Talking Point: Double whammy could shape new high street
Simon Purkess, KPMG's head of retail in the Midlands, explores how a 'double whammy' for retailers could shape a new high street.
With worrying regularity we are now seeing some retailers hit the headlines for all the wrong reasons. Difficult trading conditions, fuelled in the main by a steep drop in consumer spending coupled with higher commodity prices, is causing a 'double whammy' across the retail sector.
This was particularly evident in the May BRC–KPMG Retail Sales Monitor which for the first time in a number of months gave us a clear picture of the underlying trend without any distortions of bank holidays or major events, as have subsequent trading updates from various retailers.
Retailers, like many other sectors, have had their eye on these distortions knowing that the buoyant sales around Easter were likely to be short term. At the same time, they have had to juggle to maintain margins and cashflow, and yet remain competitive. The headlines are showing where these pressures are tipping some weaker businesses over the edge, and with no let up in sight, we believe that the outlook for retailers unable to adapt their business strategies quickly, will become even more bleak.
While all retailers will be affected by these pressures, those operating in the non-food sector are feeling the squeeze the most, particularly those reliant on big ticket purchases. Indeed, in June nearly all non-food sectors experienced negative like-for-like sales to varying degrees, and as retailers face the dilemma of how much they can absorb versus how much they can pass onto consumers or their supply chain, the room for manoeuvre is almost non-existent.
Now more than ever, this is about survival of the fittest. Those who have acted to reconfigure their business have the best chance of survival – and there remain some opportunities for retailers such as enhancing their multi-channel offer, as online and mobile continue to grow in significance.
