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Think tank predicts difficult year ahead for retailers

The New Year will continue to be difficult for the UK retail sector, according to the KPMG/Synovate Retail Think Tank (RTT).

GENERAL MERCHANDISE

Think tank predicts difficult year ahead for retailers

The New Year will continue to be difficult for the UK retail sector, according to the KPMG/Synovate Retail Think Tank (RTT).

The RTT members said they believed that consumer confidence would remain depressed in 2012 with economic forecasts pointing to slow growth at best.

"2012 will be about future proofing the business to ensure survival in a market that will not change any time soon," said KPMG’s UK Head of Retail, Helen Dickinson. She added: "The squeeze on personal incomes will continue despite the expected decline in the rate of headline inflation."

RTT members said they expected sales volumes to continue to fall in the face of strong competition as retailers look to maintain their share of a smaller pie.  

However, some retailers were predicted to fare better than others. Professor John Dawson of Edinburgh and Stirling Universities, explained: "High end retailing whether fashion or food, on-line sales, pop-up shops, or retailers with an offer emphasising convenience are more likely to be among those successfully negotiating 2012, but traditional operations targeting middle markets with large numbers of high street stores may find 2012 even more difficult than 2011."

Although the London Olympics and the Queen’s Diamond Jubilee celebrations could provide a sales boost for retailers, there were also concerns that outside of the South East, the Games might keep people at home watching TV rather than visiting the shops. Any positive effects could also be limited by the shift in consumer attitudes towards impulse buying.

Tim Denison of Synovate Retail said: "For shoppers, ‘value for money’ will remain lodged top-of-mind, eager to ensure that their lower level of discretionary income is spent wisely. The retailer’s response will continue to focus heavily on promotional activity and on helping shoppers establish justification to buy."
  
The RTT members said changes in consumer behaviour had forced retailers to alter the way they ran their businesses, streamlining their operations and adjusting strategy to allow for greater flexibility.

Richard Lowe, Head of Retail & Wholesale at Barclays Corporate said: "In 2012, it will be the operators that best manage all these changes who will turn a difficult market environment to their advantage." 

Although the think tank said the tough economic conditions and growth of online shopping could result in more vacancies on the high street, it acknowledged that prime retail sites were unlikely to be affected as  demand for outlets was still high.

However, CBRE’s Mark Teale said: "Non-food chain retailers are continuing their long-run retrenchment into larger, higher productivity markets, leaving a trail of vacant property in their wake. The internet-led decline in services activities has exacerbated the problem. Some High Streets can be bolstered by re-anchoring. Others, without long-run public subsidy in one form or another, are a lost cause."

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