recent boost in publicity thanks to Independent Retailers Month which has seen regional high streets celebrate the efforts of local stores but will these businesses have the capacity to capitalise on the opportunity?
Jeremy Michael, Managing Director of research and customer experience management firm SMG, warned that smaller businesses may not have the budget to build a website or multichannel presence, making them conspicuous in their absence from one of the most successful markets in the sector.
“Independent retailers must make sure that new customers remember the store and come back in as the first port of call to almost all customers is visiting a store online,” Michael told us.
“So this becomes about training in store employees to fill that gap. A number of retailers, for example Pets At Home, offer extensive training and empowerment to frontline colleagues.
”This is the chance to create a long-term happy customer and, while we recognise that a website presence is vitally important, strong customer service plays a massive part in profit.”
Increasing profit and brand awareness has never been more of a focus for UK retailers and, while strategies have been painstakingly implemented in the run up to the Games, the financial after effect could prove damaging if weary consumers retreat from stores to reduce further spend.
“The Olympics may be a cited as a mitigating factor in future LFLs and will certainly be something retailers focus on in next year’s reporting if the Olympics provide a timely boost to sales,” Copestake commented.
“This is a reporting concern though - I’m sure they will be pleased to bank the money now and worry about LFL reporting later. Of more concern is the risk of a retail “hangover”.
“Underlying consumer sentiment is weak and, while one off events like the Olympics and the Jubilee will bolster spending in the short term, they may lead to overspending among consumers which results in a subsequent retrenchment.
“This could mean that retail spending among consumers falls back substantially in the third quarter, especially with Christmas on the horizon.
“Weather will play a part here too. The poor summer up to July has dampened demand, but warmer weather and a possible Indian summer could stave off consumer austerity in the aftermath of the Olympics.”