// UK retailers should prepare for a brighter outlook for the second half of 2021, says Retail Think Tank
// Sales growth expected between flat and 3% for the year
// Think tank also says shifts in consumer behaviour will impact the grocery sector permanently and calls for business rates reform
The UK retail sector should be able to look ahead to a brighter outlook in the second half of 2021, according to a think tank of retail experts.
The KPMG/Ipsos Retail Think Tank said pent up savings and demand, a more confident consumer, and a successful vaccine rollout would all help to support the recovery of the UK’s embattled retail sector.
However, it warned that much like 2020, fortunes would be mixed for different retail categories due to continuingly changing consumer behaviour – with many people expected to either roll back some of their new shopping behaviours brought on as a result of the pandemic, while others will make them permanent.
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The Retail Think Tank also warned retailers there were still “very tough times ahead”, with new national lockdowns keeping non-essential retail stores closed well into the first quarter.
Despite this, it was still cautiously optimistic for the outlook of 2021, especially in the second half.
In its latest report Outlook for 2021, the think tank focuses on four areas that will have most impact on retail: the economy, regulations, consumer behaviour and technology.
The report stated that even with the mass rollout of a vaccine programme underway, the legacy of the pandemic and enduring restrictions are set to impact on the economy well into 2021 and beyond.
The Retail Think Tank believes that the tough economic background means the retail sector can’t expect to see any noticeable improvement in spending patterns much before the second half of 2021.
The think tank also highlighted how business rates were currently accounting for up to 50 per cent of retailers’ property costs before the one-year holiday was implemented at the start of the pandemic, well above those in other sectors and contributing 25 per cent of all business rate revenue raised.
With regards to consumer behaviours, the report stated that while the pandemic changed shopping behaviour radically, consumers in the non-food sector are more likely to start to revert back to pre-pandemic behaviour while the shift in the way people now shop for food is expected to be more permanent.
Local and neighbourhood shopping is also expected to become even more prevalent in 2021.
The Retail Think Tank said the convenience of local shops and local high streets will continue to be popular with and relevant to consumers, especially among those who still feel hesitant to travel into major city centres.
Meanwhile, investment from retailers in new technology will continue to increase in 2021, and will pivot from the store openings and refurbishments, to the back office and fulfilment centres.
The think tank highlighted that while it believes the retail sector will not shrink back further in 2021, but forecast a rate of growth that could be anywhere from flat to three per cent for the year as a whole.
It added that recovery and growth would likely take part in the second half of the year, driven by the non-food sector which should be well placed to bounce back as the vaccine rollout really gathers pace, allowing for non-essential retail to reopen again and boosting consumer confidence.