Our latest Retail Trading update webinar took place on 25th January. If you haven’t already watched it you can find it here Retail Trading Update 2024 | Webinar (youtube.com).
There are some key takeaways and learning points for everyone involved in the retail and wholesale sector from the webinar including:
- Whilst the UK retail market grew 4.3% to ￡387.4bn in 2023, inflation at 9.4% triggered an overall 5.1% reduction in volumes.
- Ongoing high inflation, particularly for essentials like food and energy, has continued to squeeze household budgets. This led to consumers remaining cautious with their spending throughout 2023, particularly for non-essential items. According to BDO’s High Street Sales Tracker, in 2023, retail sales growth lagged behind 2022 in every month apart from August.
- The online retail market was flat in 2023. Online once again underperformed offline, as the market continues to rebalance and as consumers turned to stores to find the lowest prices and avoid delivery charges.
?Our predictions for the year ahead:
- The retail market will grow in 2024 but at a slower rate than in 2023 as inflation eases and purchasing volumes remain weak.?Consumers will remain cautious, especially when it comes to discretionary spending.
- A prolonged recovery reflects the lingering influence of high inflation on consumer spending habits and indicates a need for cautious projections within the UK retail market for the coming year.
- From 2024, it is expected that online will return to drive growth in the overall retail market, with advancements in technology, such as AI, enhancing the online experience and shopping journey.?
- Following four turbulent years, retail businesses and consumers will be hoping for a more settled year in 2024. Although inflation is set to come down to its lowest level for two years, it will take some time for retailers’ profit margins and consumer confidence to stabilise.?
From our point of view here in BDO’s Business Restructuring team we have a few additional takeaways that we would like to share:
- Whilst the overall figures around the level of distressed business continue to increase, this is largely still concentrated in small companies - albeit it is the larger retailers that grab the headlines.
- Geo-political aspects are likely to continue to create instability for the sector - key issues such as the Red Sea and global elections will have a real impact.
- The strength of offline sales is a good reminder of the importance and resilience of physical stores and our high streets - albeit the pace of change is typically much slower than for online.
- We have continued to see more difficulties for e-commerce players due to margin, logistics, Brexit and inflation generally.
- Businesses that made decisions in Covid expecting a long term impact which have now returned to normalised levels has led to a number of insolvencies.
- There continues to be a more limited spend on big ticket items, whilst value retailers are generally faring well they don’t always get this right - as we saw with Wilko.
- With debt interest payments on average projected to be 5.7% of household income (double the cost from 2022) the control of inflation and the hope for interest rate cuts will be a critical factor in consumer attitude to spending.
Whilst there are no doubt challenges for the sector, there are also many tools and options to address these as well as opportunities to consolidate, rationalise and reduce costs. BDO has a market-leading multi-disciplinary one firm approach, led by over 30 Partners in the UK whose primary sector focus is retail, wholesale and consumer brands, supported by strong delivery teams providing tailored advice. ?
Should any of the above resonate with you, or if you would like to chat about any of these issues more generally then please do get in touch. You can either call your usual BDO contact or feel free to contact either myself here on LinkedIn or via e-mail on [email protected] or James Stephen (link to LinkedIn profile here) or via [email protected]. Plus if you haven’t already read it then you can download a copy of our latest Retail Forecasts Report here Retail Forecasts Report 2024 - BDO.
