Low levels of consumer confidence will continue to make trading difficult for retailers in the coming year, members of the KPMG/Ipsos Retail Think Tank (RTT) have warned.
The RTT members have predicted that austerity measures keeping disposable income levels low will be the main challenge for retailers in 2013, as it impacts on consumer confidence and keeps spending down.
Real pay is expected to fall this year, and the impact of this alongside continuing government cuts will reduce household incomes by 0.8 per cent, according to Vicky Redwood, Chief UK Economist at Capital Economics.
Commenting on the RTT’s predictions, David McCorquodale, Head of Retail at KPMG, said: “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.”
Retailers planning to expand this year could also face difficulties due to an undersupply of large format prime retail space on the market, while increased overheads such as enhanced pension obligations and rising business rates will make cost cutting essential.
While the structural balance of the general retail sector improved in the last 12 months, the food sector was particularly challenged in this period because of over capacity.
But the RTT emphasised the fact that there are still opportunities for growth, naming multichannel retailing as the key sector to be exploited, as the success of retailers such as John Lewis in this area shows.
Commenting that retailers shown devise their own new initiatives in the coming months, Tim Denison, Director of Retail Intelligence at Ipsos said: “Their success will be dependant largely on what they make of it themselves.
“Perhaps most exciting of all will be to see how retailers connect bricks, clicks and taps to create a truly omni-channel world.
“Well-founded investment could breath new life into down-trodden retail phrases such as ‘customer service’ and ‘the shopping experience’.”
Moving into e-commerce also offers retailers the possibility of expansion overseas, as pointed out by Richard Lowe, Head of Retail and Wholesale at Barclays.
Online stores enable retailers to test the popularity of their products overseas without the overheads associated with the traditional retail market.
A good relationship with banks and credit insurers, effective marketing, and the use of emerging new technologies such as new payment systems will all be essential to retailers’ survival in 2013.
Martin Hayward, of Hayward Strategy and Futures, commented: “Despite the harsh economic environment.