16 April 2024, 11:05
By Furniture News Jan 30, 2013

Retail hits a new low, says RTT

According to the KPMG/Ipsos Retail Think Tank (RTT), the health of retailing in the UK hit a new low in the fourth quarter of 2012, despite the customary spikes of increased sale activity in December. It says that quarter four was largely flat, exacerbated by low levels of demand during October and November and margins coming under pressure as a consequence of widespread discounting in December. 

The RTT’s Retail Health Index (RHI) marked another consecutive decline – for the eighth quarter in a row – and a difficult end to another difficult year for retailers. The outlook for quarter one of 2013 shows no signs of significant change for UK retailers – the RTT forecasts that demand will remain subdued because of continuing economic challenges facing consumers and retailers. 

With added financial pressure on consumers – such as taxation on high earners claiming Child Benefit – disposable income will be further squeezed. With the Christmas trading period out of the way and retailers keeping their stock levels low compared to previous years, there will be less pressure on stores to discount in the quarter, therefore protecting margins to a degree. However, the RTT expects there to be further casualties.

RTT panelist David McCorquodale, Head of Retail, KPMG UK, says: “As far as demand is concerned, what we saw is a stand-off between consumers and retailers through the quarter, pushing Christmas spending into the last two weeks. Consumers waited for retailers to discount whilst retailers were keen for consumers to buy at full margin, resorting to price discounting as late as possible.

Nick Bubb, independent retail analyst, said: “John Lewis was a shining light in the sector, achieving astonishing growth.  This was partly attributable to its online sales for the five weeks to 29 December.  Sales were up by 44% on last year and its online business now accounts for a quarter of all the firm’s revenue.  “People want the convenience of ordering online and more are choosing to do so.  This is good news for online retailers, but online and multichannel distribution costs – more van deliveries and more fuel, for example - also need to be factored into the equation.” 

Summarising the RTT’s quarterly discussion, Tim Denison, head of retail intelligence at Ipsos Retail Performance, says: “The quarter has been a real mixed bag. On the back of a positive September, October was a difficult month for retailers, as was November with the exception of the last week. Christmas trading was not a complete washout and as ever there were winners and losers, demonstrating that there is always opportunity for those that know their customers well.

“It is notable however that our Health Index is at its lowest point and the next quarter looks like being another challenging one for the retail industry. The economy will continue to play its part, but the successful retailers of tomorrow will be those that embrace change and continue to engage shoppers’ interests over the coming weeks and months.”

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