Geoff's View - September 2008
18.09.2008
The performance of the UK economy has been sound throughout the first half of 2008. Why therefore has the reported performance of so many retailers been poor? If they have done badly when the economy was good, what will happen when, as expected, the economy turns down?
Perhaps consumers have been spooked by the media and have been anticipating a recession. Favoured by retailer CEOs, this might be labelled the “psychological” explanation. I can’t say FSP has seen much supporting evidence in its own work. Nor is it apparent in the Office of National Statistics (ONS) retail sales figures. However, it has the benefit that it relieves retailers and the retail property industry of any responsibility to examine their own business models.
An alternative "social" explanation may be that after a very long boom period, consumer fatigue has set in. The fashions have not been compelling. The speed of technological development has outstripped consumer appetite. Living space has grown ever smaller, so there is less room to store new purchases. The population is ageing and older people set greater store on experience than on "stuff". This argument is supported on the positive side by the buoyant sales in London. Its younger shoppers have not become jaded and have continued to shop.
A third group of possible causes of poor retailer performance might be called the “industrial” explanation. Sales over the web have continued to rocket. Sales through grocery outlets have been growing. Sales in London, powered by the fall of Sterling against both the Euro and the Dollar, have been strong. There is evidence from the NSLSP (National Survey of Local Shopping Patterns) that the number of shoppers using the Top 100 shopping locations has been dropping over the last 5 years. This seems to have been driven by the increasing number of retail parks trading with Open A1 retailers. These parks are convenient to use – ample free parking, close to home and retailers which offer a full range.
FSP believes this "industrial" explanation is valid. It may not explain everything, but the changes noted are real enough. Therefore, the prospect for town centre retailing is not for a difficult period, but for a sea-change. There will be a permanent diminution of its market share unless the offering in town centres is made more attractive to shoppers. Like all challenges, this will bring opportunities and problems.
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A very useful way of keeping up to date with what's going on in retail.
Charles Denton
Property Director