In a timely webinar looking at the future of retail, we discussed the impact of the Autumn Statement on the sector. Jacqui Baker, Vice-Chair of ICAEW’s Retail Advisory group and National Head of Retail at RSM was joined by Tom Pugh, Economist at RSM, Paul O’Leary COO at Boden and Neil Robinson CFO at Central Co-op.
A recording of the webinar can be accessed here:
As the Chancellor took to the floor, our panel responded to what they were hearing, Tom shared his latest insights on the economy. Good news was limited, as anticipated, but there were some positives, including a hope that, whilst inflation is rising rapidly, it may have peaked. Tom suggested that interest rates may also have peaked at 4-4.5%. The tight labour market was discussed and strong wage growth growing at 6% year on year.
Retail turnover is growing with consumers spending more. But volumes are falling. Excess savings have been building up in the economy – around £260bn which accounts for 10% of GDP. But consumers’ confidence is dropping and consumers are reverting to saving. Spending on credit cards has fallen off a cliff. In 2023, food and non-food retail will be tough, especially in the early months. The key will be getting through it and getting to the other side.
Targeted discounts will likely carry on until the end of January as retailers aim to shift excess stock. A wave of insolvencies is likely to impact the sector. Brand consolidation is likely to continue.
The future for retail is a multi-channel experience. Customers will always want to touch and feel a product. Destination shopping is the way forward. A key differentiator is reinforcing the customer experience.
COVID-19 produced lasting changes for grocers. Food deliveries may have plateaued as customers are returning to stores. Store locations are changing as more people are working from home. Grocers are looking at mixed spaces through introducing cafes and other leisure areas in supermarkets. In 2023, the convenience sector may do better as, typically in a recession, fewer people dine out.
Luxury brands have not been impacted yet. Consumers still want to treat themselves and there doesn’t seem to be a reticent to spend at the top end of the market.
Sustainability needs to be a core value for retailers, with easy wins such as solar. Retailers are at different stages in their journey but they need to do the right thing. Taking a position can benefit the business.