Retailers hoping for pre-Christmas customer confidence boost

RETAILERS in the West Midlands will be hoping for a late surge in consumer confidence to change their fortunes this Christmas, but in reality they may have to wait until next year, sector analysts have said.

The latest sector data from the British Retail Consortium (BRC) reveals that like-for-like retail sales dipped by 1.1% in October – the slowest rate of growth for almost a year. In particular, sales of luxury goods are slowing and online sales have also not been immune from the dip in consumer spending.

Andy Lyon, partner and retail sector expert at PwC in the Midlands, said: “Despite the gloomy data, some retailers are claiming that consumers’ willingness to spend appears to be picking up. Indeed, some have noted Hallowe’en sales have been their strongest ever.

“At the big ticket end, sales of new cars in October were up 12% on the same month last year – a big increase. However, this probably disguises a trend away from big ticket items towards gifts and smaller treats or feelgood purchases.”

The firm’s latest Economic Outlook report has forecast that consumer spending is set to pick up in 2013, largely in response to the current low level of inflation, which while rising slightly in the short term, mainly due to rising energy and food prices, is predicted to fall back towards to the Bank of England’s target of 2% later next year.

“Of course, we can’t be sure that the increase in consumer spending will come in time to boost Christmas trading – retailers may have to wait until next year,” added Mr Lyon.

“However, retailers are definitely in a much better position than they were this time last year – with less inventory due to more cautious buying earlier in the year. This will result in less discounting activity in the run up to Christmas and should help to protect margins and drive profitability over the festive season.”

As far as the decline in online sales was concerned, Mr Lyon said this was probably just a blip.

“Online sales have been increasing exponentially year-on-year and we are expecting this to continue. Amazon has recently announced that it is gearing up for its biggest ever day for retail sales on Cyber Monday (December 3, 2012), so we will have to wait and see,” he said.

“Retailers in the region know that to survive and thrive they need to have a strong online presence and many have also had to rethink their strategic offering completely in order to adapt to current shopping trends. Retail apps are likely to become even more prevalent this year, as retailers reach out to consumers in a more personalised and direct way.”