The report ‘Outlook for UK Retail 2019 – Sustaining growth in a changing market’ shows a deterioration in confidence in personal finances, house prices and job security, all critical in supporting a retail sector undergoing a period of unprecedented change.
The report also highlights how technology-driven changes in consumer shopping behaviour have fundamentally changed the way consumers and retailers use property, leading to over capacity of physical space in the UK market. Forecasts predict non-food online spending to reach 50% in the next 10 years, leading to overcapacity of retail space of around 20%.
Traditional retail business models will be pushed to their limits as newly emerging models gather pace, boosted by rapid consumer adoption. The impact that technology has had on music and entertainment retailers through streaming services such as Netflix, Spotify, Amazon Music and others will proliferate to other sectors:
The sharing economy (rental and secondary markets)
Mass personalisation at scale (curated subscriptions)
Retail subscriptions (auto-replenishment or smart reordering)
Services economy (“Do it for me”)
New models of consumption such as rental markets, curated subscription models, the service economy, auto-replenishment and smart re-ordering have the potential to fundamentally alter the retail norms of today.
Richard Lim, Chief Executive, Retail Economics, said: “I fail to recall a more challenging time to accurately predict an industry’s future. Unprecedented uncertainty persists around the Brexit deal, the political landscape and the magnitude of its potential disruption to the UK economy.
“I expect the industry to remain locked in a period of disruption throughout 2019. Structural challenges facing retailers will continue to accelerate and those that embrace, adapt and innovate to the emerging environment will be the ones to benefit.”
David Scott, Head of Retail and Leisure, NatWest, said: “It is perhaps unsurprising that Brexit has been declared the top customer concern. Uncertainty always has and always will damage the sector. 2018 was a year of unprecedented change in the retail industry, and this change propels uncertainty – there is nothing more uncertain than what Brexit will look like. Consumer confidence remains shaky at present; though we think the outlook for consumer spending will improve as inflation falls towards our target of 2%. In fact, by the final quarter of this year – we expect real wage growth to be up by 1.3%. This presents the retail industry with an opportunity to attract and in many cases, re-attract custom.”