Retailers will face a tough 2015 with sales expected to grow by only 2%, a similar level to this year, the KPMG and Ipsos Retail Think Tank has warned.
According to a panel of industry experts, uncertainty around the outcome of May‘s election, along with price deflation and unrelenting low earnings growth will likely impact on consumer spending. In addition, potential reappearance in Eurozone problems, as well as the chance that VAT and interest rates could rise, leaves an uneasy nation less able to spend despite rising employment.
The panel has cautioned that 2015 will be an “incredibly expensive year” for retailers as online orders burgeon, inflating the overall ‘cost-to-serve‘. If retailers fail to achieve decent sales growth, profits will be affected over the next 12 months.
David McCorquodale, Head of Retail at KPMG, said:
“2015 will see some growth, but retailers will do well to break through the 2% barrier. There are multiple factors which could knock sales off course, including concern around the general election and an interest rate rise. There is undoubtedly growth coming through online sales, but this is a double-edged sword. Online sales have a higher cost-to-serve, putting even more pressure on retailers‘ margins.”
Food retailers will be hit the hardest, the panel has said, with sales likely to fall by at least 1% due to intense competition from discounters, commodity deflation and shoppers with the economic austerity on their mind.