Carl Jackson, managing partner at Quantuma looks at the UK retail sector and makes his predictions for the year ahead.
This time last year I looked at how the high street would fare in 2019, after a year of unprecedented conditions on the high street and it was clear that the traditional retail model was broken.
Large numbers of retail businesses have failed to take drastic enough steps to adapt their business model to enable them to survive and as such we have seen retailers with the highest of profiles continued to fail during the course of 2019.
I was surprised to learn that even the lowest performers in the vast array of sub sectors in the retail industry, to include book retailers, electrical household appliances and jewellery and watch retailers, had grown top lines by an average of 1.61%. This however is set against a backdrop of rising overheads and intense downward pricing pressures – a characteristic prevalent across all physical retail sectors. In response, numerous operators have expanded their offerings to boost back market share, increasing their online operations and introducing value-added services such as same-day delivery in a bid to meet the demands of the modern consumer.
In 2020 I’d expect to see retailers such as Next continuing to increase their market share through such strategies. I’d also expect to see value chains such as Primark benefit as economic uncertainty continues and consumers continue to maintain a modest approach to spending.
I’d expect 2020 to be characterised by new developments and challenges for the industry as retailers strive to serve increasingly sophisticated and demanding consumers. I anticipate competition from supermarkets and online retailers to remain strong. I would recommend that operators continue to adapt operating models and invest to ensure their online channels are at the front and centre of their business. I expect marketing expenditure to rise as clothing retailers attempt to engage with customers compete for market share. For clothing retailers, the early introduction of sustainable clothing lines represents a significant opportunity for growth as the rise in ethical consumerism shows no signs of slowing; noting that a number of clothing companies have come under fire for being wasteful and environmentally damaging in recent years.
The traditional retail model is broken, and those who have failed to adapt their model so far, are likely to continue to experience pressures well in to 2020 and beyond, as global economic and political uncertainty prevails and consumers become more demanding about the retail experience.
Businesses who have failed to adapt their model and are exhibiting signs of stress should seek very early professional advice to establish the viability of their business.
Carl Jackson is Quantuma’s managing partner and has over 30 years’ experience in acting for management teams and financial stakeholders on a wide range of performance improvement and delivering turnaround and restructuring assignments, he also regularly undertakes formal insolvency assignments. His experience is situational based, backed by deep sector experience, with a niche in the retail sector.