talkingtrade
Monday February 5 2018 THE NATIONAL MOTORCYCLE MUSEUM, BIRMINGHAM
The reshaping retail landscape
From sales and shop vacancies to business rates, consultant Michael Weedonexplores the changing political and economic climate and its impact on housewares retailers
prices up and incomes down, scaring consumers and starving retailers of sales. Import prices are rising and CPI (Consumer
Price Inflation) is up to 2.3%, from 0.8% in June. It will probably go higher and will almost certainly overtake wage growth, making us poorer.
“The past year in retail,
politics and the economy should have taught us all by now that the
only thing to expect is the unexpected”
T
he sky is falling. Possibly. Maybe not. Who knows? Aſter a Brexit vote that wasn’t expected to produce the
result that it did, forecasters have been near unanimous in predicting that Chicken Licken’s ‘sky-on-head’ prognosis was going to be an understatement. Completely exposed to the hopes, fears and ability to spend of consumers, retail was expected to be immediately susceptible to a big bump on the head.
Retail sales Retail sales are headline news. Across 2016 they were up. Even in the second half of the year, after the EU referendum on June 23, they were up. While in 2015 they had dropped, by £278m, by the end of 2016 there was £11bn more in the till than the year before. So far this year - with the exception of
household goods shops and some food stores - they are still up, by £256m. Small shops seem to be taking the brunt of
what pain there is. One of the groupings relevant to housewares (Glassware, Tableware and Household Utensils) is showing increases of 1% in 2017, but lags behind consumer expenditure growth on clothing and footwear. Food inflation is picking up and has two
immediate effects: diverting consumer expenditure away from non-food and flattering supermarkets with turnover growth that is more apparent than real. These things were not supposed to happen,
according to the Chicken thesis. The plunging value of the pound was expected to drive
‘The high street is now on a six-month run of net growth’ But 11 months on from the vote, we are still
in the land of predictions about the sky. The Bank of England is probably not too worried – inflation is targeted to be 2% in the long term (although it has only been 2% for one month in the past decade). Just to confuse things, CPIH is now the lead
inflation measure. This is a new version of CPI that includes a measure of owner occupiers' housing (OOH) costs calculated from rents. It’s
expected to be higher than CPI by about 0.3% in general, but right now it’s exactly the same at 2.3%. To confuse things more, it’s not actually a
national statistic, although CPI is, and is a bit like RPI (Retail Price Index). RPI is a measure of inflation published monthly by the Office for National Statistics (ONS), which hasn’t been a national statistic for several years but is still used to set increases in a number of government measures, such as business rates.
Shop vacancies Empty shops provoke an emotional response. After all, they are very visible, to everybody, unlike empty offices or warehouses. The vacancy rate, identified and monitored
by the Local Data Company (LDC), is a vital sign – a net figure resulting from the balance of new shop openings, dying shops, new builds, conversions into housing and a dozen other factors. It reflects the health of that part of the retail market (more than 80%) which uses shops to sell things in. In 2016 a gradual improvement (that started
in 2012 when the rate stood at 14.6%) saw the retail & leisure rate fall to 12.3% - and then stop dead in the second half of the year. No more
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May 2017
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