UK consumers are going to be in a mood to spend next year. Yippee. But wait, they’re not going to be spending much more on the goods I’m interested in – fashion and beauty. Ouch.
Who says so? The KPMG/Ipsos retail think tank, that’s who. Despite the fact that we’ll all have more money to spend, we’ll be doing both fun and sensible things with it and that largely leaves fashion and beauty out in the cold.
Apparently, homeowners will put any spare cash we have towards reducing the size of our mortgages and paying builders, plumbers, decorators et al to improve our homes.
And both homeowners and renters, plus those happily free of either a mortgage or rent, will be spending more spare cash on going out and enjoying ourselves in restaurants, pubs and cinemas – it just seems we won’t be doing it in a new dress and shoes!
The KPMG/Ipsos study (reported in The Guardian) said that new fashion purchases come pretty low on the must-spend list. And supermarket spending is a low priority for excess cash too – so it looks like value-focused chains Aldi and Lidl are going to have an even better time this year.
Bad news for stores
All of this is bad news for retailers on two fronts. First, it means they’ll struggle to generate extra sales. And second, it means any prospects for them getting back to a full-price selling environment any time soon are looking pretty dim.
Retailers and shoppers alike are caught up in an endless spiral of delayed purchases followed by price cuts, followed by attempts to sell at full-price, followed again by delayed purchases and… well, you know what comes next.
But somewhere along the line, something’s got to give because retailers have issues like the National Living Wage (a good thing but still an extra cost) to deal with from April, plus increasing costs from internet investment and delivery of online goods.
0.1% – a very big small figure
The specific figures KPMG/Ipsos came up with to support all this may look pretty minor at first glance. Retail sales growth is set to fall back to around 1.7% in 2016 from around 1.8% in 2015. But that 0.1% is quite big when it stands for slower growth.
We live in a world where business growth slowdowns mean share prices fall, investors are unhappy and a need to find “efficiencies” becomes suddenly more urgent.
Now, I’ve always hated the use of the word “efficiencies” when companies actually mean cost cuts (let’s face it, lean operations can be highly efficient but cost cuts for their own sake can also hold businesses back).
But it won’t surprise me if it’s a word we hear a lot of next year – and it could start in January when the first of the retailer Christmas trading updates are released. Watch this space.