Published on November 8th, 2013 | by The GC Team0
Health of UK retail picks up in third quarter of 2013
The health of UK retail has shown some signs of improvement over the past quarter and the outlook is looking more encouraging than it has for some time. This is the view of the KPMG/Ipsos Retail Think Tank (RTT), which has upgraded its Retail Health Index to 79 and forecast that this could improve to 81 in quarter four, marking the highest level since Q3 2011 and the strongest quarter-on-quarter leap for four years.
Two of the three key drivers of retail health – demand and margin – were more positive in quarter three than in the previous quarter, and cost factors over the period were largely neutral. It is the first time for three years that both demand and margins have contributed positively to the improvement of retail health.
The RTT cited the warm weather in July and August as a major contributor to the pick-up in trade, while September proved to be “a damp squib.”
It noted that many of the high street retailers left standing appear to have stabilised their businesses – with the threat of insolvencies nowhere near the levels experienced over the previous 18 months – and, significantly, several are now focusing on investment in their stores and staff as they look to improve their fortunes. By comparison, although online sales continue to show relatively strong growth, the incremental transport costs and logistical challenges of fulfilment remain a growing burden.
The RTT predicts an even more promising outlook for UK retail over the next quarter. The panel of experts stated that, because people are becoming less nervous about losing their jobs and interest rates remain low, they are less intent on saving and more comfortable in spending. “And if people do start shopping more, they may be inclined to trade up to premium goods, particularly over Christmas.”
However, on a note of caution, the RTT said that unwelcome rises in energy prices may affect some householders’ disposable incomes and a pre-election boom based on artificially cheap credit is unlikely to be sustained unless real incomes start to grow again.
Dr Tim Denison, Head of Retail Intelligence at Ipsos Retail Performance, said: “Footfall and demand were stronger in quarter three than they had been in the two previous quarters, and certainly July and August were very good months for UK retailers.
“September spoiled the summer party a bit, largely because of changing weather conditions, but there are bound to be blips along the path to recovery. The key point is that we are now trending upwards again just in time for the most important time of the retail year.”