The retail sector is an interesting one. Often the first to feel a downturn in the economy, retail spending is often regarded as a indicator of confidence: When consumers feel confident they spend and the economy grows.
If you’re in the retail sector then you probably have some sense of which direction retail spending is heading. For the rest of us, the monthly UK retail sales figures give us clues about how the country feels about itself. But any statistics about spending habits need careful interpretation, as they can easily be influenced by outside factors.
So what do make of the figures just released for April? Surprisingly, retail sales in April were lower than March, and year on year April was only 0.5% ahead of the previous year.
The big retailers say bad weather is to blame. But food sales dropped by a mighty 4.1%. That’s the largest monthly drop in more than 24 months.
Even retail-watchers have been caught off guard. It’s true analysts are reluctant to talk the economy into the ground. However they would point out that retailing, as elsewhere, is ultra competitive and retailers need to make sure they have a compelling offer. Morrisons is a good example, since its been slow to adopt an online model.
So we have avoided the dreaded triple dip reccesion. But its not too far fetched to predict we’ll be reading more stories about retailers-in-distress over the coming year facing.
Tough economic times test the metal of all businesses. It would seem that those vulnerable to competition from the internet are most likely to feel the pinch. If your business can’t get people out of the house when the weather turns bad, you need a plan B. That may mean having an alternative online offer or refining your existing one.
All the signs are there that consumers aren’t yet splashing the cash the way UK businesses would want them to. People who reduce spending on every day or seasonal items are also less likely to buy a new car, go on holiday or move house. The pain retailers feel today, may be felt by other businesses later in the year. It all depends on where retail sales are heading.