The Retailer Autumn 2017_v1

Business

Business

The ever-changing retail landscape

Diane Wehrle Marketing and Insights DirectoR SPRINGBOARD

“It is this less favourable trading landscape that suggests a more concerning time ahead. With fewer shoppers, retailers that maintain in-store footfall are at a clear advantage.”

THIS YEAR HAS CERTAINLY BEEN ONE OF UNCHARTERED WATERS, WITH THE IMPENDING EXIT OF THE UK FROM THE EU MOVING US INTO UNKNOWN TRADING TERRITORY. Throughout the first half of the year there was little evidence of any adverse impact on consumer activity, in terms of either footfall or sales, despite a weakening in published consumer confidence indices and rising inflation. In Q3 however we saw the first signs of a shift in footfall that suggests a more concerning time ahead, suggesting a sea change in consumers’ willingness to spend generally. What is the likely impact on the key Christmas trading period? The first half of the year seemed to demonstrate a subtle strengthening of performance of retail destinations – an average increase of +0.1% between January and June vs -1.2% in 2016. But needless to say, nothing stays the same for long in retail, and shifts in activity in Q3 suggests greater challenges are afoot. From the headline rate the change in footfall over the last three months seems innocuous, but the underlying data conveys the real trend. The growing importance of the leisure based trip became a key part of the narrative about retail destinations over the first half of the year. Between January and June, footfall from 5pm to 8pm rose by +1.6% compared with -0.7% between 9am and 5pm. And given that most stores don’t trade beyond 5pm, it is clear that consumers are seeking non-retail experiences, either as part or instead of transaction focussed trips.

to a drop of just -0.1% post 5pm, Q3 footfall concluded -0.5% post 5pm and -1.1% during the daytime, the poorest performance since 2016.

Despite the overall decline in footfall, retail parks continue to increase their appeal with a rise of 1.1 per cent; the seventh consecutive month of footfall increase. The appeal of their accessibility and free parking, alongside an increasingly attractive proposition, comes to the fore when household budgets are squeezed through inflationary pressures and minimal wage rise. It is this less favourable trading landscape that suggests a more concerning time ahead. With fewer shoppers, retailers that maintain in-store footfall are at a clear advantage. However, high consumer borrowing and weak consumer confidence suggest that trading conditions could be reaching a tipping point into a period of restraint.

post 5pm footfall 2017

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So, what distinguishes trading conditions as we head into Christmas from those in January? Well, weaker footfall now follows a period of poorer bricks and mortar sales, indicating that it is not necessarily taste but budget that is driving footfall down. Over the three-months to March, In-store sales declined -3.0% on a Total basis and -3.4% on a like-for-like basis, the declining -0.7% on a Total basis and -1.2% on a like-for-like basis in the 3 months to June. However, over the three months to September, Non- Food retail sales in the UK increased +0.5% on a like for like basis and a +0.9% on a total basis, above the 12-month Total average growth of +0.7%, whilst in-store sales of Non-Food items declined -1.5% on a Total basis and -2.0% on a like-for-like basis 1 . September’s sales rose due to inflation, but the accelerating decline in footfall is a strong indicator of consumers railing back spending. Aggressive early season sales indicate retailers are spooked, and they will be on edge with the six-week countdown now on to the start of the festive shopping season.

DIANE WEHRLE // enquiries@spring-board.info // www.spring-board.info

Annual % change in footfall January - June 2016 -1.2%

2017 +0.1%

5-8pm +1.6% Jan-June 2017

9am-5pm -0.7 Jan-June 2017

And the decline in footfall doesn’t just mean reduced spending on retail goods; the drops in footfall across all periods of the 24-hour day demonstrate that leisure and hospitality spending is also being curtailed.

But July saw the first sign of slowing activity post 5pm, with a flat 0.0% change in footfall, breaking the continuous annual growth post 5pm that has occurred since February which averaged +2.4%. And this shift accelerated in August with footfall post 5pm dropping by -1.4% alongside a drop in daytime footfall of -0.9%. Moreover, it was the first time that footfall dropped across both retail trading hours and into the evening since January. Despite a deceleration of this change in September

1. Source: BRC-KPMG Retail Sales Monitor.

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