For the much harassed UK retail sector during the two years of recession,this would be the unkindest cut. With an endless assortment of choices for thecustomers, vicious competitors, and a complex economy, retailers have to be ontheir toes always. Adding to their woes, current trends indicate a forthcomingretail recession.
Aresearch by Northbridge Capital states that, global apparel retail industrygrew by 2.1% during 2010 to reach $ 1, 078.2 billion. It further predicts theindustry to growth by 13.4% and reach $1,222.7 billion by 2014, an increase of13.4% since 2009. Retail industry has witnessed a massive growth during thepast decade. A significant increase in the amount of disposable income, dualincome, globalization, media awareness, and internet has fuelled its growth.
Currently,the industry is going through a tough phase, predicting a bumpy ride for UK retailers during 2011 and 2012. A recent research report released by Nielsen states thatthe larger and mature markets of UK and US saw declines year-on-year with theretail pressure shrinking the consumer confidence.
Data source:nielsenbookdata.co.uk
Data source:statistics.gov.uk
BrandPerformance:
Afterslipping into a negative territory in 2008 and 2009, retailers were expectinggrowth. On the contrary, 2010 would be a difficult year with concerns far fromgrowth. Highest profits were from Arcadia whose shares grew 0.6 percentagepoints, mainly due to absorbing Bhs. M&S and Primark acquired a 0.3 %points in womenswear market in 2010. M&S faced a tough market condition inthe past years, and, though it appears to have turned a corner, its 2010womenswear market share of 11.9% is still below its 2006 level. Primark whichexperienced growth during 2005-10 will see a slow down during 2010-11. Valueclothing retailing will see a slow growth during the two years. Entry of newbrands such as Morrison, Forever 21, and Argos will further reduce the profitmargins of the existing brands.
Probable causes for the slowdown:
Discounting has become a 'never ending game' in today's retail market. Analysts believe that a deep discounting model where prices are hefty, and an aggressive discount is followed has caused the slowdown in the market. Customers of today are well aware of these marketing gimmicks and are seeking for honest bargains. These kind of perceived bargains splurging in the market only irk them. Apart from this, a market where private lines, local, and international brands compete with each other is loaded with challenges. This requires more investments for the brand building exercise. Inadequate logistics, and supply chain management also create havoc in the market.
In the earlier times, consumers were excited when they got branded items for cheap prices. Now, apart from the price factor, they are also concerned about the quality aspects, and shopping experience. They tend to buy less, but quality brands. This change in the shopping attitudes will affect stores running mainly on discounts throughout the year.
Retailers seek alternative options:
Many Asian clothing markets are ripe for development. This challenging situation will slow down the growth of UK clothing retail market. Industry analysts predict this situation is likely to persist for a couple years. With a trepidation that growth is likely to be difficult, retailers are seeking diversifying options. Womenswear retailers seek options in related sectors of health, and beauty.
Forthcoming Olympics in London in 2012 gives rosy hopes to retailers. Multichannel retailing seeing high growth trajectory is positively anticipated to push retail sales. The influence of multichannel retailing is expected to grow from the current 8% to reach 14% of the UK retail sector by 2014.
Whether or not the country would head for a double dip recession is a question for which answer is unknown to the UK retailers. Despite the uncertainty, they are prospering themselves with well measured approach, and are optimistic about the market.
References:
1. globalretailbusiness.com
2. datamonitor.com
3. afaqs.com
4. retail-digital.com
Image Courtesy:
dailymail.co.uk
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