UK Retail Issues 2008

Introduction

Verdict Research: The credit crunch and rising global cost inflation have added a new dimension to the already challenging environment UK retailers face. These factors combined with the sector's maturity, overcapacity and more demanding consumers are leading to a raft of casualties. This report focuses on the issues and actions necessary to survive this testing trading environment.

Scope

An analysis of the economic background in 2008 and its impact on retailers, with supporting data. Growth projections for the UK retail sector revealing the underlying drivers, and for individual categories, highlighting the challenges for each. Space and channel issues including online sales' value and growth, price and proposition trends, polarisation of the market and changing consumers. How retail evolution reflects a changing society the winners and losers and recommendations for a strategy for survival.

Highlights

Though our value growth projection of 2.8% for 2008 appears relatively strong, inflation will mean that volume growth will be its lowest for over a decade. Meanwhile there is an abundance of new space coming onstream and the online channel is outperforming, which is resulting in overcapacity and the dilution of space productivity. Retailers' costs are rising, not just in the UK, but also in their global supply chains, which is increasing the pressure - particularly for those with a price-led proposition. Against such a challenging environment it is crucial to have a viable retail proposition. The fragmentation of society is being reflected in retail, with the winners being those that have aligned their proposition most closely to their customers wants and needs. This is resulting in a much more complex operation, that has to deliver the right product, at the right price, at the time and place that customers demand.

Reasons to Purchase

Ensures an understanding of the major issues facing retailers in 2008 - essential in devising winning strategies in such challenging times. Provides crucial advice on the actions necessary to evolve a retail proposition into one that is relevant to the current climate and retail trends. Use the comprehensive analysis to inform executives at all levels of the challenges, opportunities, and strategies necessary to be a retail winner.

• Verdict View
• Catalyst
• Executive Summary
  • Tough environment that will shake out weaker operators fast
  • Time to re-evaluate
• Analysis
  • Retail context
  • Pressures across the board
  • Hostile economic environment
  • Housing market slows down
  • Consumer spending squeezed
  • Disposable income shrinks
  • Retailers under pressure
  • Strain on retailers increases
  • Weakening demand and low sales growth
  • Inflation returns
  • Sector performance
  • Few winners in 2008
• Space & Channel Issues
  • Overcapacity
  • High space growth in low sales growth environment
  • Multichannel growth
  • Online sales triple
  • Retail loses share
• Proposition Issues
  • Price & price proposition trends
  • Price loses potency
  • Demand for retailers to edit choice
  • Premium outperforms
• Demand Issues
  • Demographics - changing consumer lifestyles and expectations
  • 45+s make greatest gain in number
  • Increasing importance of good customer service
  • Highest numbers in most budget constrained lifestage
  • Fragmentation of society
  • Environmental and ethical concerns
  • Greening of retail
  • Importance of ethical issues
• Operational Issues
  • Supply chain rethink
  • Cost growth vs sales growth
  • Seasonality
  • Communication
  • Advertising spend grows
  • Shifting spend by medium
  • Globalisation
  • Scope for new entrants
  • Managing stakeholders
• Summary & Recommendations
  • Time to re-evaluate
  • Shakeout of weaker operators
  • Changing nature of retail propositions
  • Retail mirrors fragmentation and polarisation of changing consumer dynamics
  • Figure 1: Context for UK Retailers 2008
  • Figure 2: Number of property transactions and y-o-y change % 1997-2012
  • Figure 3: Growth % in real household disposable income 1997-2012
  • Figure 4: Pressures for retailers 2008
  • Figure 5: UK retail sales and growth 1997-2012
  • Figure 6: UK retail price inflation/deflation and volume sales growth % 1997-2010
  • Figure 7: Y-o-y sales growth % by sector 2007 & 2008
  • Figure 8: Additional m sq ft retail space 1987-2012
  • Figure 9: UK online retail sales 1998-2012
  • Figure 10: Retail share of total consumer spending 1997-2012
  • Figure 11: Percentage of shoppers mentioning price as a driver of satisfaction 2000-2008
  • Figure 12: Changes in importance of edited range and wide choice 2008 on 2000
  • Figure 13: Segmental trends inUK clothing market y-o-y change % 2002-2007e
  • Figure 14: Service as a driver of loyalty 2008
  • Figure 15: UK population by age groups 2008 and 2012
  • Figure 16: Drive towards green retailing 2008
  • Figure 17: Retailers views on what matters to consumers 2007
  • Figure 18: Share of advertising spend by medium 2002 and 2007
  • Figure 19: Market conditions produce casualties 2008
  • Figure 20: Winning and losing formats 2008
  • Figure 21: Changing consumers and retail evolution 2008
  • Table 1: UK population changes and spend per capita 2012 on 2008
  • Table 2: Advertising spend and growth 2007 on 2002
  • Table 3: 20 clothing retailers new to the UK 2007-2008