Poor Christmas sales and a depressed 2004 will spell disaster for many independent retailers who have failed to grasp that the new year will offer no respite from the toughest trading conditions in 4 decades
A report from the retail consultancy Verdict has confirmed what many new already – that at just 3.7%, 2003 saw the lowest level of retail growth in the past 40 years. The particularly weak (but all important) last quarter set the seal on a dismal year which saw only the supermarkets performing well and continuing to steal market share from more traditional retailers.
Although shoppers did not respond to the recent increase in interest rates by cutting back on spending overall, the pattern of expenditure was skewed towards drink and food while they hunted for bargains that were amply supplied by pre-Christmas sales – particularly in the fashion sector. A raft of big names (House of Fraser, Matalan, New Look) are confidently predicted to report reduced profits or no profit at all (Austin Reed).
But now household finances are coming under increasing pressure, which will be exacerbated by credit card bills arriving in January and February and large increases in council tax in April. There is unlikely to be any respite until 2005 with the first half of 2004 being particularly tough. Quality and price will be weighed up in equal measure by discerning shoppers who will put pressure on retailers unable to increase prices to compensate for a poor Christmas.
The worst affected will be the small independents that over-estimated demand and are now left with stock on their hands. This will particularly be the case for any unfortunate enough to have rent reviews in 2004 because the evidence from previous reviews will still indicate a strong upward trend despite a deteriorating economy. Those who failed to plan ahead will be vulnerable as trading continues to languish because they will need to sell more stock just to stand still.
Reducing overheads and battening down the hatches will be essential if the fragile sector is to survive until better times arrive some 12 months hence
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