21 November 2019
Considerable political and economic uncertainty persists heading into 2020. The ongoing impact of Brexit dominates the political agenda and remains a key factor constraining business investment and dampening consumer confidence.
Against this backdrop, UK retailers face seismic structural challenges as the ongoing shift towards online shopping and the rising prominence of the experience economy collides with spiralling operating costs. The proportion of online shopping has now reached almost 20%, quadrupling in the last 10 years. We forecast that this figure could rise to 50% for internet shopping in the next 10 years.
Meanwhile, an abundance of physical possessions has caused consumers to re-evaluate the importance of material goods. Following two decades of falling prices, in real terms, for clothing, footwear, electricals and many other goods, UK households have arguably reached a period of ‘peak stuff’. The economic value they attach to material possessions has diminished, leaving them valuing ‘experiences’ more than ever before.
This perfect storm of behavioural shifts and rising operating costs (e.g. business rates, labour costs, logistics) has left many retailers with business models that are not fit-for-purpose. Exposed by too many stores, inflexible lease structures and legacy systems, business models are creaking under the pressure of spending shifts and the purpose of the in-store experience.
However, with great disruption comes opportunity. Those retailers who have ‘embraced, adapted and innovated’ have managed to thrive in this fast-paced environment where relevancy is vital.
The Retail Economics Outlook for the UK Retail Industry 2020 Report provides an in-depth analysis of the challenges facing both UK retailers and consumers as we enter a new decade of change.
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