FSP Retail Blog

Christmas 2009 sales are relevant to the past, not the future. Sales over the Christmas period, as so far reported, seem to be the last act of consumer defiance of the economic circumstance. The first reports of Christmas sales performance show like-for-like sales increases that average between 5% and 10% across all merchandise categories. Such a performance does not mean the good times are back but relief that last year was not worse. The outlook for the coming year is at best anaemic.

All the money the Government has spent, on bank bail-outs, tax relief, cash for clunkers, quantitative easing and so on, prevented complete economic melt-down in 2009 but at the cost of future growth. Recent measures of consumer confidence show the steepest drop in more than a year. While the household savings ratio has been positive for 6 quarters, household debt to income remains above 150%. It has a long way to go to match the levels of the early 1990’s, when it was about 100%. The prospect of higher taxes, unemployment and interest rates will encourage consumers to embark on the long trail back to balance, through increasing the proportion of disposable income allocated to reducing debt and to savings. The spending growth of the last decade and more, driven by massive reliance on borrowing, seems unlikely to return in the near future.

Within this low growth environment, retailers will still need to expand, to spread their fixed costs over a wider range of stores. However, the economic case for each additional store will need more than ever to be firmly based on credible evidence. Costly errors have long been unacceptable. What will now be career-threatening will be to take on marginal stores. Forward thinking landlords will continue to 'de-risk' deals. This is achieved through better understanding of individual retailers, their value to particular schemes, likely trading performance and the most effective types of assistance required to turn marginal deals into sustainable opportunities

The SnapShop Christmas Sales Report is available to Members of the SnapShop website, and to FreeZone registrants within their 3 month trial period. To sign up for FreeZone and to get access to the full report, visit www.snap-shop.co.uk/freezone